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The Guardian - UK
The Guardian - UK
Kalyeena Makortoff Banking correspondent

Metro Bank shares rebound amid reports of £600m capital offer

Metro Bank branch in Cardiff, Wales
Metro Bank became the UK’s first new high street lender in more than a century in 2010. Photograph: Matthew Horwood/Getty Images

Metro Bank shares rebounded from all-time lows on Friday, amid reports that the embattled lender was sitting on a £600m offer from bondholders that could cover its looming funding pressures.

Regulators have been keeping a close eye on developments at the high street lender, which needs fresh investor funding, and is exploring selling off up to 40% of its mortgage book, in order to shore up its balance sheet and ensure it can continue to grow.

The bank’s shares jumped as much as 30% on Friday afternoon, reversing a 25% drop a day earlier that was sparked by fears it could struggle to source enough funding – including to refinance £350m worth of bonds as early as next autumn.

While shares have lost half their value over the past month, Metro stock ended the day up 21% at 45.25p each.

The recovery came amid news that the bank – which became the UK’s first new high street lender in more than a century in 2010 – had been sitting on an offer for a £600m capital injection from bondholders since Monday.

The Financial Times said Metro Bank had acknowledged but not yet accepted the offer, which could cover its funding needs and avoid the need to sell off assets. The newspaper said bondholders – represented by boutique investment bank, PJT Partners – first contacted Metro Bank’s board on Monday, two days before news of its funding needs caused panic and a drop in its share price.

PJT was contacted for comment and Metro Bank declined to comment.

Metro Bank’s funding needs have gained more attention than usual, given the simmering concerns over any lingering weaknesses in the banking sector. It follows the mini-crisis in March that led to the collapse of three regional US lenders, including Silicon Valley Bank and Switzerland’s largest lender, Credit Suisse.

The challenger bank has insisted it is “well positioned for future growth” and pointed to the fact that it swung back to profit in the first half of the year.

However, the pressing concern is that Metro is operating at the edges of its capital requirements, which are set by regulators and are meant to offset mortgage risks and cover unexpected losses. Without fresh funding, it could be forced to slow or pause lending, ultimately harming its future profits.

It also needs to repay £3bn to the Bank of England, having borrowed money through a scheme meant to boost lending to small business customers.

While Metro made an early payment worth £550m to the Bank of England in July, it will have to find money to cover another £1.9bn in 2025 – around the same time that it needs to refinance its £350m worth of bonds.

Metro Bank told investors on Thursday that it was considering a “range of options” to raise money, including through sale of new debt, shares or existing assets – including a slice of its mortgage book.

Meanwhile, it has tried to dissuade customers from pulling their cash, and told worried customers on X, formerly known as Twitter, that “Metro Bank is a safe & secure place for our customers’ money and property. We continue to meet our minimum regulatory capital requirements and customers funds are protected by the Financial Services Compensation Scheme.”

There have been concerns that customers could end up panicking and pulling their money, causing a repeat of 2019, when rumours of Metro’s financial health led to customers withdrawing cash and emptying safety deposit boxes.

That followed an accounting scandal, in which Metro Bank underreported how much capital it needed to hold against its risks. It was eventually fined £10m for misleading investors.

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