The shares of the UK-based Metro Bank PLC (GB:MTRO) tumbled by 11% in early trading today, as the company suffered a setback with regard to the capital relief expected in 2023. Metro Bank said that the Prudential Regulation Authority (PRA) of the Bank of England (BoE) is expected to withhold the approval of the use of its internal credit risk models in the bank’s residential mortgage division this year. This added to the bank’s woes, as it will have to adhere to higher capital requirements that have been weighing on investors’ returns.
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Over the last five years, Metro has diligently pursued its endeavor to implement internal models similar to those used by larger banks. In the recent update, the PRA stated that the approval will not be achieved in 2023 and expects the bank to undertake additional efforts for the same.
This recent setback has further heightened caution among investors who are grappling with the valuation of their investments in Metro stock. Due to this approval denial, Metro Bank continues to be governed by elevated capital requirements mandated by the regulator, which have adversely impacted shareholder returns. Overall, the Metro Bank share price has lost 20% in trading YTD.
Metro Bank offers a full range of banking and financial products and services in the UK. The bank primarily concentrates on serving retail customers and small to medium-sized businesses.
Is Metro Bank a Buy or Sell?
On TipRanks, MTRO stock has received a Moderate Sell rating based on one Hold and Two Sell recommendations. The Metro Bank share price target is 80.23p, which implies a 12% decline from the current level.
It’s important to note that these ratings were assigned last month and could potentially be revised given the recent changes.
