Metro Bank considering up to £600m capital raise - reports

5th Oct 2023 07:33

(Sharecast News) - Metro Bank confirmed on Thursday that it is considering its refinancing options following reports it was looking to raise hundreds of millions of pounds from investors.

The challenger bank said in a statement that it was "evaluating the merits of a range of options, including a combination of equity issuance, debt issuance and / or refinancing and asset sales".

Metro said no decision has been made on whether to proceed with any of these options.

The company said that following its update on capital planning on 12 September, it continues to consider how best to enhance its capital resources, "with particular regard to the £350m senior non-preferred notes due in October 2025".

Metro Bank said it continues to meet its minimum regulatory capital requirements.

"For three consecutive quarters ended 30 June 2023, the bank has been profitable on an underlying basis, and it expects the Q3 trading update to show continued momentum in personal and business current account growth and customer acquisition, in line with expectations," it said, adding that it remains well positioned for future growth.

The statement followed a series of earlier press reports, with the Financial Times citing people with knowledge of the plan as saying that Metro was looking to raise as much as £600m after its share price fell nearly 50% in recent weeks.

It was understood the challenger bank was in talks with investors about raising £250m in equity funding and £350m in debt to shore up its balance sheet.

Last month, Metro Bank failed to get approval from regulators to lower the capital requirements attached to its mortgage business.

A person familiar with the decision told the FT that Metro had hired Morgan Stanley to provide strategic advice and lead any potential capital raise. According to Sky News, Moelis, another investment bank, was also thought to be involved, along with Metro's corporate broker, Royal Bank of Canada.

The FT also reported on Thursday that Metro's chair and chief executive have been summoned to urgent talks with the UK's top financial regulators after reports of a fundraising caused the share price to collapse. Metro's chief executive Daniel Frumkin and chair Robert Sharpe have both been asked to meet officials from the Bank of England's Prudential Regulation Authority and Financial Conduct Authority later in the day, according to FT sources.

At 0920 BST, Metro shares were down 24% at 38.42p.

Victoria Scholar, head of investment at Interactive Investor, said: "There have long been concerns about Metro's finances - back in 2019 queues formed at some of its branches, sparked by negative comments about its financial position on social media. It also admitted in the same year it faced a major error around how it classified its loan book, sending its shares crashing down by nearly 40% in a single session.

"Just yesterday, ratings agency Fitch placed Metro Bank on 'rating watch negative' reflecting its view that short-term risks to its 'business model stabilisation, capital buffers and funding have increased'.

"Metro floated on the stock market in March 2016 at £20 a share. Initially it rallied to a high of over £40 in 2018, but now it trades at around just a fifth of its flotation price, currently at around £4 a share, reflecting the major lack of confidence in the business among investors and its balance sheet woes."