(Reuters) – Britain’s Metro Bank plans to raise £350 million in a shareholder cash call, it said on Tuesday, a month after announcing a sharp rise in exposure to higher-risk mortgages.
Metro, founded in 2010 to help to break up the dominance of Britain’s biggest banks, said the equity raise was expected to be launched in the first half of 2019 after consultation with shareholders.
Metro’s stock closed 15.8 percent lower at 1,300 pence on Tuesday.
The bank reported an error in its risk-weighted assets (RWAs) in January following a review of its commercial property exposures and specialist buy-to-let loans.
It said then its RWAs had risen by around £900 million, piling on pressure on its core capital ratio – a widely-tracked measure of bank strength.
It later said regulators at the Bank of England’s Prudential Regulation Authority had first identified the mistake, not its management.
The lender said it had entered into a standby underwriting agreement with RBC Capital Markets, Jefferies and KBW for the equity raise, meaning the investment banks will have to plug any shortfall if the funds cannot be raised from investors.
Metro Bank has previously had to go to investors for an earlier-than-expected equity raise as it has struggled to self-fund ambitious expansion plans, pushing it into a 303 million pounds raise last year.
Metro compounded investor disappointment last month by warning of pressure on its profit amid competition in the UK mortgage market. Lenders in Britain expect demand for mortgages and credit card lending to fall by its greatest level for several years this year, adding to signs of an economic slowdown ahead of Brexit.
The lender said it would announce its 2018 preliminary results after market close on Tuesday.
(Reporting by Noor Zainab Hussain in Bengaluru and Iain Withers and Clara Denina in London; Editing by David Goodman and David Evans)