Metro Bank chief executive Craig Donaldson will be in the spotlight next week as the lender continues to grapple with the fallout of an accounting error that saw nearly 40% wiped off its value in one day.
The challenger bank will reveal its full year results on Wednesday, just weeks after Metro told the market it had miscalculated the risk weighting of commercial loans secured on property and certain specialist buy-to-let loans.
As a result, City analysts expect Metro to raise as much as £300 million in fresh capital and rein in expansion plans as it looks to plug the shortfall.
John Cronin, analyst at Goodbody, said: “We believe one of the key ‘levers’ that management will call out next week is a material slowdown in short to medium-term growth ambitions.
“However, we don’t believe that a capital raising will be stitched up as soon as next week as management is likely to want to engineer a share price recovery. While we know that some shareholders are supportive of growth tapering, it will disappoint others.”
Mr Donaldson has come under particular fire for insisting that it was the bank that detected the accounting error as part of a review of its year-end accounts.
We feel nervous coming into next week’s updateJohn Cronin, Goodbody Analyst
But Metro later admitted that it was in fact pointed out first by the Bank of England and not unearthed by the lender.
The episode has raised serious questions over the chief executive’s future and he will be probed over the saga at the results.
At the time, the revelations led to shares in the high-street bank dropping almost 40% and Mr Cronin is predicting another sell off.
“We feel nervous coming into next week’s update. We think selling pressure will ensue in response to a slowing growth message.
“Indeed, any wider strategy recalibration is unlikely to excite given Metro has not proven its ability to deliver and we struggle to see how new shareholders can be attracted to the story.”
In better news for Metro, the bank on Friday won the biggest portion of a fund aimed at boosting competition in the business banking sector.
Metro will receive a grant with £120 million, followed by Starling with £100 million and then £60 million for ClearBank.
Figures out next week are also expected to show Metro booked underlying pre-tax profits of £50 million for 2018, a rise of 138%, but below forecasts of £59 million.
On a pre-tax basis, profits are tipped to rise from £18 million to £48 million.
Metro has grown rapidly since it was founded by US banking tycoon Vernon Hill in 2010, operating from over 60 branches across the UK and employing nearly 4,000 people.
However, it made headlines last year after Mr Hill, the bank’s chairman, came under fire over payments made by the lender to his wife’s architecture firm.