Metro Bank is engaging shareholders this weekend to discuss potential funding options as the struggling British lender aims to stabilize its finances and satisfy regulators.
According to sources, Metro Bank has deemed a 600 million pound ($734 million) capital injection proposed by bondholders as ceding too much control. So the bank is consulting equity investors on alternatives.
Metro Bank has also discussed selling part of its mortgage portfolio to raise funds. This is while maintaining constant contact with the Bank of England’s Prudential Regulation Authority regarding its plans.
The exploratory talks follow Metro Bank’s reporting accounting errors, executive departures, and delays in securing key regulatory capital relief over recent years.
Earlier this week, Metro Bank saw its stock plunge over 30% after posting disappointing quarterly results and guidance. The lender attributed weak net interest margins to legacy commercial loans.
However, Metro Bank does have government backing, having been approved for the Bank of England’s Term Funding Scheme, which provides cheap financing to encourage lending.
With its finances under scrutiny, Metro Bank aims to assure regulators it can shore up its capital position through these latest funding conversations.
However, finding a balance between diluting existing shareholders and avoiding onerous bondholder terms presents challenges.
Selling part of Metro Bank’s mortgage assets also risks destabilizing its lending business if not calibrated properly.
Still, Metro Bank’s pursuit of multiple options shows it recognizes the need for bold moves to reignite sustainable growth and profitability. This weekend’s investor engagements mark a pivotal moment for Metro Bank to plot its path forward.