A false WhatsApp rumour telling Metro Bank customers to empty their accounts ‘as soon as possible’ was behind a panic which sent the company’s shares tumbling, it has emerged.
A message which circulated on the Facebook-owned service claimed falsely that Metro Bank ‘may be shut down or going bankrupt’.
It sparked fears for the future of the High Street bank and prompted some West London savers to queue up at a local branch and withdraw their money.
The bank has faced a tumultuous few months but has told customers there is ‘no reason to be concerned’ about the false claims.
The WhatsApp message, reported by Business Insider, read: ‘Urgent. Guys if anyone has Metro Bank account with money or locker. You need to empty as soon as possible.
‘The bank is facing a lot of financial difficulties and may be shut down or going bankrupt.
‘Their share price and market capital has dropped by 85 per cent since last year and they may not get funding.
‘If your money or locker gets trapped [it]might be harder to pull money out or even loss [sic].
‘Please withdraw all lockers and keep in a safe place.’
One branch in Harrow, north-west London, was packed with people trying to withdraw funds.
The message, which shared a link to a BBC report, also sparked fears over valuables stored in one of the bank’s safe deposit boxes.
The group saw its stock drop five per cent, having fallen as much as nine per cent at one stage, amid talks over a cash injection.
However Metro Bank dismissed the claims which spread on WhatsApp as ‘false rumours’ and said plans to shore up its finances were well advanced.
‘There is no truth to these rumours and we want to reassure our customers that there is no reason to be concerned,’ they said in a statement.
Up to £85,000 of deposits in banks and building societies are protected by the Bank of England.
Metro Bank’s shares have plummeted 75 per cent since January after announcing it needed to plug a funding gap.
The bank had flagged that it had miscalculated the risk weighting of commercial loans secured on property and certain specialist buy-to-let loans.
It later announced a £350 million cash call to make up for the shortfall on its balance sheet.
The bank saw underlying first quarter pre-tax profits sink to £6.9million, compared with £10million a year ago, while statutory profits halved to £4.3million.
To compound matters, shareholders have been urged to vote against the re-election of founder and chairman Vernon Hill amid the fallout from the accounting blunder.
Michael Hewson, chief market analyst at CMC Markets, said: ‘Not surprisingly shareholders are furious, having already been tapped for £300million last summer and while the bank has announced this morning that the £350million capital raising is well advanced, they haven’t answered any of the questions around why the error happened in the first place.’
He said: ‘It is highly probable that shareholders will insist on some management changes as a quid pro quo for any new capital, with chairman Vernon Hill, as well as chief executive Craig Donaldson, in the firing line of some investors, on the back of a share price dive from £35 12 months ago to under £5 now.’
Metro Bank is becoming a huge test for the Bank of England’s Prudential Regulatory Authority (PRA).
Established in the wake of the financial crisis of a decade ago, the PRA has thus far managed to steer leaking banks, such as the Co-op and TSB (after Lloyds and Spanish ownership), to safe shores.
There was much brave talk of ending ‘too big to fail’ in the wake of the 2008/09 meltdown.
But the approach of first Andrew Bailey at the PRA, and its current head Sam Woods, has been to try to stabilise problem institutions by encouraging equity and bond investors to step up to the plate rather than allowing failure.
The hammed-up weekend social media post of customers piling into a Metro Bank branch, amid fears about their deposits, can be ignored.
After all, consumer deposits are insured up to £85,000 and it is only people engaged in some kind of exceptional transaction, such as a property sale, who might be vulnerable should the slide in Metro’s share price signal something worse.
But what we also know from the financial crisis is that it is the unseen run which really matters. This is the withdrawal of deposits made by institutions and other banks in the wholesale money markets.
When Northern Rock first ran into difficulty in the summer of 2007, the Bank of England stepped in as the lender of last resort. Since the financial crisis, the Bank has operated all manner of loan windows designed to ease temporary pressure on the banking system.
In Metro’s case, the important thing now is to underpin capital.
The delay in getting the proposed £350million rights issue over the line has offered short-sellers a free lunch.
Indeed, with each fall in the share price, repairing Metro’s capital becomes harder. That is why it is now suggested that it may have to dispose of some of its loan book.
If, and when the refinancing is over the line it is hard to imagine the authorities will continue to support chairman Vernon Hill or chief executive Craig Donaldson.
The latter’s optimism about the quality of Metro Banks’s loan book has been wholly unfounded.
The easiest solution to Metro’s problem would be absorption by another financial group.
But at a time when branch banking has become expensive, it is not clear who would want to take on a costly experiment in architect-designed banking halls.