Metro Bank stocks fall amid cash crunch

Metro Bank’s shares have experienced a significant decline following reports that the bank is seeking to raise funds to strengthen its financial position. The bank’s shares plummeted by 23% in early trading after several newspapers reported that Metro Bank was in need of raising £600 million. The bank did not confirm the specific figure but stated that it is actively considering how to optimise its capital resources.

Metro Bank, which started operating in the aftermath of the financial crisis, positioned itself as a “challenger” bank aiming to compete with established High Street banks. It has approximately 2.7 million customers.

The bank had already faced challenges when regulators refused to approve a request to lower capital requirements for its mortgage business, leading to a decrease in its share price.

To boost its balance sheet, Metro Bank is reportedly considering various options, including a share sale of approximately £100 million and seeking a debt deal that could potentially raise around £350 million with the assistance of advisers at Morgan Stanley. However, there are concerns about the bank’s ability to raise the required capital.

Metro Bank did return to profitability in the first half of the year, partly due to higher interest rates. This marked the bank’s first half-year profit since an accounting scandal in 2019, when it was revealed that the risk associated with some of its loans had been underestimated. Despite the recent profit, there are concerns about its capital strength, funding, and business model, as indicated by the negative watch placed on the bank by ratings agency Fitch. The bank’s CEO, Daniel Frumkin, had previously stated that 2023 would be a “transitional year” for Metro Bank.