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As markets closed last night, Metro Bank (MTRO) announced the terms of its hotly-anticipated equity placing: a sale of 70 million shares at £5 a pop, some 5.2 per cent adrift of the stock’s five-day average closing price but more than three-quarters down on a January high. In the event, strong demand saw the sale expand to 75 million shares, raising £375m, which will be put towards growing loan balances and risk-weighted assets, “while investing in the expansion of stores and new technologies”. Assuming approvals are given at next month’s annual general meeting, the new shares will begin trading two days after, on 5 June. On a pro-forma basis (assuming none of the proceeds are immediately invested in the branch expansion programme), that would give Metro a common equity tier one (CET1) capital ratio of 15.6 per cent, five percentage points above its minimum regulatory level. News of the funding has pushed the stock up 19 per cent at 640p. Following the share dilution and cash injection, the book value is likely to be around 900p, though it’s hard to argue that this year’s debacle should award Metro a valuation as racy as the other challenger banks, or if its expensive business model is a wise place for investor capital. Sell.
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