The bank said was in final discussions with existing and new shareholders about the equity raise, which is expected to be complete via a share placing.
It aims to tie up the fundraise by by the second quarter, subject to shareholder approval.
Ahead of the announcement on the equity raise, a WhatsApp message that circulated on group chats advised people to pull money out of their accounts and empty safe deposit boxes.
At the weekend the bank saw queues in some branches despite reassuring people 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.
'No truth to the rumours'
“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 number-one for personal current account service by the CMA and committed to serving our 1.7 million customer accounts.”
Earlier this month, Metro Bank posted a 50% drop in first-quarter profits following a £900mln loans error.
The group lost a small number of large customers after admitting in January that many commercial loans had been incorrectly classified in an accounting error.
The Financial Conduct Authority and the Prudential Regulation Authority are investigating the issue.
On Friday, Fidelity – Metro Bank’s second largest shareholder – cut its stake in the lender by nearly a third to 5.4%.
Metro Bank’s chief executive, Craig Donaldson, gave up his £800,000 annual bonus in February but is likely to come under pressure from shareholders at the bank’s annual general meeting on May 21.
He offered to resign after the loans scandal in January but remained in the role after the board backed him. Donaldson recently said the lender was considering selling a portion of the loans at the centre of the accounting blunder, which make up more than 10% of its loan book.
Shares in Metro Bank fell 4% to 511p in morning trading.
Citi cuts target price
Citi repeated a 'sell' rating on the shares and cut its target price to 480p.
"We have a sell rating on the shares, as we are concerned: 1) Metro’s strategy is being forced upon it, given a need to preserve capital, 2) downside risk to growth, especially if franchise value is impacted given recent events, 3) consensus earnings are too high, and 4) Metro needs still more capital," it said.
"While the shares trade at 0.4x TBV, in our view the low multiple makes it harderto justify raising capital for growth and we see a risk the growth strategy breaks down entirely."
-- Adds share price, broker comment --