Shares in Metro Bank, a UK-based high-street bank, experienced two brief suspensions from trading on Thursday due to a sharp decline of nearly 30%. This significant drop was a result of reports that Metro Bank urgently needed to raise capital in order to strengthen its balance sheet.
Since September 12, Metro Bank shares have fallen by over 60%. This decline began when the bank announced that its plan to run its mortgage business at a lower cost had not been approved by UK regulators. The London Stock Exchange confirmed that the trading halts were triggered by its circuit breaker mechanisms, responding to Metro Bank’s stock crash.
Metro Bank released a statement on Thursday, stating that it is currently considering various options to enhance its capital resources. One option involves asking investors to help refinance debt of £424 million ($727 million) that is due in 2025. Additionally, Metro Bank is exploring the possibility of raising hundreds of millions of pounds through the sale of debt, shares, or assets. However, the bank clarified that no decision has been made on whether to proceed with any of these options.
Following the news of Metro Bank’s urgent fundraising efforts, rating agency Fitch placed the bank on negative watch. Fitch cited increased risks to Metro Bank’s business model, capital position, and funding as the reasons for this decision.
Founded by US billionaire Vernon Hill in 2010, Metro Bank became the first new high-street bank in the UK in over a century. However, in 2019, the bank faced a misreporting scandal which resulted in the departure of its chair and chief executive.
The recent events surrounding Metro Bank have raised concerns about the bank’s stability and its ability to overcome the challenges it faces. With its stock plummeting and its urgent need for capital, the future of Metro Bank remains uncertain.
As the situation unfolds, investors, regulators, and the banking industry will closely monitor Metro Bank and its efforts to raise capital. The outcome of these efforts will undoubtedly have a significant impact on the bank’s future and its position in the UK banking sector.
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