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Metro Bank shares tumble after accounting error U-turn

The Prudential Regulation Authority first flagged the error, not the bank.


Metro Bank in Tottenham Court Road, London (PA)

Metro Bank in Tottenham Court Road, London (PA)

Metro Bank in Tottenham Court Road, London (PA)

Shares in Metro Bank continued to come under pressure after it was revealed that an accounting error was pointed out first by the Bank of England and not by the lender.

The high-street bank’s shares dropped almost 40% last week when Metro flagged that it had miscalculated the risk weighting of commercial loans secured on property and certain specialist buy-to-let loans.

To correct the mistake, Metro needs to raise over £300 million according to analysts, which would risk diluting its share capital.

On Thursday, shares continued to fall and were down nearly 10% at 1,104p after Metro said that the Prudential Regulation Authority unit of the Bank of England had helped to “identify potential inconsistencies in certain loans”.

Metro’s chief executive Craig Donaldson had previously insisted that it was bank that had found the error as part of a review of its year-end accounts.

Metro Bank said: “The Prudential Regulation Authority (PRA) has subjected Metro Bank to the highest of supervisory standards. Ongoing supervision by the PRA helped to identify potential inconsistencies in certain loans which were raised with the bank.

“Metro Bank then undertook a comprehensive review, in order to establish the full picture before our year end, which identified the need to make adjustments in our risk-weighting of some commercial and specialist buy-to-let loans.”

The Bank of England declined to comment and Metro did nOt reveal when the central bank raised the inconsistencies in its loan book.

Last week, the bank also said that it expects underlying pre-tax profits to come in at £50 million for 2018, a rise of 138% but below forecasts of £59 million. Metro is due to publish full-year results on February 27.

Metro has grown rapidly since it was founded by US banking tycoon Vernon Hill in 2010, operating from 66 branches across the UK and employing nearly 4,000 people.

However, it made headlines after Mr Hill, the bank’s chairman, came under fire last year over payments made by the lender to his wife’s architecture firm.

PA Media