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FTSE falls as Metro Bank dives 39% on profit warning

FTSE falls as Metro Bank dives 39% on profit warning

Update: The FTSE 100 has fallen into the red as fears over global growth continued to linger, shedding 59 points to 6,843.

The latest damage to sentiment came from the Financial Times' report that the US had rejected an offer for preparatory talks with China ahead of a higher level meeting next week.

Among the FTSE 100’s biggest fallers were cigarette maker British American Tobacco (BATS), down 1.9% to £24.82, oil major Shell (RDSb) which fell 2.3% to £22.81 and consumer goods business Reckitt Benckiser (RB), down 4.1% at £57.84.

However, a profit warning from Metro Bank (MTRO) was one of the biggest stories in UK markets this morning. The FTSE-250 listed bank saw its shares dive 39% to £13.45 after it reported full-year pre-tax profit guidance of £50 million, 15% below analysts’ forecast of £59 million.

Profit before tax in the fourth quarter was down to £11 million, versus £15 million in the third quarter and £14 million in the second, though it did open seven stores in the final period of 2018 putting pressure on costs, Jefferies analysts pointed out.

The news had left the market wondering what had gone wrong with the once ‘shining star’ of the banking sector, AJ Bell investment director Russ Mould said.

‘Intense competition in the mortgage market is a major issue at the moment and has been flagged by other lenders,’ he said. ‘Savings rates are also going up across the industry as the Bank of England has started to slowly lift base rates.’

‘This has created a perfect storm for some banks and is likely to have put pressure on Metro Bank’s net interest margin, which compares the money paid on savings to the interest customers pay on loans.’

Metro Bank is not well-held among mainstream UK funds, but is heavily shorted, with fund groups BlackRock, JPMorgan Asset Management, Odey Asset Management and Polar Capital among those shorting the shares.

Another heavy mid-cap faller was Sanne Group (SNN), down 17.7% to 450p after the surprise retirement of chief executive Dean Godwin.

Alternative Investment market stock Patisserie Holdings (CAKEP), parent of high street cake maker Patisserie Valerie, has announced it had fallen into administration.

The business has been engulfed in scandal since it found a £20 million black hole in its accounts in October, forcing it to suspend its shares and undertake an emergency rights issue. Banks have refused to bail out the business.

The pound strengthened, topping the $1.30 mark against the dollar amid hopes MPs would try to prevent a no-deal Brexit

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