How to buy, sell and short Metro Bank shares
Metro Bank was the first UK high street bank to launch in over 100 years, but it has had a tumultuous beginning. If you’re interested in buying, selling and shorting Metro Bank shares, you can learn more in this guide.
How to buy and invest in Metro Bank shares
Share dealing platforms enable you to take ownership of shares outright, meaning that you will profit if the price rises, or from any dividend payments that a company pays out.
Derivatives trading lets you speculate on the price of Metro Bank shares without owning them directly, enabling you to open positions with leverage.
To invest in or trade Metro Bank shares with IG, follow these steps:
Investing in Metro Bank shares
- Create or log in to your IG share dealing account
- Search for ‘Metro Bank’
- Select ‘buy’ in the deal ticket
- Choose the number of shares you want to buy
- Confirm your purchase and monitor your investment
Trading Metro Bank shares
- Create or log in to your IG trading account
- Decide whether you want to trade CFDs or spread bets
- Search for ‘Metro Bank’
- Choose your position size and select 'buy'
- Confirm your trade and monitor your position
How much would it cost to invest in Metro Bank?
|UK best commission||UK standard commission|
IG’s best commission is available to active clients who placed three or more trades in the previous month. If investing isn’t for you, consider speculating on the price of Metro Bank shares with derivatives. You’ll be able to:
- Get full exposure with a small deposit – usually just 20-25% of the full value of the trade1
- Trade spread bets without paying any tax2
- Hedge your positions with CFDs and offset any losses against potential profits
How to sell and short Metro Bank shares
After investing in Metro Bank, you might want to sell your stake if the price starts to fall. Alternatively, you could short Metro Bank shares with CFDs and spread bets if you think the price is going to fall to profit from any downward momentum. Follow the steps below to sell and short Metro Bank shares:
Metro Bank’s live market prices
Understanding Metro Bank: a brief history
Metro Bank was founded in 2010 by Vernon Hill, and it was the first new UK high street bank to launch for over 100 years. Initially, the bank had planned to open between 200 and 250 stores in Greater London within its first ten years. The bank’s first location opened in Holborn (London) on 29 July 2010.
After its founding, the bank raised capital equal to $200 million in 2012. This came from investors including David and Simon Reuben (members of the UK’s second-richest family), American hedge fund manager Steven A. Cohen, and Fidelity Investments Inc.
Metro Bank failed to make a profit for several years after its launch, reporting pre-tax losses of over £100 million from 2010 to 2013. However, the bank’s founder stated that initial losses were expected as part of the rapid growth plan for the company.
Early in 2019, Metro Bank came under scrutiny after it was revealed that the bank had miscategorised £900 million worth of loans as being less risky than they actually were. This prompted an investigation by the Financial Conduct Authority (FCA) into the miscategorisation, and the investigation was widened into senior management at the bank to assess whether there was any involvement.
After this, Metro Bank attempted to raise another £200 million through the sale of 7.5% bonds, but the process didn’t raise the necessary capital, which caused its share price to fall further in late September 2019.
Metro Bank shares: the basics
Metro Bank is listed on the London Stock Exchange (LSE) under the MTRO ticker. The shares have been in a decline since late in 2018, leading them to become the second most-shorted shares on the UK stock market at the time of writing, having lost over 90% of their value from October 2018 to October 2019.
Metro Bank’s main competitors are other UK high street banks. Examples include Lloyds (LLOY), Barclays (BARC) and Royal Bank of Scotland (RBS). Banking shares have been some of the most traded shares in the UK in recent years because of the uncertainty surrounding Brexit. This is also true because of the integral role that banks play in modern society, meaning that there will always been a demand for banks from consumers.
However, despite posting positive revenue growth of 17% year-on-year (YoY) from March 2018 to March 2019, Metro Bank’s share price has been in virtual freefall, although this is not exclusive to Metro Bank but a reflection of the wider UK and European financial sector.
Metro Bank key personnel: who manages the company?
There are ten members of the executive leadership team at Metro Bank:
|Sir Michael Snyder||Interim chairman|
|Dan Frumkin||Chief executive officer|
|David Arden||Chief financial officer|
What is Metro Bank’s business model?
Initially, Metro Bank’s business model was based on rapid expansion, both of locations and of customer accounts to ensure the bank was competitive on the UK high street. However, following the series of setbacks – including the failed £200 million bond offering to raise capital – plans for expansion were restricted and gains consolidated. The company is currently under investigation by the FCA as a result of the loan scandal in 2019, and it remains to be seen whether it will have to readjust its business model following the findings.
Metro Bank fundamental analysis: how to analyse MTRO
Before you take a position on Metro Bank shares, you should carry out a fundamental analysis to determine whether the shares are currently oversold or overbought – which could mean you either go long or short.
Fundamental analysis involves looking at the fundamentals of a company, including the senior leadership, its financial statements, its operations, and consumer demand for its products and services. As well as this, you can use the following three formulas to show you information about a company’s stock price and future earning potential, which can help you to determine whether you wish to open a position.
Metro Bank’s price-to-earnings ratio
Metro Bank’s price-to-earnings (P/E) ratio can be used to assess the value of its stock. This is because the P/E ratio shows how much you would need to spend on Metro Bank shares to make a £1 profit. If the company has a high P/E ratio compared to its direct competitors (such as other UK high street banks), then it could lead investors to believe that the company’s stock is overvalued.
To calculate the P/E ratio, you would need to divide the market value per share by the earnings per share (EPS). The EPS is calculated by dividing the total company profit by the number of shares it has issued. At the end of September 2019, Metro Bank’s P/E ratio was 4.30.
Metro Bank’s return on equity
Return on equity (ROE) measures a company’s return on shareholder capital. ROE is expressed as a percentage and it can be calculated by dividing a company’s net income by the total amount of shareholder equity.
For potential investors or traders, a low ROE could mean that a stock is currently overvalued. This is because the issuing company is not currently generating as much income per dollar of shareholder investment as its competitors.
Metro Bank’s relative dividend yield
The dividend yield compares annual dividends to its current share price. The relative dividend yield is a company’s dividend yield compared to the dividend yield of an entire index or the average for other firms in the sector. While Metro Bank hasn’t yet paid a dividend, it is still useful to know about the relative dividend yield metric as it could pay a dividend in the future.
To calculate the relative dividend yield of a stock, you would first calculate the company’s dividend yield by dividing its annual dividend by the current share price. Next, divide the dividend yield by the average dividend yield for the index or competitors you want to compare it against.
If the result of is relatively low, it might suggest that the company’s shares are currently overvalued when compared to the shares of its competitors.
1 Deposits for leveraged trades are 20-25% on 99.11% of tier one UK shares.
2 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
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.
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