Metro Bank shares plunge despite fundraising progress

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Shares in Metro Bank fell more than 9% to a record low Monday despite the British lender’s assurances that its 350-million-pound ($455 million) share sale to repair its finances was well advanced.

Metro has started “final discussions with existing shareholders and new investors, and the feedback continues to be positive,” the firm said in a statement, confirming reports over the weekend.

The bank said the sale will be completed by the end of the second quarter, sticking to a schedule announced in February when it first said it was raising money. Shares in the bank have lost three-quarters of their value since regulators found that some of Metro’s mortgages were given the wrong risk weighting.

“While this may provide near-term respite, it is still not enough in our view,” Citigroup analysts Nicholas Herman and Andrew Coombs said in a note before the market open on Monday.

Metro was among the challenger banks that appeared in Britain after the financial crisis, taking on the nation’s four big established lenders. Led by the American entrepreneur Vernon Hill, the bank advertises longer opening times and branches that are friendly to dogs, even providing water bowls.

A shareholder vote to approve the transaction is expected to take place in the coming weeks, according to the report, which cited unidentified sources. The plan to raise equity to support Metro Bank’s growth “is well advanced,” the company said in a statement in response to the report, adding that it has commenced final discussions with existing shareholders and new investors, “and the feedback continues to be positive.”

The stock fell as much as 9.5% in early trade on Monday. Metro has also become the most shorted company on the London stock market.

Bloomberg News