RE: Question28 Sep 2019 12:38
Same thoughts. Here's last week's FT article. That's if you don't mind me posting it ;)
Metro Bank’s share price plunged by a third to a record low after a failed attempt to raise £200m, prompting speculation from analysts and rivals that the challenger bank could be forced into a sale.
The lender had to pull a bond sale on Monday after a lack of investor interest, despite offering an unusually high interest rate of 7.5 per cent.
However, its advisers insisted on Tuesday that it would be able to raise the new debt after it issues its third-quarter results next month. People close to Metro said the bank was still optimistic about meeting a Bank of England deadline of January 1 to raise the new debt.
Its shares fell 35 per cent to 177p on Tuesday, bringing their decline since the start of the year to almost 90 per cent.
“People do these things, pause and then come back again — Bank of Ireland for example pulled an issuance earlier this year — so it’s not as though we’re in unprecedented territory,” said one adviser to the bank.
“Waiting for more positive Q3 results and coming back in late October or early November is a realistic scenario.”
We wouldn’t be surprised to see Metro cornered into a sale in the relative near-term
John Cronin, analyst at Goodbody
Another adviser added that Metro would benefit from more clarity over Brexit, and an update on its search for a new chairman.
The bank has been under pressure since January, when it revealed it had miscategorised large numbers of loans when calculating how much capital it needed to protect against losses.
A £375m share issue in May provided enough funds to meet its capital requirements, but it also must issue debt to meet new so-called MREL regulations designed to prevent governments from having to bail out banks in the event of a crisis.
The two advisers said Metro had not ruled out asking the BoE for additional time to meet the new rules. One said he was confident the central bank would be willing to grant a reprieve because “they don’t want to create distress in a major bank with lots of customers”, but they were confident it would not have to.
They pointed to the precedent set by the Co-operative Bank, which was given extra time to raise MREL when it was going through a major restructuring.
The Bank of England declined to comment.
Customers pulled £2bn of deposits out of Metro Bank in the wake of its scandal, but last week’s bond prospectus showed it recovered much of that over the summer.
However, Jérôme Legras, head of research at Axiom Alternative Investments, which attended last week’s investor roadshow, said it would take more than a single quarter of improved performance to win over sceptical investors.
“I would say the biggest uncertainty right now is the [Financial Conduct Authority’s] investigation?.?.?.?that is clearly something that will need to be clarified before they can be a normal capital markets issuer.”
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