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Editing by Mark Potter
Finance
Metro Bank plunges on talk of big fundraising to fix finances
Signage is seen outside of a Metro Bank in London, Britain, May 22, 2019. REUTERS/Hannah McKay/File Photo Acquire Licensing Rights
LONDON, Oct 5 (Reuters) – Metro Bank (MTRO.L) shares plunged more than 25% on Thursday following reports the British lender was exploring options to raise as much 600 million pounds ($728 million) in debt and equity to bolster its finances.
Shares in the bank have lost about two thirds of their value since mid-February. As of Wednesday’s close, Metro Bank was valued at 87 million pounds. The broader UK bank index (.FTNMX301010) was little changed.
The fundraising could include more than 100 million pounds from selling shares to bolster capital, three sources familiar with the matter told Reuters on Wednesday.
A 350 million bond due to mature in 2025 also fell sharply on Thursday, according to MarketAxess, dropping by more than four pence on the pound from Wednesday’s close, the data showed.
A spokesperson for the bank did not immediately respond to a request for comment on Thursday.
“Supporting a further capital raise for this struggling bank would be akin to throwing good money after bad, in our view,” Gary Greenwood, banking analyst at Shore Capital said in a note.
“Investors and bondholders may therefore be better served investing their money elsewhere.”
The bank is also looking to refinance existing borrowings and is weighing other options, such as selling assets, to reduce the funding needs, two of the sources said.
Metro Bank recently brought in Morgan Stanley as adviser, the people said.
Shares in the bank dropped as much as 29.4% on Thursday, triggering a brief automatic suspension in trading. As they resumed, they were down 20.7% at 0739 GMT.
The shares dipped last month after the Bank of England’s Prudential Regulation Authority (PRA) – its principal regulator – signalled it was unlikely to allow the lender to use its own internal risk models for some mortgages.
Metro Bank is subject to higher capital requirements set by the regulator if unable to use its own models, a concern that has been weighing on the stock.
“The board retains conviction in the merits of Metro Bank’s customer-centric model and strongly believes that there is a significant opportunity set that the company can capitalise on, subject to renewed balance sheet strength,” Metro said in September.
($1 = 0.8239 pounds)
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