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Metro Bank raises £375m in discounted share sale

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The challenger bank surpassed expectations after completing a £375m fundraise, albeit at a discounted share price.

Metro Bank has raised £375m from existing and new shareholders. The challenger bank said strong demand for its shares had enabled it to raise more than its initial target of £350m.

The shares were issued at a price of £5 per share, which represents a 14% discount to Metro Bank’s closing share price on Wednesday 15 May.

The bank was keen to stress that the money will be used to fund future growth plans, including plans to expand in the north of England. The successful fundraise will be a relief for Metro Bank’s management team, led by chief executive Craig Donaldson, following a torrid few months.

Investors in Metro Bank were spooked after the business disclosed an accounting error in January. This related to the way it classified the risks associated with certain loans – with some proving to be riskier than had been initially assumed. As a result, the bank withdrew its portfolio commercial buy-to-let products in February.

In a recent interview with the Financial Times, Donaldson said Metro Bank was considering selling £1bn worth of loans, which lie at the centre of the accounting error.

Things went from bad to worse last weekend when rumours on Whatsapp messaging groups alleged that the challenger bank was in trouble, resulting in a wave of customers visiting branches across West London to withdraw cash and check their safety deposit boxes.

These events caused Metro Bank’s share price to fall by more than 70% since late January. Fortunately, the successful fundraise caused the bank’s shares to jump by 19% on Friday morning. By 12:20 they were trading at £6.37 per share, albeit some way off a share price of £22.02 on 22 January.