Metro Bank shares surge after discount share sale raises £375m
Metro Bank shares have surged after the high street bank secured £375 million from investors who backed the firm after a major loans blunder.
Shares in the challenger bank jumped by 17.5% to 630p in early trading after the discount share sale raised more than the £350 million initially targeted.
The equity raise follows an accounting error in January which left the bank short of the capital it needed to grow.
The lender, which had 67 branches in London and the South East, revealed in January that it had under-reported the risk element on some loans by almost £1 billion.
It later revealed a hit to profits and suffered a subsequent 75% decline in share price since the start of the year.
In the wake of the share sale, Metro Bank founder and chairman Vernon Hill said: “I am really pleased with the support we have received from both existing and new shareholders, and for their confidence and belief in Metro Bank’s strategy.
“Although we’ve faced challenges in the past few months, we remain fully focused on providing the outstanding service and convenience that our customers expect of us.
“This growth capital will enable us to continue to expand the business and implement our strategic initiatives.”
However, this morning major shareholder Legal & General Investment Management (LGIM) has publicly announced it had lost confidence in the chairman and will vote against Mr Hill at the bank’s AGM next week.
LGIM also criticised the investors poor gender diversity, pay practices and failure to manage conflicts of interest.
The Bank of England has given the lender a clean bill of health following the equity raise.
A Bank of England spokesman said: “Metro Bank is profitable and continues to have adequate capital and liquidity to serve its current customer base. It has raised additional capital in order to fund future growth.”
Russ Mould, AJ Bell investment director said: “Quite why it has taken Metro Bank nearly three months to get around to arranging the fund raising it first suggested on 26 February is a bit of a mystery.
“However, demand has been so strong that Metro has been able to raise more than the £350 million originally planned.
“This should lay to rest the more lurid headlines about the company’s financial health and allow it to focus on reassuring customers and shareholders and get back to the day job of accepting deposits and making loans.”