The share price of the UK-based Metro Bank PLC (GB:MTRO) crashed by 24% this morning as the company continued to struggle to raise fresh capital to enhance its balance sheet and overall financial health. Metro Bank is considering options to raise around £600 million through a combination of debt and equity financing. The bank has approached Morgan Stanley for a capital-raising deal, seeking £250 million in fresh equity and £350 million in debt.
The company stated that it is assessing various options, considering a mix of equity and debt, refinancing, and potential asset sales. However, no final decision has been made regarding any of these options.
At the time of writing, the stock was trading down by 25% today, marking a total loss of approximately 60% so far in 2023. This led to another setback for the bank’s stock, following last month’s decline when the bank failed to secure approval from the Bank of England to utilize internal credit risk models until 2024.
Metro Bank provides a comprehensive range of banking and financial solutions in the UK, with a primary focus on serving retail customers and catering to the needs of small to medium-sized businesses.
The Struggle Continues
In the past five years, Metro Bank has been actively working to implement internal models similar to those employed by larger banks. However, last month, the Prudential Regulation Authority (PRA) indicated that approval for these models would not be granted in 2023. The PRA expects the bank to undertake additional efforts to meet the necessary criteria.
Adding more to its worries, yesterday, the rating agency, Fitch, placed Metro Bank on “negative watch”, highlighting risks to its business model, capital position, and funding. Fitch added that the bank’s earnings are also under pressure in the near term, impacted by higher funding costs.
Is Metro Bank a Buy or Sell?
On TipRanks, MTRO stock has received a Moderate Sell rating based on one Hold and Two Sell recommendations. The Metro Bank share price target is 65.35p, which implies a change of 72% from the current level.
It’s crucial to highlight that these ratings were allocated last month and may undergo revisions considering the recent developments.
