Metro Bank shares fell 10 per cent as three US law firms announced they were investigating whether the lender's bosses took part in securities fraud.
The New York-based firms Pomerantz and Levi & Korsinsky announced fresh investigations into the bank, while Glancy Prongay & Murray confirmed it was continuing with a probe launched earlier in May on behalf of investors.
Pomerantz said its investigation “concerns whether the UK’s Metro Bank and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices”. The two other law firms cited similar “possible violations of federal securities laws”.
The firms did not make detailed allegations or cite specific actions that may have breached securities law. Instead, their statements summarised a series of problems that have plagued Metro Bank since January, when it revealed a major accounting blunder.
Metro Bank declined to comment.
Its shares fell nearly 10 per cent, to 703p per share, on Thursday, just days before investors were expected to rubberstamp a £375 million fundraising call to strengthen the lender’s balance sheet.
Accounting error
Metro Bank’s accounting error misclassified £900 million worth of loans as being less risky than they actually were. Banks are required to put aside more cash to cover their riskier products, to ensure they are protected in the event of a sudden downturn.
Metro's mistake, revealed in January, prompted investigations by the UK's Financial Conduct Authority and the YUK's Prudential Regulation Authority. It went on to announce plans to tap shareholders for more cash, just months after its last fundraising, when it had ruled out further cash calls.
The bank later announced disappointing first-quarter results showing a 50 per cent drop in profits and the exit of some of its large business customers, which pulled around £566 million in deposits after being spooked by the accounting error.
The run of negative headlines led to customer panic over Metro’s financial strength, resulting in queues at some west London branches where people tried to empty safety deposit boxes and withdraw cash.
Metro said the panic was based on “false rumours” on social media and within days successfully raised £375 million via a share placing. Its American chairman and founder, Vernon Hill, personally bought 1m shares worth £5 million. – Guardian service
