Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Can the Metro Bank share price make a comeback in 2022?

The Metro Bank share price has fallen 95% since the beginning of 2019. After private equity giant Carlyle pulled out of a takeover proposal last week, what are its prospects for 2022?

At its launch in 2010, Metro Bank (LON: MTRO) was the first UK high street bank to open in over a century. Six years later, its Initial Public Offering on 10 March 2016 saw the challenger bank’s share price open at 2,200p. And by 28 February 2018, it had soared to its all-time high of 3,952p. But after falling to 2,196p by 18 January 2019, disaster struck for the retail and commercial banking outfit.

The Prudential Regulation Authority (PRA) discovered that it had misclassified hundreds of millions of pounds of high-risk commercial property and buy-to-let loans. Metro Bank was forced to issue an additional £350 million of shares to meet its capital requirements in case some of its debtors defaulted. Chairman Vernon Hill resigned, and the bank also had to scale back its growth plans.

By March 2019, it was one of the most shorted shares on the UK market. Some customers were starting to close their accounts and withdraw their deposits. The Metro Bank share price is now down 95% from 2,196p to 101p and has hovered around that level since the market mini-crash of March 2020.

Carlyle exits takeover plan

On 4 November the Metro Bank share price rose 29%, from 103p to 133p on the news that private equity giant Carlyle had entered into buyout talks with the struggling challenger bank. But on 17 November, Carlyle informed investors that it had ‘agreed to terminate discussions.’ In response, Metro said that its board ‘strongly believe in the standalone strategy and future prospects.’ The bank’s share price promptly fell back to its current price of 101p.

When Carlyle announced the plan, Goodbody analyst John Cronin suggested that it could be a ‘deep value play’ for the private equity group, as a combination of Metro’s repositioning and the prospects of increasing UK interest rates could see profits begin to soar. And as it now appears that a rate rise is almost inevitable, it may leave investors wondering why Carlyle would pull out of the proposed deal.

However, it may simply be that Metro Bank’s board considered the private equity bid to be too low. Arguably, it could one day return to its former valuation. Or the bank thinks it can secure an improved bid in the near future. But without further information, investors can’t know for sure. And this ongoing uncertainty is another problem for the struggling stock.

Metro Bank share price: Q3 2021 results

Last month’s third-quarter (Q3) results did not impress investors. Total deposits fell again, to £16.412 billion, a 1% drop quarter-over-quarter. Meanwhile, total net loans of £12.315 billion were £200 million less than in Q2. However, this also represents an 18% increase over Q2 2020.

And CEO Daniel Frumkin remains positive, commenting that ‘the Bank has continued to deliver against its strategic priorities during the quarter. We have seen improvements in our lending mix from our expanded product offering.’

And first-half H1 2021 results were more encouraging. Adjusted underlying revenue rose 14% compared to H1 2020 and was up 47% year-on-year. Moreover, customer accounts rose 20% from 2.0 million in H2 2020 to 2.4 million, reversing the prior downwards trend.

But with new online-only competition, including Monzo, Starling, and Wise, Metro Bank's physical presence may prevent it from being the prime challenger it once was. The Covid-19 pandemic has driven more people online than ever before, at the cost of high street foot traffic. Many of its traditional competitors, including Barclays, HSBC, and Lloyds, have all reported record results recently. And they’ve all been closing branches in response to new digital trends.

A comeback next year for the Metro Bank share price is not impossible. The bank has repositioned its finances, is growing customer accounts, should grow profits when interest rates rise, and is receiving private equity interest. And its low valuation means there’s plenty of room for share price growth. But it’s been a penny stock at times over the past year. And in the face of stiff competition, it could even have further to fall.

Trade over 16,000 international shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading shares with us, or open an account to get started today.

*Based on revenue excluding FX (published financial statements, June 2020).

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Act on share opportunities today

Go long or short on thousands of international stocks with spread bets and CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.