Metro Bank shares crash to record low: Troubled lender suffers sharp sell-off amid reports it is seeking a lifeline of up to £600m

Shares in troubled lender Metro Bank plummeted by more than a quarter yesterday on reports that it was seeking hundreds of millions of pounds to shore up its finances.

Investors took fright as Metro confirmed that it was exploring options including a share issue, new borrowing and the sale of assets.

The shares were down by as much as 32 per cent and closed 25.7 per cent, or 13p, lower at 37.5p valuing the bank at less than £65million.

That was just a fraction of its £1.6billion value when making its stock market debut in 2016.

Cash crisis: Metro Bank has confirmed that it was exploring options including a share issue, new borrowing and the sale of assets to raise cash

The bank’s bonds also suffered a sharp sell-off.

Chairman Robert Sharpe held crisis talks with City regulators, though the bank said that it was a ‘long-standing, pre-diarised meeting’.

Metro Bank is due to refinance £350million of its debt by October 2024. And reports suggested it could also be looking at £100million equity raise – though the Financial Times suggested this could be as much as £250million.

Meanwhile, Sky News reported that the lender had kicked off talks about a £3billion sale of its mortgage book.

Metro said it was ‘evaluating the merits of a range of options, including a combination of equity issuance, debt issuance and/or refinancing and asset sales’ but that ‘no decision has been made on whether to proceed with any of these options’.

And the bank stressed that it had been profitable on an underlying basis for the past three quarters, with its next update expected to show ‘continued momentum’ and the bank ‘well positioned for future growth’.

But analysts voiced deep concerns. Gary Greenwood of Shore Capital said: ‘Metro Bank has been struggling for a number of years to establish itself as a profitable and self-sustaining bank.

‘During this period the share price has collapsed.

‘Supporting a further capital raise for this struggling bank would be akin to throwing good money after bad.

‘We believe Metro Bank is in a very tricky situation.

‘The group needs to move fast to shore up its balance sheet. If it cannot convince the regulator it can deliver, it may find matters are taken out of its own hands.’

The bank was also hit by a report from ratings agency Fitch, which placed it on negative watch.

It cited increased risks to Metro’s business model, capital position and funding.

The note said earnings were expected ‘to come under pressure in the short term’ amid growing competition to attract savers with higher interest rates and the higher cost of borrowing money on wholesale markets.

Metro has been plagued by problems over recent years but this year said it was ‘fixing the issues of the past while positioning itself for the future’.

In 2019, the disclosure of an accounting error spooked investors and saw hundreds of millions wiped off its market value.

The fall-out ultimately led to the departure of top managers led by founder and chairman Vernon Hill and then chief executive Craig Donaldson.

This post first appeared on Dailymail.co.uk