Metro Bank has announced a successful capital package consisting of the following: a £325m capital raise and a £600m debt refinancing.
Metro Bank says it has “secured £325m capital raise, comprising £150m of new equity and £175m of new MREL issuance, alongside £600m of debt refinancing, enhancing balance sheet strength and accelerating earnings potential.”
According to the firm, the capital package significantly “strengthens CET1 ratio, takes Metro Bank out of the CRD IV Combined Buffer and is expected to support Metro Bank’s delivery of RoTE in excess of 9% in 2025 and low double-digit to mid-teens thereafter over the medium term.”
This update reportedly “delivers a pro forma 30 June 2023 CET1 ratio in excess of 13% and MREL ratio in excess of 21.5%.”
There’s also an opportunity “to grow assets significantly over the coming years, via a gradual shift in asset side growth towards specialist mortgages and commercial lending to optimise risk adjusted returns; supported by continued success in raising deposits and driving current account growth.”
The equity raise was “led by Spaldy Investments Limited, Metro Bank’s largest shareholder, which is contributing £102m.”
Spaldy Investments Limited will “become the controlling shareholder of Metro Bank upon completion of the Transaction with a c.53% shareholding.”
The refinancing extends “the call date of the existing MREL Senior Instrument to 2028.”
The bank confirms it is in discussions “regarding an asset sale of up to £3bn of residential mortgages which are expected to reduce RWAs by c.£1bn (assuming a c.£3bn Asset Sale), increase Metro Bank’s CET1 ratio and be earnings accretive in 2024, subject to pricing.”
The bank reports continued positive trading “in Q3 2023, made a statutory profit after tax and continued momentum in Personal and Business Current Account growth and customer acquisition.”
The Capital Package also allows Metro Bank “to continue to evolve its products and services to meet the banking needs of its customers both digitally and in-store.”
The Capital Package is subject “to certain customary conditions and regulatory approvals.”
Daniel Frumkin, Chief Executive Officer at Metro Bank, said:
“Today’s announcement marks a new chapter for Metro Bank, facilitating the delivery of continued profitable growth over the coming years. Metro Bank made a statutory profit after tax in Q3 2023, and continues to demonstrate ongoing momentum as we strive towards our ambition to be the UK’s number one community bank.”
For more details, check here.