Metro Bank higher after upgrade. Are the shares worth 150p?

Metro Bank (LSE:MTRO) shares rose 2.3% following an RBC upgrade that lifted its price target to 150p from 100p and removed its speculative risk rating. This increased confidence stems from an anticipated rise in the Minimum Requirement for Own Funds and Eligible Liabilities (MREL) threshold, expected to ease capital pressures and boost the bank's profit before tax by approximately 20% by 2027. RBC forecasts significant adjusted earnings per share growth and a notable reduction in the cost-income ratio by 2027, driven by improved operational efficiency and strong management execution.

Analysis

Metro Bank Holdings PLC (LSE:MTRO) experienced a 2.3% share price increase to 133p following a significant upgrade from RBC, which raised its price target to 150p from 100p and removed its speculative risk rating. The core driver for this renewed confidence is an anticipated regulatory change: an increase in the Minimum Requirement for Own Funds and Eligible Liabilities (MREL) threshold. This development is projected to alleviate capital pressures and could boost Metro's profit before tax by approximately 20% by 2027. The positive outlook is further supported by improving fundamentals, with RBC forecasting adjusted earnings per share to reach 26.7p by 2027, up from 14.9p in 2026. This earnings growth is underpinned by management's successful execution on cost controls, reflected in the forecast for the cost-income ratio to drop from 81% in 2025 to 61% by 2027.

Key Decisions for Investors

• Given the price target of 150p and the removal of the speculative risk rating, investors could view the current price of 133p as an attractive entry point, contingent on the materialization of the expected regulatory tailwind.
• The primary catalyst is the MREL threshold adjustment, so investors should closely monitor the Bank of England’s upcoming Financial Stability Report and the Chancellor's Mansion House speech for confirmation.
• It is crucial to track management's ability to execute on its efficiency plan, specifically the reduction of the cost-income ratio to the targeted 61% by 2027, as this is a key driver for the forecasted profitability.