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Metro Bank Struggles to Raise Fresh Capital as Stock Downgraded, Reports of Mortgage Book Sale Emerge

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Metro Bank Faces Struggle to Raise Fresh Capital, Analysts Warn

Metro Bank, the U.K.’s troubled lender, is expected to face difficulties in raising new capital to stabilize its balance sheet, according to analysts. The bank’s stock has been downgraded by several ratings agencies and investment banks, following a tumultuous 24 hours that saw its shares briefly suspended from trading twice after plummeting more than 29% from Wednesday’s close.

Amidst the chaos, reports emerged that Metro Bank was considering raising £250 million ($305 million) in equity funding and £350 million of debt. The bank confirmed on Thursday that it was exploring options to enhance its capital resources. Furthermore, rumors have circulated that Metro Bank is in discussions to sell off a third of its mortgage book, with potential buyers including HSBC, Lloyds Banking Group, and NatWest Group.

Selling off these assets would undoubtedly impact the bank’s earnings, but it would also significantly reduce the amount of capital it would be required to hold. Metro Bank has yet to respond to these reports, and the potential buyers mentioned have declined to comment.

Analysts have expressed skepticism about the bank’s ability to raise funds successfully. Stifel, an investment bank, downgraded Metro Bank’s stock from “hold” to “sell,” stating that there are “no easy solutions for the bank, and risks to the bonds remain skewed to the downside.” The analysts even suggested that the bank could potentially be nationalized under the Bank of England’s resolution scheme and then sold, either as a whole or in parts.

Barclays Bank also downgraded the stock, classifying it as underweight. Meanwhile, Fitch Ratings placed Metro Bank on “ratings watch negative” due to concerns about the bank’s business model stabilization, capital buffers, and funding in the short term.

The challenging situation at Metro Bank underscores the ongoing struggles faced by many challenger banks in the U.K. The bank is projected to require up to £1 billion in capital over the next two years, according to analysts, although it is currently breaking even or slightly profitable under the current market conditions.

As the bank continues to navigate these difficulties, investors and customers will be closely monitoring its progress. Metro Bank’s ability to raise fresh capital and stabilize its balance sheet will be crucial in determining its future trajectory and the confidence it can inspire in the market.

More detail via CNBC here… ( a )

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