Metro Bank Holdings PLC (LON: MTRO) plans to secure £600 million from backers to strengthen its strained balance sheet after facing numerous financial challenges and regulatory obstacles.
Sky News initially highlighted that the move for additional funds comes after the UK regulator rejected Metro Bank’s bid to enhance its residential mortgage standing.
The bank had hoped to adopt a more lucrative home loan strategy using sophisticated internal rating-based systems. This change would have allowed the bank to maintain lower capital against its mortgage holdings, easing some financial strains.
Metro Bank’s interactions with regulators have been rocky, characterized by penalties and fines for disseminating inaccurate details to shareholders and other breaches.
Response to press speculation
Metro Bank notes the recent press speculation regarding a potential capital raise. Following Metro Bank’s update on capital planning on 12 September 2023, the Company continues to consider how best to enhance its capital resources, with particular regard to the £350m senior non-preferred notes due in October 2025. The Company continues to meet its minimum regulatory capital requirements and had a total capital plus MREL ratio of 18.1% and a leverage ratio of 4.4% as at 30 June 2023.
The Company is evaluating the merits of a range of options, including a combination of equity issuance, debt issuance and /or refinancing and asset sales. No decision has been made on whether to proceed with any of these options.
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. Metro Bank continues to be well positioned for future growth.
Last December, the bank incurred a £10 million fine for inaccurately reporting assets that determined the capital it needed to keep. This resulted in the most dramatic single-day plummet in a UK bank’s share value since the 2008 financial downturn.
This oversight led to the departure of CEO Craig Donaldson and significantly damaged the bank’s image and investor trust.
The bank’s shares, which emerged as the first new UK bank chain in 100 years after its 2010 inauguration, plummeted another 30% upon the fundraising news, pushing the annual losses upwards of 70%.
Since its inception in 2010, Metro Bank has ascended to the ranks of the top 10 UK banks, serving 2.7 million clients.
