Metro Bank share price forms death cross as woes mount

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on Sep 12, 2023
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  • Metro Bank stock price sell-off continued on Tuesday.
  • The company admitted that its capital relief was delayed by the Bank of England.
  • UK mortgage in arrears jumped sharply in the second quarter.

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Metro Bank (LON: MTRO) share price sell-off gained steam on Tuesday as the company continued facing rising headwinds. The stock dropped to 94.7p, the lowest level since May 19th. It has plunged by more than 40% from the highest level this year, making it one of the worst-performing UK bank stocks this year.

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Metro Bank capital relief challenges

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Metro Bank, the challenger UK bank, has been under pressure in the past few months amid rising concerns about its capital relief from the Bank of England. On Tuesday, the company confirmed that it will not be able to deploy its internal models used by banks like Lloyds and Barclays to boost its profitability. In a statement, the bank said:

“The [Prudential Regulation Authority] has indicated that at this stage more work is required by the company which means approval will not be attained during 2023. Whilst Metro Bank continues to engage with the PRA on its application, there is no certainty that approval will be obtained.”

The statement was a major blow for Metro, one of the biggest challenger banks in the UK. The models it seeks are important in that they allow it to calculate the riskiness of loans rather than using the standardised models. 

Therefore, the company will continue working with regulators to achieve this relief. Analysts believe that such a move will make it more competitive in the lucrative housing sector.

The statement came on the same day as the Bank of England (BoE) warned about the mortgage sector. In a report, the bank said that the value of mortgages in arrears jumped in the second quarter. They increased by 28.8% on a YoY basis.

The most recent results showed that Metro Bank’s underlying profit for the first year rose to £16.1 million. Its statutory profit before tax rose to £15.4 million as its total income dropped slightly to £286 million. Customer deposits fell to £15.5 billion.

Metro Bank share price forecast

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Metro Bank share price

Regular readers know that I have a negative bias on British banks like Lloyds, as you can read here. The daily chart shows that the Metro Bank stock price has been in a strong bearish trend in the past few months. 

Most importantly, it has formed a death cross, which happens when the 200-day and 50-day moving averages have a bearish crossover. The stock has moved below the 61.8% Fibonacci Retracement level.

Therefore, the outlook for the stock is bearish, with the next reference level being at 90p, the lowest level on May 18th. 

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