TREAS­URY IN TALKS OVER METRO BANK’S WOES – Lender’s shares plum­met as it scrambles to raise up to £600m to shore up its bal­ance sheet

Treas­ury offi­cials were last night in talks with the Bank of Eng­land after Metro Bank’s shares plunged by more than a quarter amid a race to shore up its fin­ances. A Treas­ury source said offi­cials were “mon­it­or­ing the situ­ation” and were in con­tact with the Thread­needle Street as the lender scrambles to raise up to £600m to boost its bal­ance sheet. 

Spec­u­la­tion about its fin­ances promp­ted an unplanned mar­ket announce­ment from Metro, which said it was “eval­u­at­ing the mer­its of a range of options” to boost cash, includ­ing a pos­sible equity raise or an increase in debt. The com­pany’s state­ment said the bank has been prof­it­able on an under­ly­ing basis for three con­sec­ut­ive quar­ters and is meet­ing min­imum reg­u­lat­ory cap­ital require­ments.

As part of fun­drais­ing efforts, Metro was sound­ing out poten­tial buy­ers for a £3bn chunk of its mort­gage book, includ­ing Nat­w­est and Lloyds Bank­ing Group, Sky News repor­ted. About 40pc of Metro’s res­id­en­tial mort­gages are interest-only, accord­ing to the bank’s latest half-year res­ults. Selling mort­gage assets would cut the amount of cap­ital the bank is forced to hold.

Metro, which has 2.7m cus­tom­ers and 76 UK branches, suffered a set­back last month when reg­u­lat­ors failed to approve a plan that would have reduced the amount of cap­ital it is required to hold for res­id­en­tial mort­gages.

It means its capital requirements will not be lowered until next year at the earli­est. The delay triggered con­cerns about the com­pany’s fin­an­cial pos­i­tion, with credit rat­ings agency Fitch on Wed­nes­day pla­cing Metro Bank on “neg­at­ive” watch for pos­sible down­grades.