Metro Bank bosses to meet regulators as it seeks £600m cash

The bosses of Metro Bank have been summoned to urgent talks with the UK’s top financial regulators, it was reported.

Metro’s chief executive Daniel Frumkin and chair Robert Sharpe have been asked to meet officials from the Bank of England’s Prudential Regulation Authority and Financial Conduct Authority, according to reports.

The summons follows the high street lender’s admission it is looking to raise £600m of fresh funds in an effort to to strengthen its troubled balance sheet.

The challenger bank, which has more than £15bn in customer deposits and was valued at £65m, saw its shares fall by more than a quarter after it was revealed it was looking for ways to boost its finances.

In a statement the bank said: “The Company is evaluating the merits of a range of options, including a combination of equity issuance, debt issuance and or refinancing and assets sales. No decision has been made on whether to proceed with any of these options.”

Metro stressed it continued to meet its minimum regulatory capital requirements, and remains “well positioned” for future growth. Earlier this year Metro had assets of £22bn with debts of nearly £5m according to Bloomberg data.

The bank, which was launched in 2010 and was valued at nearly £3.5bn at its peak, is reported to have hired Morgan Stanley to help with advice and the potential capital raise. Last month Metro failed to secure regulatory approval to lower certain capital requirements in its mortgage business.

The bank needs to refinance around £350m of debt in a year’s time. It has around 2.7 million customers and 76 branches nationwide.

Victoria Scholar, Head of Investment, at interactive investor said: “Metro Bank is reportedly looking at ways to raise up to £600 million in debt and equity financing including more than £100 million from selling shares after a steep slide in its share price.

“There have long been concerns about Metro’s finances – back in 2019 queues formed at some of its branches, sparked by negative comments about its financial position on social media. It also admitted in the same year it faced a major error around how it classified its loan book, sending its shares crashing down by nearly 40 per cent in a single session.

“Just yesterday, ratings agency Fitch placed Metro Bank on ‘rating watch negative’ reflecting its view that short-term risks to its ‘business model stabilisation, capital buffers and funding have increased’.

Metro shares, she said were trading around £4 a share – one fifth of its original £20 a share flotation price in 2016, “reflectingf rallied to a high of over £40 in 2018, but now it trades at around just a fifth of its flotation price, currently at around £4 a share, “reflecting the major lack of confidence in the business among investors and its balance sheet woes.”

Ratings agency Fitch placed Metro Bank on negative watch on Wednesday, citing concerns over its capital strength and funding, as well as its business model.

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.”

The PRA and the FCA refused to comment on the situation.