What happened
Shares of the nearly $6.3 billion asset Metropolitan Bank(NYSE: MCB) traded more than 25% higher as of 10:33 a.m. ET today after the bank issued a financial update this morning, which follows a recent short report on the bank by Vidar Research.
So what
Yesterday, Vidar Research in a Substack post called Metropolitan Bank a "mixed bag of problems," which sent shares tumbling. The post cited Metropolitan Bank's similarities to Signature Bank, which was taken into receivership by the Federal Deposit Insurance Corp. (FDIC) earlier this month; its ties to crypto; and issues with the company's balance sheet.
This morning, Metropolitan seemingly fought back, issuing an update on the company's current financials. Metropolitan said that total deposits between the end of 2022 and March 29, 2023, had grown by more than 5% and that insured deposits accounted for 66% of total deposits. The bank also said it has enough liquidity and funding capacity to cover 170% of uninsured deposits, as well as strong capital ratios, and that asset quality in its commercial real estate portfolio remains strong.
Finally, Metropolitan Bank said it is nearing an exit from its crypto prepaid debit card program, which currently accounts for 4% of total deposits and which should go down to zero by the second quarter. Following the update, analysts at J.P. Morgan issued a research note this morning calling the short report "substantially overblown."
Now what
The bank is not sitting on a significant amount of unrealized bond losses relative to its tangible common equity. Also, the bank's 66% insured deposits and coverage for its uninsured deposits is quite strong when you look across the industry, and the stock now trades at just 60% of its tangible book value or net worth, which is quite cheap.
That said, it is hard to know if the bank has issues lurking in its commercial real estate portfolio, although this is really a concern across the sector and not necessarily unique to the bank.
While I don't see the same problems as Vidar Research, you'll want to do a lot of homework on the company before investing because banks that get caught in the middle of an internet battle can experience a lot of volatility, especially given what has happened recently.
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