Metro shares dive as bank scraps £250 million bond offer on lack of interest

Metro Bank shares crashed today after the battered lender was forced to pull a £250 million bond offering due to lack of interest from investors.

The dog-friendly bank, which set out to change the face of the industry with strong customer service, has endured a torrid year. An accounting error hit investor confidence and questions about the role of founder and chairman Vernon Hill remain.

Last night Metro scrapped a four-year bond deal that was paying a hefty 7.5% yield. The high level of the interest rate is an indication of how risky investments in Metro are now regarded. Even so, it flopped.

The company said in a statement: “Metro Bank PLC thanks the broad number of investors who have met with the company and shown interest in their potential inaugural MREL issuance. Given the current market conditions, though, Metro Bank has elected to not proceed with a transaction at this time. As a responsible issuer Metro Bank shall consider future issuance mindful of all relevant stakeholders.”

Metro shares tumbled 13%, 37p, to 236p. They were above 3000p just a year ago. The bank needs to raise fresh capital to meet EU rules on balance sheet strength.

John Cronin at Goodbody said: “Not being able to get a senior unsecured issue away at 7.5% is pretty staggering.”

Other bank analysts said that the failure reflects a lack of confidence in the business.

Chief executive Craig Donaldson offered to resign in the wake of the accounting scandal, but the board wanted him to stay.

Vernon Hill will stand down as chairman once a replacement is found, but will remain a director. In the first half of the year Metro saw profits slump more than 80% to £3.4 million.

Customers, mostly commercial, have pulled more than £2 billion in deposits from the bank.

In January, Metro revealed that it had misclassified £900 million of loans as less risky than they truly were.

It later raised £375 million from investors to boost its finances.

Metro launched in 2010 and won plaudits for its customer-focused stance and longer branch opening times.