UK’s embattled Metro Bank expected to struggle to raise capital with ‘no easy solutions’

by | Oct 6, 2023 | Financial

The U.K.’s embattled Metro Bank has launched talks to sell a third of its mortgage book in an urgent attempt to shore up its balance sheet.Matthew Horwood | Getty Images News | Getty ImagesLONDON — The U.K.’s Metro Bank will likely struggle to raise fresh capital to shore up its balance sheet, according to analysts, who outlined bleak prospects for the beleaguered bank.A number of ratings agencies and investment banks have downgraded the bank’s stock following a turbulent 24 hours in which its shares were briefly suspended from trading twice after plunging more than 29% from Wednesday’s close.Metro Bank reversed its losses Friday and was trading up around 34% at 12:55 p.m. London time.The turmoil came amid reports that the embattled bank was seeking to raise up to £250 million ($305 million) in equity funding and £350 million of debt. Metro Bank confirmed in a statement early Thursday that it was considering “how best to enhance its capital resources.”Late Thursday, reports emerged that the bank was in talks to sell a third of its mortgage book. Rival banks including HSBC, Lloyds Banking Group and NatWest Group are now being sounded out to buy around a £3 billion chunk of its mortgage book, according to sources who spoke to Sky News and the FT.Selling the assets would reduce the bank’s earnings but also sharply reduce the amount of capital it is forced to hold.Metro Bank did not immediately respond to CNBC’s request for comment on the reports; nor did any of the rival banks cited.However, analysts said the bank’s fund-raising prospects did not look good.Investment bank Stifel on Friday downgraded the stock from “hold” to “sell,” saying it thinks there are “no easy solutions for the bank and risks to the bonds remain skewed to the downside.” It noted that the bank could be nationalized under the Bank of England’s resolution scheme and then sold on, either as a whole or in parts.”We thin …

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