Metro Bank reverses its decision not to raise equity with a placement of 8.85m new shares

METRO Bank performed a U-turn as it yesterday announced plans to raise around £300m in equity overnight, despite saying it wouldn’t need to do this earlier in the year.

The FTSE 250 challenger bank told investors after markets closed yesterday that it was issuing 8.85m of new shares representing around 10pc of the company’s share capital. The lender has a market cap of close to £3bn.

The bank said the placement would help it deliver its “future growth ambitions”. But it comes after chief executive Craig Donaldson ruled out the need for an equity raise earlier this year.

He told The Daily Telegraph in April that the bank would raise debt instead, saying: “We are not planning to raise equity this year, but we were always planning to raise debt.”

It comes against a backdrop of growing City concerns about Metro Bank’s ability to deliver on its ambitious growth and profitability targets. Some have increased short positions against Metro Bank since the start of the year, with stock on loan currently at 6.59pc, according to FCA data.

John Cronin, analyst at Goodbody, told The Daily Telegraph: “I’ve never believed they didn’t need to raise more capital.” However, Mr Cronin said he expected the equity raise to be strongly supported by existing investors close to Metro Bank’s American founder and chairman Vernon Hill. Separately, Metro Bank confirmed it had raised £250m in debt.