RBC has lifted its rating on Metro Bank Holdings PLC (LSE:MTRO) to 'outperform' from 'sector perform', citing a major shift in the regulatory landscape that reduces the lender’s funding costs and improves its capital flexibility.
The broker kept its price target at 155p, suggesting close to 30% upside from current levels.
The turning point is the Bank of England’s decision to remove Metro’s Minimum Requirement for Own Funds and Eligible Liabilities (MREL) from January 2026.
MREL is a type of loss-absorbing debt that smaller banks have long argued is disproportionately onerous. Its removal means Metro will no longer need to issue expensive wholesale debt, a change RBC said was “transformational” for shareholder returns.
RBC analysts expect the bank to deliver a return on tangible equity of 18.2% by 2028, alongside the resumption of dividend payments from 2027, something they described as “an important sentimental development” for investors.
Metro’s near-term focus remains on strengthening its balance sheet and cutting costs, but the combination of capital relief, improving profitability and the prospect of distributions to shareholders has persuaded RBC to shift stance.
The shares rose 1% to 121.4p.