By Iain Withers and Noor Zainab Hussain
LONDON (Reuters) - The chief executive of crisis-hit Metro Bank told Reuters there were "absolutely no question marks" over the future of the lender, after a major accounting blunder triggered a hefty investor cash call, sending its shares into a tailspin.
Shares in Metro Bank fell as much as 24 percent on Wednesday to record lows of around 10 pounds, after it announced plans to tap shareholders for 350 million pounds in fresh capital on Tuesday.
CEO Craig Donaldson told Reuters he had offered to resign after the accounting mistake was uncovered last month but he had the confidence of the board to continue. He would, however, forego his bonus in the wake of the misstep.
Despite the uncertainty thrown up by the planned cash call - still yet to secure full underwriting support - Donaldson insisted he was confident investors would back Metro.
"We are a growth organisation focussed on providing great service to our customers," he told Reuters.
The new capital will be used to plug a hole in Metro's balance sheet after the lender admitted it was more heavily exposed to higher-risk mortgages than its loan book showed.
But it gave no guidance on pricing or terms of the cash call and is yet to determine fees it will have to pay the three investment banks involved - RBC, KBW and Jefferies.
Metro, founded in 2010 to help to break up the dominance of Britain's biggest banks, also told investors it would slow its expansion plans amid "challenging" market conditions, despite more than doubling its annual profits in 2018.
The lender also said the Financial Conduct Authority and Prudential (LON:PRU) Regulatory Authority intended to investigate the circumstances around the accounting blunder.
Spooked investors have fled the stock since the mistake was disclosed, shaving more than a billion pounds off its market value. Shares were trading 19 percent down at 0903 GMT.
For a graphic on Metro Bank shares hit all time low, see - https://tmsnrt.rs/2VkfpfC
The cash call overshadowed a boost in 2018 pretax profit to 40.6 million pounds, up from 18.7 million pounds in 2017.
However, both its net interest margin - a closely-watched measure of underlying profitability and its core capital ratio - showed weakness.
Analysts at KBW said the Metro Bank now faced more headwinds than tailwinds.
"While the update provided some favourable items we were hoping for, including a slowdown and re-mixing of the balance sheet, it fell short as it relates to the incremental capital plan including its return on equity aspirations," KBW said.
Goodbody analysts said Metro's update was more downbeat than anticipated, adding that short term trading in the stock "won't be pretty".
"If confidence falters and the rights issue looks like it won't be supported, we believe that private equity could be waiting in the wings," Goodbody said.