Metro Bank says it has begun the process of raising £350m from shareholders to bolster its finances, in a bid to ease fears over its future.
It follows an accounting error in January which left the bank without the capital it needed to grow.
Existing shareholders still need to approve the deal, but the firm is likely to raise the money it needs.
Shares in Metro Bank have fallen about 75% this year, wiping about £1.5bn off its market value.
The firm said it had priced its shares at 500p – a 36p discount to its closing share price on Thursday.
The bank – which has 67 branches in London and the South East – is selling new shares to new and existing investors.
It revealed in January that it had underestimated the risk level of some of its commercial loans by almost £1bn.
That meant it did not have the required shock-absorbing capital it needed to support a number of its business loans.
The funds it raises are aimed at strengthening its capital position.
- Metro Bank opened its first branch in London’s Holborn in 2010 in the wake of the financial crisis
- It was the first High Street bank to open in the UK in more than 100 years
- It is one of so-called challenger banks to the big High Street names, and opens seven days a week
- Founder Vernon Hill shook up the US banking scene in 1973 when, aged 26, he founded Commerce Bank with one branch
- When he sold Commerce Bank in 2007 for $8.5bn, it had 440 branches
Metro Bank has been under close supervision by regulator the Prudential Regulation Authority after the capital miscalculation.
The issue has also weighed heavily on its performance, with its recent results for the first three months of the year showing a sharp drop in pre-tax profit to £6.9m from £10m for the same period a year ago.
Chief executive Craig Donaldson said “adverse sentiment” has also impacted deposit growth, but said that 2019 would be “a year of transition” for the bank.
The bank was founded in 2010 by American Vernon Hill, becoming Britain’s first new High Street bank for over 100 years.
Its unusual focus, in a world where most banks are drastically cutting back on branches, has been on building physical branches, which open earlier and longer than any of their rivals.
However, in February it said it would scale back ambitious plans to open 200 branches across the UK.