Société Générale downgrades Metro Bank ahead of Q1 results

The French investment bank opted to downgrade the UK challenger bank ahead of its first quarter results next week, while short sellers raise bets against the lender.

Analysts from Société Générale have downgraded Metro Bank from a ‘buy’ rating to ‘hold’ ahead of its first quarter (Q1) earnings next week.

The French investment bank also lowered its price target for the stock to 100p a share, which implies that the challenger bank is unlikely to see significant gains in the near-term.

Metro Bank is trading at 92p a share as of 13:45 (GMT) on Wednesday.

Société Générale’s uninspired outlook for the UK challenger is no surprise after the lender was order by the UK Competition and Markets Authority (CMA) ordered it to repay £11.4 million to customer for overdraft charges earlier this week.

Around 130,000 Metro Bank customers will receive average payments of approximately £86 after the lender failed to adequately warn its customers about unarranged overdraft charges.

‘We are very sorry that we didn’t include all the information we should have done on our overdraft text alerts, and that on certain occasions some customers did not receive these alerts before 10am as they should have done,’ David Thomasson, Metro Bank chief commercial officer, said.

‘This isn't the level of service that we pride ourselves on providing and we are now contacting any customers who have been impacted to put things right for them as quickly as possible,’ he added.

The fine is a blow for Metro Bank, with the lender eager to cut costs after a disappointing performance in 2019 due to an accounting error that caused it to play down the risk of a significant proportion of its mortgage loans which caused it to exaggerate the strength of its balance sheet.

The accounting error prompted regulators to launch an investigation into what went wrong, while the bank’s share price collapse with the stock showing no signs of recovering any time soon.

Short sellers raise bets against Metro Bank

With pressure mounting on Metro Bank, short sellers have begun raising their bets against the UK challenger bank over the last eight weeks.

ENA Investment Capital, Odey Asset Management and Voleon Capital Management have all upped their short positions against the stock, with 7.19% of Metro Bank shares held by short sellers, according to data from the Financial Conduct Authority.

Metro Bank will unveil its Q1 results Wednesday 29 April.

How much does it cost to buy UK shares with IG?

There are three ways to ‘buy’ UK shares with IG: spread betting, trading CFDs or buying physical shares. The cost will depend on which method you choose. The table below illustrates how the costs to get exposure to £10,000 of Lloyds stock, which is equivalent to 16,000 shares (quoted at 62.5p a share).

Remember, spread bets and CFDs are derivatives, which come with higher risk and reward than investing.

Cost to get exposure to Lloyds stock:

Spread betting

CFD trading

Share dealing

Action

Buy £160 per point

Buy 16,000 share CFDs

Buy 16,000 shares

Capital required to open

£2000

£2000

£10,000

Total fees

£20.88

£20.88

£16

Note: Amounts do not include overnight funding charges and taxes. Spread bets are not subject to tax. CFDs are free from stamp duty, but subject to capital gains tax. Share dealing is subject to both stamp duty and capital gains tax.

How to trade stocks with IG

Looking to trade Metro Bank and other stocks? Open a live or demo account with IG and buy (long) or sell (short) the asset using derivatives like CFDs in a few easy steps:

  • Create an IG trading account or log in to your existing account

  • Enter ‘Metro Bank’ in the search bar and select it

  • Choose your position size

  • Click on ‘buy’ or ‘sell’ in the deal ticket

  • Confirm the trade


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