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Metro Bank to raise £350mln in emergency cash call and CEO to waive bonus after accounting blunder

The Financial Conduct Authority and Prudential Authority have notified the bank that they intend to investigate the accounting error
Metro Bank
Metro Bank released its annual results a day early, shortly after announcing the cash call

Metro Bank said it plans to tap investors up for a further £350mln of capital and its chief executive will waive his bonus following a major accounting blunder last month.

In reaction, shares plunged 19% to 1,041p in mid-morning trading.

The cash call is expected to kick off in the first half of 2019 following consultation with shareholders. No details were provided on pricing.

READ: Metro Bank the big winner from first round of £775mln RBS funding

Chief executive Craig Donaldson said he will give up his bonus but did not confirm the size of the payout. His bonus last year was worth £800,000, which made up a larger portion of his £1.5mln pay package than his £650,000 salary.

Donaldson told the Guardian that he had offered to resign after the accounting mistake emerged but the bank’s board members have backed him to stay.

“I have offered to resign and the board have been very supportive, and I have actually asked that I’ll waive my bonus this year in response to what’s happened,” he said.

Regulators, the Financial Conduct Authority (FCA) and Prudential Authority (PRA), have notified the bank that they intend to investigate the accounting error that wiped millions of pounds off the group's market value last month.

Full year results published a day early

It prompted the group to release its annual results a day early. In the results, released just after the closing bell, Metro said underlying pre-tax profits surged 140% to £50mln and revenue jumped 38% to £404.1mln.

Metro Bank reported record deposit and lending growth of 34% to £15.7bn and 48% to £14.2bn respectively.

It also achieved a record increase in customer accounts of 403,000 to 1,620,000.

However, the net interest margin – the difference between interest paid and interest received – fell 12 basis points to 1.81% amid tough competition on the mortgages market.

The common equity tier 1 capital ratio, a measure of capital strength, was 13.1%, above the bank’s 12% target.

Metro Bank said it would scale back its expansion plans to open eight branches a year and reduce deposit growth to 20% a year to adapt to a challenging market. 

The lender also revised its return on equity target to "low double-digit" by 2023, down from the previous guidance of 17%-19%.

We need to evolve, says CEO

"These are a strong set of results demonstrating progress across all key areas despite an uncertain and challenging environment," Donaldson.

"While our strategy is delivering, we need to evolve to ensure continued progress over the medium term."

Last month Metro Bank released a trading statement ahead of the full year results, which revealed the profits would fall short of analysts' expectations of £58mln. 

In better news, the bank last month won £120mln from the first round of grants of a £775mln funding pot aimed at boosting competition in the banking sector.

The fund was set up by the Royal Bank of Scotland Group PLC (LON:RBS) as a condition of its state-backed bailout during the height of the financial crisis in 2008. 

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