Metro Bank raises £375m in new funds to bolster finances

Metro Bank chair Vernon Hill, pictured with dog Duffy, founded the bank in 2010

Metro Bank has raised £375m from shareholders to bolster its finances, in a bid to ease fears over its future.

The bank said it had exceeded its initial target of £350m, thanks to strong demand from existing and new shareholders.

The move follows an accounting error in January which left the bank without the capital it needed to grow.

Metro Bank shares have fallen about 75% this year, wiping £1.5bn off its market value, but rose sharply on Friday.

The firm said it had priced its new shares at 500p - a 36p discount to its closing share price on Thursday.

The bank's founder, Vernon Hill, said: "I am really pleased with the support we have received from both existing and new shareholders, and for their confidence and belief in Metro Bank's strategy.

"The placing was significantly oversubscribed and as a consequence, we raised a total of £375m.

"Although we've faced challenges in the past few months, we remain fully focused on providing the outstanding service and convenience that our customers expect of us."

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The Bank of England's Prudential Regulation Authority, which has been subjecting Metro Bank to close scrutiny since the capital miscalculation, said it welcomed the move.

"Metro Bank is profitable and continues to have adequate capital and liquidity to serve its current customer base," the Bank of England said.

"It has raised additional capital in order to fund future growth."

The bank - which has 67 branches in London and the South East - revealed in January that it had underestimated the risk level of some of its commercial loans by almost £1bn.

That meant it did not have the required shock-absorbing capital it needed to support a number of its business loans.

The funds it has raised are aimed at strengthening its capital position.

• Metro Bank opened its first branch in London's Holborn in 2010 in the wake of the financial crisis

• It was the first High Street bank to open in the UK in more than 100 years

• One of the so-called challenger banks to the big High Street names, it opens seven days a week

• Founder Vernon Hill shook up the US banking scene in 1973 when, aged 26, he founded Commerce Bank with one branch

• When he sold Commerce Bank in 2007 for $8.5bn, it had 440 branches

The issue has weighed heavily on Metro Bank's performance, with its recent results for the first three months of the year showing a sharp drop in pre-tax profit to £6.9m, from £10m for the same period a year ago.

Chief executive Craig Donaldson said "adverse sentiment" had also affected deposit growth, but said that 2019 would be "a year of transition" for the bank.

The bank was founded in 2010, becoming Britain's first new High Street bank for more than 100 years.

Its unusual focus, in a world where most banks are drastically cutting back on branches, has been on building physical branches, which open earlier and longer than any of their rivals.

However, in February it said it would scale back ambitious plans to open 200 branches across the UK.