Metro Bank share price extremely oversold as capital raise nears

October 05, 2023 01:02 PM AEDT | By Invezz

Metro Bank share price extremely oversold as capital raise nears — Image source: Invezz

Capital raise ahead

Metro Bank and other British banking groups like Lloyds, Barclays, and NatWest have come under pressure this year as concerns about the British economy continue. The country is seeing entrenched inflation, with the headline consumer price index (CPI) remaining above 6%.

At the same time, the Bank of England (BoE) has pushed interest rates to the highest level in more than a decade. Higher interest rates help to boost banks’ earnings by increasing their interest income.

However, they also lead to higher delinquency rate as the cost of borrowing rise. Most importantly, as we saw with Silicon Valley Bank, higher rates can have a negative impact as long-term bond yields surge.

Metro Bank is also facing other challenges, as I wrote here. In a statement in September, the Prudential Regulation Authority said that it was not ready to approve its advanced internal ratings-based (AIRB) in mortgage loans. The PRA said that it will not approve this application this year, continuing a delay that has been going on for a while.

The Metro Bank share price has also retreated after the company revealed more plans to raise cash. In a report, Bloomberg said that the company had engaged Morgan Stanley to help it with this process. Some of its available options are securitisation and loans and asset sales.

The most recent results showed that Metro Bank’s business was not doing well. Its profit before tax rose to 16.1 million pounds in the first half of the year, an improvement from the 2.3 million pounds loss it made in the previous year. Its customer deposits fell to 15.2 billion pounds while loans to deposit ratio fell to 81%.

Metro Bank share price forecast

Metro chart by TradingView

The daily chart shows that the Metro Bank stock price has been in a strong bearish trend in the past few months. It has flipped the important support at 67p, the lowest swing in October last year. The shares have plunged below the 50-day and 100-day moving averages.

Most importantly, the Relative Strength Index (RSI) and the Stochastic Oscillators have dropped below the oversold level. Therefore, the outlook for the shares will likely continue falling as sellers target the key support at 40p.

The post Metro Bank share price extremely oversold as capital raise nears appeared first on Invezz.

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