Metro Bank has seen further dramatic share falls after unveiling a hefty investor cash call and regulatory investigation into a major accounting blunder.
The challenger bank saw shares drop as much as 24% following its announcement after market close on Tuesday that it plans to raise £350 million through a new share sale to help plug a shortfall left by the accounting error.
The stock, which had tumbled 16% on Tuesday ahead of the news, has been sent into a tailspin after details of the accounting error emerged last month, falling 40% in one day.
Once the darling of the financial services sector, its stock market value has fallen from a peak of £3.5 billion last March to just over £1 billion.
The lender said on Tuesday that it has entered into a “standby underwrite agreement” with RBC Capital Markets, Jefferies and KBW for the equity raise.
The transaction is expected to be launched in the first half of 2019 after consultation with shareholders, Metro added.
Metro also revealed that the Financial Conduct Authority and Prudential Regulation Authority intend to investigate the accounting error.
It comes 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, the group has been forced to raise fresh capital to make up for the shortfall on its balance sheet.
Questions have been raised over the future of chief executive Craig Donaldson, who has come under particular fire over the debacle for insisting that it was the bank that detected the accounting error as part of a review of its year-end accounts.
Metro later admitted that it was, in fact, pointed out first by the Bank of England and not unearthed by the lender.
In details of the share sale released on Tuesday, Metro said chairman Vernon Hill and other directors intend to participate in the equity raise.
In full-year results also released earlier than planned, it reported underlying pre-tax profits of £50 million in 2018, a rise of 140%, but below forecasts of £59 million.
Despite the commotion surrounding the bank, Metro last week won a £120 million portion of a fund aimed at boosting competition in the business banking sector.
Metro has grown rapidly since it was founded by US banking tycoon Mr Hill in 2010, operating from more than 60 branches across the UK and employing nearly 4,000 people.
However, Mr Hill came under fire last year over payments made by the lender to his wife’s architecture firm.