Calls for change at Metro as share price falls

Calls for management change at Metro Bank are mounting after an accounting error which triggered a 62 per cent share price drop since January.

Regulators and shareholders are reportedly pressing for management change at Metro Bank after a significant accounting error was revealed in January.

The banks share price rose from 1,718p on January 2 to a high of 2,202p on January 22, before tumbling to 837.5p earlier today – a drop of 62 per cent.

As the markets closed today its share price stood at 851.5p.

Metro Bank is now the second most shorted company on the UK stock market, according to the BBC.

A top-20 shareholder told The Financial Times that “new blood” was urgently needed, claiming that the management team was currently dominated by co-founder Vernon Hill’s close allies.

“The board is stacked with his mates,” the shareholder reportedly said.

The Financial Conduct Authority and the Prudential Regulation Authority are understood to be investigating an accounting error in which the bank under-estimated the risk in its loan book.

The FT reports the regulators are joining investors in pushing for a change in management, but both the PRA and FCA declined to comment.

Analyst view:

Hargreaves Lansdown senior analyst Laith Khalaf says: “Metro claims to have fans not customers, but its recent stumble has lost the bank some admirers in the city.

“Confidence is key to a business that’s in the early foothills of a growth story, and that’s been eroded by the recent accounting blunder.

“That’s unlikely to spill out of the square mile into the UK high street and Metro’s customers, but Metro now needs to raise fresh capital, and it’s the city it needs to turn to.”

Khalaf adds: “Problems surfaced in January when the bank admitted it had got the risk rating on some of its loans wrong, and that was compounded by a humiliating admission that the error had been pointed out by the industry regulator, the Bank of England.

“Regulators are now investigating the blunder at Metrobank, and there could be further sanctions for the bank ahead. There are also questions about the profitability of the loans that Metrobank now has to re-categorise.

“In the meantime shares have fallen significantly, and the bank is now looking to raise £350 million of fresh funding from shareholders, at a time when the share price is at a low ebb, which makes that funding more expensive.

“Clearly the error also raises questions about the management and whether the right controls are in place.

“All in all, an inauspicious start to the year to say the least.”

Metro Bank declined to comment.

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