Metro Bank, a British lender, has seen its shares fall more than 25% following reports that the bank is considering options to raise up to 600 million pounds ($728 million) in debt and capital to strengthen its capital. financial position. The bank’s shares have lost about two-thirds of their value since mid-February. At the close of business on Wednesday, the bank, which recorded around £15.5bn in customer deposits at the end of June, was valued at £87m.
Fundraising efforts could include more than 100 million pounds from the sale of shares to raise capital, according to three sources familiar with the matter. In a statement released on Thursday, Metro Bank confirmed it was considering its options, saying it met its minimum capital requirements and had not yet made a decision on its fundraising plans.
The bank stated: “The company is evaluating the merits of a number of options, including a combination of equity issue, debt issue and/or refinancing and asset sale.” After that announcement, the bank’s shares fell as much as 29.4% on Thursday, prompting two brief automatic trading suspensions. Shares fell 24.8%.
A £350m bond due in 2025 also fell sharply, falling around seven cents in the pound since Wednesday’s close. Some analysts have expressed doubts about the bank’s prospects. Gary Greenwood, banking analyst at Shore Capital, commented: “In our view, supporting a further capital increase for this struggling bank would be like throwing good money after bad.”
Metro Bank, which was established to challenge the dominance of Britain’s major lenders, has faced numerous challenges since its listing in 2016. The bank’s shares fell last month after the Banking Prudential Regulation Authority of England, its main regulator, indicated that it was unlikely to allow the lender to use its own internal risk models for some mortgages. This has led to higher capital requirements set by the regulator, a concern that has been weighing on the stock.
In 2019, Metro Bank was forced to increase shareholders’ equity after an accounting error led to an incorrect reporting of its risk-weighted assets, causing alarm among investors and regulators and wiping hundreds of millions of pounds from its market value Despite these challenges, the bank remains confident in its customer-centric model and believes there are significant opportunities for the company to take advantage of, subject to renewed balance sheet strength.
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