Metro Bank Shares Keep Sliding Amid Fundraising `Urgency'
(Bloomberg) -- Metro Bank Plc stock slid to another record low despite the British lender’s assurances that its 350 million-pound ($453 million) share sale to repair its finances was well advanced.
Metro has started “final discussions with existing shareholders and new investors, and the feedback continues to be positive,” the firm said in a statement, confirming reports over the weekend. The bank said the sale will be completed by the end of the second quarter, sticking to a schedule announced in February.
Shares in the bank have lost three-quarters of their value since January after regulators found that some of Metro’s mortgages were given the wrong risk weighting. The decline deepened earlier this month, when the firm said some business customers had pulled their deposits in the first quarter. Over the weekend, Metro moved to reassure customers after a photo of queues at a branch in Harrow, northwest London, was posted on social media.
“With retail investors getting spooked, I really think they need to get on and announce this capital raise ASAP,” John Cronin, an analyst at Goodbody in Dublin, said by phone. “The best thing you could do with the business is sell it to someone bigger.”
Metro, which has become the most shorted company on the London stock market, tumbled 11% to 475 pence on Monday. The company’s bonds also fell.
There is “significant urgency” for Metro to get the share sale done, wrote Robert Sage, an analyst at Macquarie Capital, who reduced his earnings per share estimates by more than 30 percent for 2020 and 2021. “Capital is, in our view, at minimum levels.”
While “the perception of a stock overhang persists, the share price continues to decline, and our expectations of the price at which the equity issue will be made continue to reduce,” Sage wrote.
Metro Bank branches are open seven days a week. Over the weekend, its Twitter account fielded multiple questions from people who said they were customers. Some said there was a queue in their local branch. The bank said that there were “increased queries” about access to safe deposit boxes.
“We’ve seen reports of some false rumors about Metro Bank on social media and messaging apps,” Anthony Silverman, a spokesman for the firm, said in an emailed statement on Saturday. “There is no truth to these rumors and we want to reassure our customers that there is no reason to be concerned.”
Metro was among the challenger banks that appeared in Britain after the financial crisis, taking on the nation’s four big established lenders. Led by the American entrepreneur Vernon Hill, the bank has been dotting southeastern England with branches while the legacy lenders close them, aiming to attract retail customers and their deposits with better service and longer hours.
Any deposit outflows are a “fundamental challenge to the Metro business model,” Macquarie’s Sage wrote. “Our view of the stickiness of the deposit franchise, and by implication the loyalty of the customer base, is less good than we had previously thought.”
©2019 Bloomberg L.P.