Barclays has taken a look at the options for Metro Bank Holdings PLC (LSE:MTRO) as reports continue to emerge regarding its financing options.
Shares in the under-pressure lender have bounced back 20% today after being mauled on Thursday on reports it needed to shore up its finances.
On Thursday, Metro Bank said it "continues to consider how best to enhance its capital resources” and was “evaluating the merits of a range of options, including a combination of equity issuance, debt issuance and/or refinancing and asset sales”.
Barclays thinks to fully offset any headwinds from maturing MREL debt, “there would need to be a sale of a £5.5 billion mortgage portfolio, £2.6 billion consumer credit portfolio or £2.1 billion commercial portfolio”.
Barclays estimates this would be equivalent to a £1.9 billion reduction in risk-weighted assets, benefiting the CET1 ratio by 3.4% and MREL ratio by 6.0%.
The Bank of England requires all banks, building societies and certain investment firms to maintain a minimum requirement for own funds and eligible liabilities – or MREL.
In the absence of AIRB approval to ease capital burdens, Barclays thinks asset sales are key whilst Metro Bank continues to operate within its capital buffers.
The lender announced last month it had not received permission from regulators to change the way it calculates the capital requirements on its mortgage book.
That change would have improved the bank's capital position and made it more profitable.
“Whilst the bank may be able to modestly build revenue without growing the balance sheet further given the higher-for-longer rates backdrop, we think AIRB approval is key to realising growth and delivering a capital-generative business,” it added.
"We continue to see the outlook challenged whilst capital constrains growth," it added.
The bank has an 'underweight' rating on Metro.