Setback for Metro Bank as investors snub £250m bond sale

Despite high interest rate of 7.5%, lender forced to cancel offer just hours after launch

Metro Bank has been forced to cancel a bond sale of up to £250m after failing to drum up interest from investors, marking a setback for the lender struggling to recover from an accounting blunder earlier this year.

The challenger bank had been trying to sell its debt to investors to meet EU regulatory requirements, which would help it wind down effectively in a crisis without using taxpayer cash.

Metro launched the sale on Monday, offering bonds with an interest rate of 7.5%, a high figure for a European bank. But even at that rate of return investors snubbed the sale, forcing Metro to cancel the offer by Monday afternoon.

While the lender blamed poor market conditions for a lack of appetite for its debt, others said it signalled that confidence in Metro’s strategy was starting to erode.

John Cronin, a financial analyst for stockbroker Goodbody, said: “It would appear that Metro Bank has failed to secure sufficient interest even at this level, which points to a major lack of confidence in the continued adequacy of the bank’s capital position, as well as its ability to generate sufficient profits in the future.”

He added that it was unlikely that Metro Bank would return to the market later this year to reissue the bonds, and may be forced to ask the Bank of England to postpone a deadline for meeting its minimum requirement for own funds and eligible liabilities (MREL) by the of 2019.

Another failed bond sale could prove embarrassing for Metro Bank, which has been working to repair its reputation following a major accounting mistake earlier this year.

In January Metro Bank revealed it had misclassified loans worth £900m as being less risky than they were. The discovery meant the bank had a smaller capital cushion to protect it from a larger pool of risky loans in the event of a downturn. The mistake prompted an investigation by City regulators, which was recently widened to include Metro Bank’s senior managers. That investigation is still underway.

Metro Bank said in a statement: “Given the current market conditions Metro Bank has decided to not proceed with a transaction at this time. Metro Bank has a strong capital position and therefore the flexibility to raise MREL at the right time for the bank.”


Kalyeena Makortoff Banking correspondent

The GuardianTramp

Related Content

Article image
Metro Bank shares plunge after investors snub £200m bond sale
Bank forced to cancel sale despite offering a high 7.5% rate of interest

Kalyeena Makortoff Banking correspondent

24, Sep, 2019 @5:48 PM

Article image
Metro Bank fined £10m for misleading investors
FCA also penalises two of challenger bank’s former top executives

Jasper Jolly

12, Dec, 2022 @11:17 AM

Article image
Metro Bank agrees rescue deal with investors
Lender secures £325m capital from new and existing shareholders and £600m of debt refinancing

Julia Kollewe and Kalyeena Makortoff

08, Oct, 2023 @2:26 PM

Article image
Metro Bank considering raising hundreds of millions from investors
High street lender recently failed to convince regulators it could be trusted to hold less cash against its mortgage risks

Kalyeena Makortoff Banking correspondent

04, Oct, 2023 @8:02 PM

Article image
Metro Bank shares soar after potential takeover approach
US private-equity group Carlyle has until 2 December to make formal offer or walk away

Mark Sweney

04, Nov, 2021 @1:28 PM

Article image
No bonus for Metro Bank boss after loans blunder
Craig Donaldson apologises for failures, which are to be investigated by City regulators

Kalyeena Makortoff Banking correspondent

26, Feb, 2019 @8:41 PM

Article image
Metro Bank hit with fresh lawsuit by Iranian customers
Group of 17 claimants expected to seek at least £1.5m in damages over account suspensions

Kalyeena Makortoff Banking correspondent

17, Mar, 2020 @6:00 AM

Article image
Metro Bank chairman steps down early after torrid year
Vernon Hill quits as regulatory investigation into bank’s accounting error continues

Kalyeena Makortoff Banking correspondent

23, Oct, 2019 @10:02 AM

Article image
Metro Bank shares plummet as bank seeks to shore up balance sheet
Stock falls by quarter after news high street lender looking to sell off mortgages or tap investors for more cash

Kalyeena Makortoff Banking correspondent

05, Oct, 2023 @5:38 PM

Article image
Metro Bank scales back expansion plans after £131m loss
Bank takes £27m hit to cover costs of investigation into accounting error

Kalyeena Makortoff Banking correspondent

26, Feb, 2020 @10:29 AM