Analysts anticipate that it will be difficult for Metro Bank to secure additional capital to strengthen its financial position. Thursday saw the bank's stock suspended on two occasions after it made known its search for new financing.The news suggests that institutions such as HSBC, Lloyds Banking Group, and NatWest Group might have to invest up to £3 billion to purchase the bank's mortgages.
Analysts have suggested that Metro Bank may struggle to raise necessary capital to support its balance sheet. Following two days of turmoil in which its stock was temporarily suspended in the wake of a 29% decline, the bank has confirmed they are looking into "enhancing its capital resources" and are in discussions to sell a third of its mortgage book. However, investment bankers at Stifel have downgraded the stock to "sell" and Fitch Ratings has placed it on "ratings watch negative." The bank has a potential need for up to a billion in capital over the next two years, and Barclays Bank has downgraded their stock to underweight.
The latest chapter in the ongoing story of Metro Bank has seen the Bank of England's Prudential Regulation Authority suggest it was unlikely to let the lender use its own risk models for certain mortgages. On Thursday, chair of Metro Bank, Robert Sharpe, was asked to meet with the Bank of England's regulatory authority and the Financial Conduct Authority, according to the Financial Times. This came after a period of increased contact between the two parties, as Metro Bank's share price dropped nearly in half. When contacted by CNBC, the Bank of England declined to comment on the meeting.
Since mid-February, Metro Bank's stock price has drastically decreased, falling to a market cap of £87 million. DBRS Morningstar believes the bank's access to external funds is limited; however, it is unlikely that Metro Bank's issues will have a significant effect on the U.K.'s finance sector because of its size.In 2019, the bank was fined a total of £15 million from the FCA and PRA for incorrectly measuring its risk-weighted assets.Short sellers have taken advantage of this circumstance, accruing a profit of £7.3 million in 2023, with £2.5 million earned in October alone.Ortex estimates that 9.35% of Metro Bank's tradable shares are being borrowed and likely sold short.
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