Metro Bank has been forced to reassure customers over the safety of their money after “false rumours” about its financial health were circulated online, leading to queues in some branches.
The embattled lender is preparing to unveil the terms of a £350 million fundraising to shore up its finances and has also said it may look to sell some of its loan book to free up further capital.
Messages posted online advised that customers should withdraw savings and belongings. The bank also operates safe deposit boxes and this weekend there were queues in some branches despite its assurances that in the event of insolvency “items remain owned by the customer and they are free to remove them as normal”. Retail customers’ deposits are protected up to £85,000 per person under the Financial Services Compensation Scheme.
Metro Bank was founded in 2010 by Vernon Hill, 73, an American billionaire. It has 66 branches, offering seven-day banking, and 1.7 million customers in the UK.
The bank held £15.1 billion of deposits as of the end of March, of which just over half were from corporate customers.
In a statement yesterday it said: “We’re aware there were increased queries in some stores about safe deposit boxes following false rumours about Metro Bank on social media and messaging apps. There is no truth to these rumours and we want to reassure our customers that there is no reason to be concerned.
“We’re a profitable bank, rated No 1 for personal current account service by the CMA [Competition and Markets Authority] and committed to serving our 1.7 million customer accounts.”
Metro Bank also confirmed that its plans for a £350 million equity raise were “well advanced” and that this was “expected to be by way of a placing, subject to shareholder approval”.
The bank has been rocked by the disclosure in January that it had mistakenly categorised some loans as less risky than they actually were.
The £900 million accounting error knocked its capital ratio, a key measure of financial strength, and led to it announcing the £350 million equity raise to bolster its balance sheet. The Financial Conduct Authority and the Prudential Regulatory Authority are both investigating the error.
Shares in Metro Bank have fallen by three quarters since the day before the accounting blunder was announced, wiping more than £1.5 billion from its market capitalisation.
Earlier this month Metro Bank disclosed that business customers, whose deposits would not be protected in the event of a collapse, had withdrawn £500 million in the aftermath of the January announcement.
Plans for a £350 million fundraise were first announced in February and are backed by a standby underwriting agreement from RBC Capital Markets, Jefferies and KBW.
There has been speculation that the bank could seek to raise more cash but Metro Bank reiterated this weekend that it planned to raise “circa £350 million of equity capital to support its growth”.
The bank said it intended to “respect the principles of pre-emption as far as practicable via the allocation process”, which would give existing shareholders the chance to buy in to the raising if they wished to avoid dilution of their shareholding.
A prospectus for the placing is expected to be announced later this week.
It has emerged that the bank could also seek to sell some of its loan book, in a move that could offer an alternative way of improving its capital position instead of an additional fundraising.
