Metro Bank Holdings PLC on Thursday said it is continuing to evaluate the best ways to enhance its capital resources.

Shares in Metro Bank were down 23% at 38.81 pence in London on Thursday morning, valuing the firm at around £67 million. In 2018, the bank was valued at around £3.5 billion.

The UK challenger bank was responding to a Financial Times report on Wednesday.

The FT reported that Metro Bank is seeking to raise up to £600 million, citing people with knowledge of the plan.

The lender is in talks with investors about raising £250 million in equity funding and £350 million in debt to shore up its balance sheet, the report said.

The talks came after regulators last month failed to approve a request from Metro to lower the capital requirements attached to its mortgage business.

On Thursday, Metro Bank said it ‘continues to consider how best to enhance its capital resources.’ In particular, it noted its £350 million senior non-preferred notes due in October 2025.

‘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 said.

Metro Bank also said that in the three months to June 30, it has been profitable on an underlying basis. It added that it expects its quarter three trading update to show continued momentum in Personal & Business Current Account growth and customer acquisition, in line with expectations.

Looking ahead, Metro Bank said it continues to be well positioned for future growth.

However, the past few years have been tricky for Metro Bank.

Back in 2019, UK regulators found an accounting error in Metro Bank’s loan book.

In January of that year, Metro Bank announced it had underestimated the risk on its commercial loans book and needed to raise capital to compensate for the shortfall and, as a result, was forced to issue an update highlighting the increased risk.

More recently, Metro Bank announced last month it had not received permission from regulators to change the way it calculated the capital requirements on its mortgage book.

That change would have improved the bank’s capital position and made it more profitable. At the time, Metro said that while it ‘continued to engage with the PRA on its application, there is no certainty that approval will be obtained’.

Metro Bank was demoted from the FTSE 250 index in September 2019. It has not returned since. The company had listed in 2016.

Rating agency Fitch earlier Wednesday put Metro on negative watch, citing increased risks to its business model, capital position and funding of the company.

Fitch said: ‘We expect the group’s earnings prospects to come under pressure in the short term due to rising funding costs, resulting from higher competition for deposits and given likely more expensive access to wholesale funding. In addition, capitalisation is tight.’

Fitch also called attention to the £350 million of senior bonds.

Copyright 2023 Alliance News Ltd. All Rights Reserved.