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Metro Bank’s chair and chief executive have been summoned to urgent talks with the UK’s top financial regulators today, after the bank’s share price plunged 28 per cent following reports of a large fundraising.
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 to 36.32p by mid-morning on Thursday, leaving the bank’s market capitalisation at around £62mn. The price of a £350mn bond due in 2025 fell 7.4p to a record low of 62.6p.
Metro’s chief executive Daniel Frumkin and chair Robert Sharpe have both been asked to meet officials from the Bank of England’s Prudential Regulation Authority and Financial Conduct Authority later on Thursday, according to two people familiar with the situation.
“Metro Bank notes the recent press speculation regarding a potential capital raise,” the bank said in a 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.
A Metro Bank spokesman declined to comment on the regulatory summons, as did the FCA and the PRA.
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 Bank of England 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. Last year, the FCA 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.