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Depends on how you view it.
The existing £350m always needed refinancing before October 2024.
If Metro Bank can get AIRB before then that changes a lot of things in Metro Bank’s favour.
The bit that wasn’t known and the bit that Metro Bank aggressively pushed back against on Investor Calls was the need to raise funds “urgently”. If there’s no urgency then it’s all speculation. If it’s urgent then shareholders are doomed unless Bank of England/PRA through them a lifeline.
They could do one of the following
- Get a loan, won’t be cheap
- Issue more shares to raise cash, existing shareholders will be diluted, badly
- Sell assets (e.g. Mortgage Loan Book) to reduce amount of Regulatory Capital they need and possibly release funds
- Sell the bank in its entirety
Chances of them raising the funds are slim so that leaves taking on debt at ridiculous rates, selling more of their mortgage book, or doing an outright sale. If they were going to issue equity then we’re all going to be stupendously diluted.
Also London markets are run down. The chancellor has thrown about a potential policy that encourages investment in UK markets but that’s just noise until it’s announced and until he can convince people UK is worth investing in.
Metro’s on an accelerated track in terms of decline.
The reason is they’re being dragged down by the uncertainty regarding funding. Doesn’t help that they are operating in the capital buffers and the AIRB salvation is delayed until next year. If the board can act and provide more certainty then this skyrockets up at least ten’s of percent on the announcement.
They might not be able to, depending on the timing of the next trading update (normally end of October or start of November). I think the closed period is 30 days before the announcement.
That's not to say they will even if they did or had the money, they just all seem wet and happy to erode shareholder value.
It's how aggressive the shorters are being on a already suppressed share price, they built a lot of their short position sub 70p. I don't know what the future holds, but objectively the share price is very detached from the current reality of the Bank.
It’ll be entertaining to see the shorters close their positions. We only know of 2 companies, but there will be more under the reporting threshold.
Incredible how one poorly considered RNS that went against the previous stance of not commenting on AIRB timelines has sunk the share price to all time lows. It’s not like they even said we won’t get it, it’s delayed, yet the share price is finding its way down to zero.
To be fair they had stabilised the ship until that ridiculous RNS, they were addressing what was in their control. Of course they benefited from the rate rise, but equally they were hindered by the lockdown.
Anyway, the key thing is that RNS suggests they will need to find other ways of reducing the regulatory capital like sell off some assets, raise more funds as debt or a share issue. On the other hand they could get lucky with a more favourable regulatory environment for smaller banks, or the PRA offers them AIRB before they are forced to act.
Daniel buying shares would draw a line under this, and so would if they issue a RNS explaining they will be okay without more funding.
But without more funding they can’t grow either.
Metro Bank really like to self-sabotage. The board has refused to provide guidance on when they will get the AIRB accreditation and then out the blue they say we are not getting it in 2023 with no further comment from the board and a huge gap until the next scheduled trading update.