Metro Bank shares jumped on Monday as the banking institution avoided catastrophe by raising £925m in debt and equity to help bolster its balance sheet.
The £925m was substantially more than the £600m amount reported by the Times last with £325m equity raised and £600m debt.
The equity raise was led by Spaldy, Metro Bank’s largest shareholder who contributed £103m to the raise. Splady is now a Metro Bank controlling shareholder.
“Another crisis in the banking sector has been averted… for now. Metro Bank’s fundraising agreement is important on two counts. First, it avoids any panic and a run on the bank, something that could have feasibly happened if it had not raised a significant amount of cash over the weekend to shore up its balance sheet. Second, it provides breathing space for the company to conclude talks on asset sales,” said AJ Bell investment director Russ Mould.
“The value of the company’s bonds and shares shot up on the fundraising plan as they were previously priced as if the company was in serious trouble. The fundraising now removes a lot of the risks, yet existing shareholders who do not participate in the equity raise will suffer significant dilution. Bondholders also get a big haircut.
“The past week will have been extremely damaging for the company’s reputation and there will undoubtedly be customers who may still prefer to shift their money to a different bank.”
Metro Bank shares were 26% higher at the time of writing on Monday.