- Metro Bank seeks funding, shares plunge.
- Options to bolster balance sheet.
- Facing challenges amid losses.
Metro Bank seeks funding, shares plunge.Options to bolster balance sheet.Facing challenges amid losses.
Metro Bank’s stock plunged after reports surfaced that the bank is seeking to raise millions to bolster its finances.
Approximately one-third of the bank’s shares saw a decline following newspaper reports suggesting it requires up to £600 million in funding.
On Thursday, Metro Bank attempted to reassure investors about its financial position.
The bank stated that it “continues to explore ways to enhance its capital resources” but did not comment on the specific figure.
Officials from the Treasury have engaged with the Prudential Regulation Authority, the regulatory body responsible for overseeing Metro Bank circumstances.
These discussions followed earlier talks between the regulator and Metro Bank, described as routine by company insiders.
The bank emphasized that it remains in compliance with all regulatory requirements and maintains a strong financial position.
The Financial Services Compensation Scheme guarantees customer deposits of up to £85,000. In the event of any banking difficulties, depositors are ensured to receive their funds up to the specified amount.
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Metro Bank was established as the first bank to reopen in the United Kingdom in over a century after the financial crisis.
Founded in 2010, it positioned itself as a “challenger” bank, promising round-the-clock operation. It currently boasts an approximate customer base of 2.7 million.
On Thursday morning, its shares experienced a temporary suspension, ultimately closing over 25% lower than the previous day. A month prior, significant declines occurred due to regulators rejecting a proposal to reduce cash or capital requirements related to the mortgage business.
The bank is actively considering various options to strengthen its balance sheet before the required restructuring of approximately £350 million in debt by October 2025.
One option being considered is a share offering of approximately £100 million. Additionally, the bank has engaged Morgan Stanley advisers to explore raising millions through an equity sale, borrowing up to £350 million, and potentially selling assets owned by the bank.
Metro Bank stated that it is still meeting financial authorities’ minimal cash requirements and has not made any final decisions.
On Thursday morning, the bank’s chairman, Robert Sharpe, reportedly met with executives at the Prudential Regulation Authority.
However, concerns linger about whether the High Street lender will be able to secure the necessary funds in the future.
The bank reported profitability in the first half of this year, partly due to increased interest rates. This marked the bank’s first profit for the first half of the year since a 2019 accounting controversy revealed underestimations of risk associated with some loans.
CEO Daniel Frumkin predicted in July that the bank would experience a “transitional year” in 2023.
On Wednesday, ratings agency Fitch placed Metro Bank on negative watch, citing concerns about its funding, capital strength, and business model.
The stock market value of Metro Bank has fallen to below £100 million from an estimated £3.5 billion five years ago.
Established in 2010, Metro Bank gained attention for its seven-day-a-week branch schedule and thoughtful amenities, such as water containers for customers’ dogs.
However, AJ Bell’s investment director, Russ Mould, commented, “Metro Bank has struggled for years in its attempts to establish a path to sustained profitability. It appears that Metro had relatively less expertise in the operational aspects of banking.” The question remains whether it can garner enough support if it opts for a fundraising effort.
