Metro Bank shares plunged to fresh lows on Wednesday, after the lender shocked markets with plans to raise a further £350m just months after its last cash call.
The high street challenger also revealed that it is under investigation by City regulators, the Financial Conduct Authority and Prudential Regulation Authority, over a major accounting failure first disclosed last month. The announcements were made alongside the bank’s annual results on Tuesday night.
Metro Bank’s share price slumped once again on Wednesday and was down more than 26% at about 950p shortly before the London market closed. The company’s shares have lost 50% of their value since the accounting issue was announced.
The lender confirmed in January that hundreds of millions of pounds of commercial property loans and loans to commercial buy-to-let operators had been wrongly classified in risk terms and should have been among its “risk-weighted assets” (RWAs). While the bank originally suggested it had uncovered the issue on its own, it later emerged the error was caught by the PRA.
Craig Donaldson, the CEO, is now giving up his annual bonus, which was worth £800,000 in 2017, over the debacle. He also offered to resign, but said he has full backing of the board and is staying put. After apologising to investors over the affair, he denied that the latest cash call was influenced by the loans misclassification.
The challenger bank raised £303m from investors last July, after which Donaldson ruled out further cash calls to fuel the lender’s growth in the medium term.
When asked to respond to criticism over his U-turn, the CEO said: “I think it’s fair to say that we would always look to raise capital when it’s right for the organisation and we want to raise capital in advance of the growth, and therefore we made the decision over the last few days and weeks to raise the capital now.”
John Cronin, a financials analyst at stockbroker Goodbody, said the recent slowdown in deposit growth and the fact that Metro was “consistently in need” of more core capital were all “serious concerns”. He said it is not yet clear how the stock would react over the coming days, but expected shares to fall to 729p.
Metro Bank shareholder Royal London Asset Management said the recent accounting error threw up red flags for investors. “Governance issues are always the canary in the coalmine. This case is no different. We are seeking a meeting with the company to understand the steps it is taking to reassure shareholders and improve governance and accounting oversight.”
