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Metro Bank to raise £350m following accounting blunder

The equity raise is expected to be launched in the first half of 2019.


The episode has raised serious questions over the chief executive’s future (Laura Lean/PA)

The episode has raised serious questions over the chief executive’s future (Laura Lean/PA)

The episode has raised serious questions over the chief executive’s future (Laura Lean/PA)

Metro Bank has announced plans to raise £350 million through a new share sale as it looks to plug a shortfall linked to an accounting error that saw nearly 40% wiped off its value on one day.

The lender said on Tuesday that it has entered into a “standby underwrite agreement” with RBC Capital Markets, Jefferies and KBW for the equity raise.

The transaction is expected to be launched in the first half of 2019 after consultation with shareholders, Metro added.

It comes just weeks after Metro told the market it had miscalculated the risk weighting of commercial loans secured on property and certain specialist buy-to-let loans.

As a result, the group has been forced to raise fresh capital to make up for the shortfall on its balance sheet.

Metro also revealed that the Financial Conduct Authority and Prudential Regulation Authority intend to investigate the accounting error.

Chief executive Craig Donaldson has come under particular fire over the debacle for insisting that it was the bank that detected the accounting error as part of a review of its year-end accounts.

Metro later admitted that it was in fact pointed out first by the Bank of England and not unearthed by the lender.

The episode has raised serious questions over the chief executive’s future.

At the time, the disclosures led to shares in the high street bank dropping almost 40%.

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Shares in Metro Bank closed down nearly 16% at 1,300p on Tuesday.

Metro said that chairman Vernon Hill and other directors intend to participate in the equity raise.

The group also issued full year results earlier than planned.

Figures released after the market close on Tuesday showed Metro booked underlying pre-tax profits of £50 million in 2018, a rise of 140%, but below forecasts of £59 million.

On a pre-tax basis, profits rose from £18.7 million to £40.6 million.

The bank’s net interest margin, the difference between the money it makes on lending and pays out on deposits, fell from 1.93% to 1.81%.

Customer accounts grew 403,000 to 1.6 million and deposits were up 34% year-on-year to £15.7 billion.

Mr Donaldson said: “These are a strong set of results demonstrating progress across all key areas despite an uncertain and challenging environment.

“While our strategy is delivering, we need to evolve to ensure continued progress over the medium term.

“Today’s update on our growth, cost efficiency plans and capital requirements, enhanced by last week’s C&I fund award, outlines how we are building the best bank for customer service whilst continuing our focus on generating growth and strong long-term returns for shareholders.”

Despite the commotion surrounding the bank, Metro last week won a £120 million portion of a fund aimed at boosting competition in the business banking sector.

Metro has grown rapidly since it was founded by US banking tycoon Mr Hill in 2010, operating from over 60 branches across the UK and employing nearly 4,000 people.

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

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