Metro Bank’s capital raising exceeded its £350 million target by £25 million last night as it asked investors to pay £5 a share to help to shore up its finances.
The price was higher than some had predicted, as Metro’s shares have plunged amid concerns over whether it would be able to drum up enough support to back the fundraising and reports last weekend about customers withdrawing cash.
Metro took only three hours to close the book with investors. It is thought to have had demand for $1 billion of new investment in total.
The placing level was at a discount of 6.8 per cent to Metro’s 536½p closing price and 6 per cent lower than the average price it has traded at this week. Although that is a much narrower gap than most capital raisings, Metro’s shares have lost three quarters of their value since it revealed a £900 million accounting error in January.
Metro said that it had suffered a “short period of deposit net outflows” earlier this week after intense speculation about its future. “The position is stabilising,” it said.
It previously said that depositors withdrew £500 million from the bank in the immediate aftermath of its accounting problem, but that deposit growth turned positive in April.
Metro said back in February that it would raise £350 million, prompting some to question why it took the bank so long to press the button.
Three banks, RBC, Jefferies and KBW, have underwritten the placing.
Demand was understood to be strong, with the placing oversubscribed. It was taken up by a mixture of new and existing investors. Metro’s advisers have been talking to large institutional investors and sovereign wealth funds about potentially taking a significant holding in the bank.
Vernon Hill, 73, its chairman and founder, who owns 5 per cent of its stock, will subscribe for up to £5 million of new shares. Craig Donaldson, 47, its chief executive, will buy up to £350,000 and David Arden, 50, chief financial officer, will pay up to £75,000.
Metro was launched in 2010 as the first new bank since the financial crisis by Mr Hill, an American billionaire. It aimed to be different from traditional lenders by offering seven-day opening and high service levels and has grown to have 66 branches, 1.7 million customers and a £22 billion balance sheet.
The bank has been struggling to stabilise after it admitted in January that it had made mistakes in the way it had categorised loans to landlords and companies, requiring it to hold more capital.
That revelation stirred up other problems, including scepticism among some about the sustainability of its high-cost branch-based model and criticism of payments to Mr Hill’s wife, Shirley Hill, 74, for branch design.
Metro gave more details of its plans to rein in costs as its growth slows. It is aiming to save between £40 million and £45 million by 2022 through measures including “flexible store size”.
