(qlmbusinessnews.com Thurs, 5th Oct, 2023) London, UK —
Metro Bank's Shares Plunge Amid Funding Concerns.
Metro Bank's shares saw a dramatic decline today following reports suggesting the bank's efforts to secure additional funds. Shares plummeted by as much as a third after newspapers hinted at the necessity to raise up to £600 million.
Metro Bank, however, remained tight-lipped about the exact figures and the urgency of these discussions. Nevertheless, the bank asserted its commitment to exploring avenues for enhancing its capital resources.
Banking industry insiders have emphasized that customer deposits are safe, and the bank maintains a robust financial standing. Deposits up to £85,000 are safeguarded by the Financial Services Compensation Scheme, providing assurance to account holders in case of financial instability.
Founded in the aftermath of the 2008 financial crisis, Metro Bank revolutionized the industry by being the first bank to open in the UK in over a century. Branded as a “challenger” bank, it promised seven-day-a-week accessibility and now serves around 2.7 million customers.
The bank had experienced substantial declines in its share prices last month after regulators rejected a request to lower the capital requirements tied to its mortgage business.
Currently, Metro Bank is evaluating several strategies to fortify its balance sheet before facing £350 million of debt refinancing in October 2025. Among these options is a £100 million share sale, exploring an equity sale to generate millions in capital, borrowing up to £350 million, and evaluating potential asset sales.
The bank emphasized that no final decisions have been made, underscoring its compliance with minimum cash requirements outlined by financial regulators.
Chairman Robert Sharpe held discussions with the Prudential Regulation Authority on Thursday morning to discuss the situation.
However, there are concerns that Metro Bank may encounter difficulties securing the necessary funds in the future. Despite returning to profitability in the first half of this year, Metro Bank continues to grapple with the repercussions of an accounting scandal in 2019, which revealed underestimations of risk associated with some of its loans.
Metro Bank's stock market valuation currently stands at less than £100 million, a significant fall from its peak value of approximately £3.5 billion five years ago.
Russ Mould, investment director at AJ Bell, commented on the situation, stating, “Metro Bank has been struggling for years to achieve sustained profitability and has made numerous missteps. The question now is whether it will secure enough backers if it proceeds with a fundraising effort.”
He added that existing investors may feel compelled to participate in a fundraising campaign, albeit without great enthusiasm.
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