Metro Bank (MTRO) has begun a process to sell a £3 billion chunk of its mortgage book to shore up its finances, Sky News reported on Thursday.
The under-pressure lender as sized up high street banking neighbours as possible buyers, including Lloyds Banking Group and NatWest Group, Sky News reported, citing City sources.
Metro Bank shares fell 29% to 36.10p each in London on Thursday, but have recovered more than 20% on Friday morning.
The measures would form part of a wider capital raising plan, which Sky News reported would include a £100 million equity raise and a refinancing of £350 million worth of debt which is due roughly this time next year.
The Financial Times had that Metro Bank’s possible balance sheet boosting efforts would be worth £600 million, £250 million in equity funding and £350 million in debt.
On Thursday, Metro Bank said it “continues to consider how best to enhance its capital resources.” In particular, it noted its £350 million senior non-preferred notes due in October 2025.
“The company is evaluating the merits of a range of options, including a combination of equity issuance, debt issuance and/or refinancing and asset sales. No decision has been made on whether to proceed with any of these options,” it said.
Metro Bank also said that in the three months to June 30, it has been profitable on an underlying basis. It added that it expects its quarter three trading update to show continued momentum in Personal & Business Current Account growth and customer acquisition, in line with expectations.
Looking ahead, Metro Bank said it continues to be well positioned for future growth.
However, the past few years have been tricky for Metro Bank.
Back in 2019, UK regulators found an accounting error in Metro Bank’s loan book.
In January of that year, Metro Bank announced it had underestimated the risk on its commercial loans book and needed to raise capital to compensate for the shortfall and, as a result, was forced to issue an update highlighting the increased risk.
More recently, Metro Bank announced last month it had not received permission from regulators to change the way it calculated the capital requirements on its mortgage book.
That change would have improved the bank’s capital position and made it more profitable. At the time, Metro said that while it “continued to engage with the PRA on its application, there is no certainty that approval will be obtained”.
Metro Bank was demoted from the FTSE 250 index in September 2019. It has not returned since. The company had listed in 2016.
