Metro Bank (LON: MTRO) gives one of those delightful little lessons in how to read a corporate announcement. MTRO shares fall 24% as people do so. For what Metro has done is confirm some of the gossip running around the newspaper - a £600 million capital raise for example - without actually saying so out loud. It’s actually quite the masterpiece of the spinner’s art to be honest - and we know, we’ve written press releases ourselves.
From the FT: “Metro Bank is seeking to raise up to £600mn after its share price fell almost 50 per cent in recent weeks, said people with knowledge of the plan. The UK challenger bank is in talks with investors about raising £250mn in equity funding and £350mn in debt to shore up its balance sheet, the people said. The talks came after regulators last month failed to approve a request from Metro to lower the capital requirements attached to its mortgage business.”
That’s last night - so the news had got out. So, today the Metro Bank announcement to the stock exchange: “Metro Bank notes the recent press speculation regarding a potential capital raise. Following Metro Bank's update on capital planning on 12 September 2023, the Company continues to consider how best to enhance its capital resources, with particular regard to the £350m senior non-preferred notes due in October 2025.” They’ve got to refinance that bond and the current holders aren’t going to roll it over. So, yes, the £350 million is needed. “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.” Oh, and a share issue for capital. Finally “For three consecutive quarters ended 30 June 2023, the bank has been profitable on an underlying basis,” What that really means is that we’re not going to be able to shore up the balance sheet with retained profits. So, capital issue it will have to be.
Metro Bank share price from Google Finance
So, yes, the press speculation was right then. We’ve talked before of Metro Bank: “Metro Bank (LON: MTRO) shares are down 6%. The MTRO share price problem is that the application to be allowed to sell mortgages has been declined. Whether we call it declined again or delayed again makes little difference. They’re not going to get the licence this year. If we’re really bear British property values then that could be seen as a bonus really but that’s not the way the share price is reacting.” That’s the mortgage capital issue the FT piece was referring to.
Yep, Metro Bank needs more capital - so, who wants to give it to them?
