Metro Bank in talks about urgent £600mn capital raise

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Metro Bank is seeking to raise up to £600mn after its share price fell almost 50 per cent in recent weeks, said people with knowledge of the plan.

The UK challenger bank is in talks with investors about raising £250mn in equity funding and £350mn in debt to shore up its balance sheet, the people said.

The talks came after regulators last month failed to approve a request from Metro to lower the capital requirements attached to its mortgage business.

The Prudential Regulation Authority and the Financial Conduct Authority declined to comment on Metro’s condition.

Metro said: “As previously stated, Metro Bank continues to consider how best to optimise its capital resources to allow it to take advantage of the deposit and asset origination platform that has been built.”

Metro has hired Morgan Stanley to provide strategic advice and lead any potential capital raise, said a person familiar with the decision. The US bank declined to comment.

Rating agency Fitch put Metro on negative watch earlier on Wednesday, citing increased risks to its business model, capital position and funding of the company, which had a market capitalisation of about £85mn at Wednesday’s close after a 98 per cent plunge in the past five years.

Fitch said: “We expect the group’s earnings prospects to come under pressure in the short term due to rising funding costs, resulting from higher competition for deposits and given likely more expensive access to wholesale funding. In addition, capitalisation is tight.”

Fitch also called attention to the £350mn of senior bonds that Metro must refinance by next October.

Last month Metro announced it had not received permission from regulators to change the way it calculated the capital requirements on its mortgage book.

That change would have improved the bank’s capital position and made it more profitable. At the time, Metro said that while it “continued to engage with the PRA on its application, there is no certainty that approval will be obtained”.

One adviser said the PRA’s decision on the mortgage business was “a message they are fed up”.

Metro’s 2010 launch marked the first new UK bank on the high street in more than 100 years, making it the poster child for the growth of challenger banks.

In 2019, Metro admitted that its commercial loan portfolio was far riskier than previously reported, triggering a 39 per cent fall in its share price in a single day and a £10mn fine from the FCA, which said the bank had misled investors.

Colombian billionaire Jaime Gilinski is the largest investor through his Spaldy Investments vehicle. His daughter, Dorita, sits on the board.