Metro Bank explores raising up to 600 million pounds -sources

By Anousha Sakoui, Pablo Mayo Cerqueiro and Iain Withers

LONDON (Reuters) -Metro Bank is exploring options to raise as much 600 million pounds ($728 million) in debt and equity financing, people familiar with the situation said on Wednesday, as it works to bolster its balance sheet.

Shares in the British lender fell 26% in early trading on Thursday, against a flat FTSE 350 Banks index.

Metro Bank was valued at 87 million pounds after the close on Wednesday. Its shares have lost about two thirds of their value since mid-February.

The fundraising could include more than 100 million pounds from selling shares, three of the sources said.

Metro Bank is also looking to refinance existing borrowings and is weighing other options, such as asset sales, to reduce its funding needs, two people said.

Metro Bank recently brought in Morgan Stanley as adviser, the people said.

The Financial Times first reported the size of the fundraising on Wednesday.

The bank's shares dipped last month after the Bank of England's Prudential Regulation Authority (PRA) - its principal regulator - signalled it was unlikely to allow the lender to use its own internal risk models for some mortgages.

Metro Bank is subject to higher capital requirements set by the regulator if unable to use its own models, a concern that has been weighing on its shares.

A spokesperson for Metro Bank did not immediately respond to a request for comment on Thursday.

"The board retains conviction in the merits of Metro Bank's customer-centric model and strongly believes that there is a significant opportunity set that the company can capitalise on, subject to renewed balance sheet strength," it said in September.

The Gilinski Group, which holds a 9% stake in Metro Bank, declined to comment on Wednesday.

Metro Bank has 350 million pounds of bonds due in 2025, according LSEG data.

($1 = 0.8237 pounds)

(Additional reporting from Nelson Bocanegra and Sinead Cruise; Editing by Elisa Martinuzzi, Marguerita Choy, David Gregorio and Alexander Smith)