Metro Bank shares fall after reassuring over fundraising
Metro Bank has seen its shares come under pressure after the lender was forced to quash “false rumours” on social media over its financial health and said plans to shore up its finances were well advanced.
The troubled group saw its stock drop 5%, having fallen as much as 9% at one stage, after it said it was in final discussions with existing and new shareholders over plans to raise £350 million of equity, which is expected to complete by the end of June.
It came after a difficult weekend that saw the group suffer a rush of customers to some of its west London branches, amid concerns over the bank’s financial health, following a WhatsApp message advising people to pull money out of their accounts and empty safe deposit boxes.
The group said in a statement at the weekend: “We’re aware there were increased queries in some stores about safe deposit boxes following false rumours about Metro Bank on social media and messaging apps.
“There is no truth to these rumours and we want to reassure our customers that there is no reason to be concerned.”
It comes after a tumultuous past few months for the group, following an accounting blunder and slump in profits.
In January, Metro flagged that it had miscalculated the risk weighting of commercial loans secured on property and certain specialist buy-to-let loans.
It later announced a £350 million cash call to make up for the shortfall on its balance sheet.
Michael Hewson, chief market analyst at CMC Markets, said: “Not surprisingly shareholders are furious, having already been tapped for £300 million last summer and while the bank has announced this morning that the £350 million capital raising is well advanced, they haven’t answered any of the questions around why the error happened in the first place.”
The group’s first quarter figures earlier this month showed quarter-on-quarter deposit growth was affected by some major customers withdrawing during the fallout from the debacle, resulting in a 3.6% reduction.
It also saw underlying first quarter pre-tax profits sink to £6.9 million, compared with £10 million a year ago, while statutory profits halved to £4.3 million.
To compound matters, shareholders have been urged to vote against the re-election of founder and chairman Vernon Hill amid the fallout from the accounting blunder.
Investor advisory firm Glass Lewis has recommended that shareholders reject Mr Hill’s reappointment at the lender’s annual meeting on May 21, citing millions in payments made by Metro to his wife’s architecture firm InterArch.
Mr Hewson added: “It is highly probable that shareholders will insist on some management changes as a quid pro quo for any new capital, with chairman Vernon Hill, as well as chief executive Craig Donaldson, in the firing line of some investors, on the back of a share price dive from £35 12 months ago to under £5 now.”