Troubled British lender Metro Bank is actively consulting shareholders this weekend to discuss potential capital raising options as it looks to stabilize its finances and satisfy regulatory requirements.
According to sources, Metro Bank believes a £600 million injection proposed by bondholders concedes too much control. So the bank is engaging equity investors to find more favorable alternatives.
Exploring All Funding Avenues
In addition to equity capital, Metro Bank has also assessed selling part of its mortgage portfolio to generate fresh funds. The lender remains in close discussions with the Bank of England’s Prudential Regulation Authority regarding its plans.
This urgent pursuit of financial options follows Metro Bank revealing accounting errors, executive turnover, and delays in securing key regulatory relief in recent years.
Earlier this week, Metro Bank saw its stock plunge 30% after posting disappointing quarterly results attributed partly to underperforming commercial loans.
Regaining Profitability a Priority
While backed by government financing schemes, Metro Bank has yet to return to profitability since its 2010 founding. The latest efforts to raise new capital reflect the ongoing challenges of stabilizing its business model.
By exploring all possible funding levers, Metro Bank aims to assure regulators its capital position is solid enough to support lending growth.
But balancing dilutive share issuances versus unfavorable bondholder terms poses difficulties. Selling mortgage assets also risks destabilizing its core lending book.
Still, Metro Bank’s comprehensive pursuit of options demonstrates its commitment to making bold moves necessary to spark sustainable profit growth once more. This weekend’s shareholder engagements mark a pivotal moment for Metro Bank to plot its path forward.