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Metro Bank’s chair met with the UK’s top financial regulators on Thursday as the bank seeks to raise up to £600mn to shore up its balance sheet.
The UK challenger bank is sounding out investors about raising £250mn in equity funding and £350mn in debt to shore up its balance sheet, the Financial Times reported on Wednesday.
The shares, which had already fallen sharply in recent weeks, dropped 25 per cent to 38.6p by Thursday afternoon, leaving the bank’s market capitalisation at about £66mn. The price of a £350mn bond due in 2025 fell 7.4p to a record low of 62.6p.
Metro’s chair Robert Sharpe was asked to meet officials from the Bank of England’s Prudential Regulation Authority and Financial Conduct Authority on Thursday, according to two people familiar with the situation.
The bank’s “chairman attended a longstanding, pre-diarised meeting with the PRA this morning”, a Metro spokesperson said.
“Metro Bank notes the recent press speculation regarding a potential capital raise,” the bank said in a previous statement. “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,” it added.
The FCA and the PRA declined to comment.
Rating agency Fitch put Metro on negative watch on Wednesday, citing increased risks to its business model, capital position and funding.
Metro’s shares have now fallen more than 60 per cent since September 12, when the bank said UK regulators had failed to approve a plan that would allow it to run its mortgage business at a lower cost.
Metro had spent five years seeking permission from regulators at the BoE to use its own models to estimate the risk on its mortgage book.
Metro became the first new high-street bank in more than a century when it launched in 2010, but was rocked by a 2019 misreporting scandal that led to the exit of its chair and chief executive. The FCA last year fined the bank and censured two former top executives over the episode.
Once the highest-profile of a wave of new lenders seeking to challenge the UK’s established banks, Metro has been beset by problems in recent years. The bank was co-founded by Vernon Hill, an American who promised to revolutionise UK banking by improving customer service and introducing longer opening hours at branches.
The bank said on Thursday that it “continues to be well positioned for future growth”, pointing to its underlying profits for the past three quarters.
This article has been amended since first publication to reflect that only Metro Bank’s chair met regulators, not its chief executive, and to include the bank’s statement that the meeting was pre-arranged
