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Metro Bank, whose shares have fallen nearly 50% in recent weeks, is seeking to raise up to 600 million pounds, people familiar with the matter said.
The British challenger bank is in talks with investors to raise 250 million pounds in equity financing and 350 million pounds in debt financing to shore up its balance sheet, people familiar with the matter said.
The talks come after regulators last month failed to approve Metro’s request to lower capital requirements for its mortgage business.
The Prudential Regulation Authority and the Financial Conduct Authority declined to comment on Metro’s status.
“As previously stated, Metrobank continues to consider how best to optimize its capital resources to enable it to leverage its established deposit and asset origination platform,” Metro said.
Metro has hired Morgan Stanley to provide strategic advice and lead any potential financing, a person familiar with the matter said. Bank of America declined to comment.
Ratings agency Fitch puts Metro on rating list negative observation Earlier on Wednesday, the company faced greater risks to its business model, capital position and financing. As of Wednesday’s close, the company’s market capitalization was around 85 million pounds, after plunging 98% over the past five years.
“We expect the group’s earnings outlook to come under pressure in the near term as funding costs rise due to intensifying competition for deposits and potentially higher costs of obtaining wholesale funding. In addition, capital is tight,” Fitch said.
Fitch also drew attention to the fact that Metro must refinance £350m of senior bonds by October next year.
Last month, Metro announced it had not yet received permission from regulators to change the way capital requirements on its mortgage book are calculated.
This change will improve the bank’s capital position and increase its profitability. At the time, Metro said that while it “continues to engage with the PRA regarding its application, it is unsure whether it will be approved”.
One adviser said the PRA’s decision on mortgages was “information they are tired of”.
Launched in 2010, Metro marked the first new UK bank to open 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 business loan portfolio was far riskier than previously reported, causing its share price to fall 39% in a single day and being fined £10 million by the FCA, which said the bank misled investors.
Colombian billionaire Jaime Gilinski is its largest investor in Spaldy Investments. His daughter, Dorita, is a board member.
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