The Financial Times reports that several large customers had deserted UK’s Metro Bank after an accounting error that miscategorised several commercial loans, leaving the bank with inadequate capital for this exposure.
Chief executive Craig Donaldson said “adverse sentiment” had led to the departure of a “small number of large commercial and partnership customers”, contributing to a 4 per cent quarter-on-quarter reduction in deposits.
Metro Bank in January revealed that it had miscategorised a large number of commercial loans, meaning it did not have as much capital against them as it should. The discovery prompted a sharp drop in its stock — it is down 54 per cent since the start of the year — and forced the lender to cut its long-term growth plans. It is also working on a new share issue to prop up its capital levels, but the bank gave no major update on the hotly-anticipated capital raise alongside its quarterly results, which were reported after markets closed on Wednesday. It noted only that the raise was “anticipated” to be completed in the second quarter.
Mr Donaldson said it had been a “challenging” start to the year, as the company also suffered from some of the industry-wide pressures that have affected its rivals. In particular, intense competition in the mortgage sector squeezed profit margins. But he said “the underlying resilience of the bank is evident”. Chairman Vernon Hill, who has also been the target of recent criticism over perceived governance problems, said it would “adapt” to changing circumstances but stressed that he had “complete faith” in Metro’s underlying model.
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