Financial News

  • 5 December 2013, 6:56

Metro Bank Raises 385m After Buoyant Demand

Metro Bank is to raise almost 400m from a combination of existing and new investors following buoyant demand for shares in Britain's first new high street lender for more than 100 years.

Sky News has learnt that Metro Bank directors have decided to increase its biggest-ever cash call to 387.5m, which should enable it to open dozens more branches and move into profit more quickly than originally expected.

100m of the equity raised will come from new investors after a number of wealthy families and institutions urged Metro Bank to expand the share offering.

In a circular to shareholders on Wednesday, Metro Bank chairman Vernon Hill and Craig Donaldson, chief executive, said that due to "exceptionally strong demand", the capital-raising would be increased.

"The Follow-On Offer will be at the same price as the original, 13, and will consist of the sale of 7,692,308 A Ordinary (common) shares, raising up to a further 100m. This additional capital raise will be used to further support Metro Bank's continued unprecedented growth in deposits, lending and accounts," they said.

"We expect to be able to fulfil all orders from existing shareholders from the current Offer which will close on 6th December. We then expect to be able to fulfil orders from new shareholders in the Follow-On Offer."

Sky News revealed last month that Metro Bank was seeking 285m to accelerate its growth, following the introduction of rules aimed at making it easier for customers to switch current account providers.

Among the lender's existing shareholders are the billionaire Reuben brothers and Steven Cohen, the head of the US hedge fund SAC Capital, which was last month the subject of the biggest-ever insider trading settlement in the US.

A recent circular to shareholders outlined the escalating losses at Metro Bank, which lost 14.3m before tax in the three months to September and 38.6m in the year-to-date. That took the lender's total losses since being set up to nearly 140m.

However, Vernon Hill, chairman, and Craig Donaldson, chief executive, told shareholders that the second quarter of 2013 "will therefore have marked the peak quarterly loss and that quarterly losses will now fall until the bank achieves profitability".

The losses underline the costs associated with breaking into the UK's retail banking sector at a time when Government ministers are attempting to foment new competition through a string of new policy measures, including reducing capital and liquidity requirements for new entrants.

Metro Bank declined to comment.