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.
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Cost to get exposure to Lloyds stock
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| Capital required to open | £2000 | £2000 | £10,000 |
| Total fees | £20.88 | £20.88 | £16 |
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