Stifel sees ‘no easy solutions’ for the U.K.’s struggling Metro Bank

Shares of Metro Bank Holdings PLC (LON: MTRO) is paring back recent losses significantly on Friday but a Stifel analyst warns of continued challenges ahead.

Why is Metro Bank struggling?

Metro Bank was hit particularly hard this week following reports that it wanted to raise £350 million ($427 million) and £250 million in debt and equity, respectively.

The embattled bank was also reported in talks to unload about 33% of its mortgage book to lower capital requirements. The likes of Lloyds Bank, HSBC, and NatWest are interested in buying a huge slice of its mortgage book, as per Sky News.

Cutting assets will weigh on the bank’s profit that stood at just over £16 million in the first half of 2023.

Shares of Metro Bank Holdings PLC are down more than 70% versus their year-to-date high at writing.

Stifel downgraded the Metro Bank today

On Friday, analysts at Stifel downgraded Metro Bank to “sell” saying raising capital will likely remain a struggle for it moving forward. Their research note also reads:

There are no easy solutions for the bank and risks to the bonds remain skewed to the downside. Bank is in a difficult position, with capital needs of up to billion over the next two years.

News that it wants to raise capital is a harbinger of trouble particularly because the Silicon Valley Bank that collapsed earlier this year made a similar announced before it went under as Invezz reported here.

Note that Fitch Ratings also cited risks to the capital buffers and business model stabilisation as it placed Metro Bank today on ratings watch negative.