Metro Bank has announced its intention to carry out a share issue of up to £302m as profits almost quadrupled year-on-year in the first half, driven by continued strong growth in deposits.
In an announcement after the market closed which took analysts by surprise, the high street challenger bank said that it will place around 8.85m shares at the closing price today, of £34.22 per share.
Analysts had long expected Metro Bank to approach capital markets for more cash to sustain its heady rate of growth, although the £300m target is above the amount predicted by some.
The bank said it had brought forward plans to raise new equity capital as it seeks to continue its rapid pace of growth. The cash will be used to invest in growth as its branch network continues to expand, as well as to replace some of the capital used in the March purchase of a £523m UK mortgage book.
Vernon Hill, Metro Bank’s chairman and founder, has indicated an intention to subscribe up to £10m in the placing, which would increase the ordinary share capital in the company by 10 per cent. Meanwhile, the bank has already “consulted with and received support from a number of its leading shareholders”, it said in its stock market announcement. The bank has a large US investor base.
The bank continued to build up deposits rapidly during the first half of the year, with £2bn more in the six months to the end of June, a 40 per cent increase year-on-year. Metro now has £13.7bn of deposits on its balance sheet. Lending volumes also surged by 55 per cent year-on-year in the first half to hit £12bn.
The bank’s leadership has previously targeted a deposit base of £50bn by 2023, with Hill saying the bank will have to go to markets “multiple times” to fund growth.
The rise in volumes drove profits before tax to £20.8m, up from £4.4m in the first half of 2017.
Craig Donaldson, Metro Bank’s chief executive, said: “Almost eight years to the day we opened the doors to our first store and I’m delighted with the momentum demonstrated by the performance in the first half of 2018.”
RBC Capital Markets, Jefferies International Limited and Keefe, Bruyette & Woods are acting as joint bookrunners on the placing.