Metro Bank shares set to slide as short interest continues to build

• Metro Bank set to unveil its Q3 earnings on 21 October
• Short interest in Metro Bank continues to build amid dim outlook for British lenders

Metro Bank is set to unveil its third quarter (Q3) results on 21 October, but with Covid-19 applying even greater pressure on the already struggling lender and short interest continuing to build, its share price is set to slide further in this month.

Odey Asset Management (4.31%), ENA investment Capital (.67%) and Voleon Capital Management (1.60%) all upped their short positions against Metro Bank, with the UK challenger among the top five most shorted UK stocks.

In fact, 8.1% of Metro Bank shares are held by short sellers, according to data compiled by the UK Financial Conduct Authority.

Metro Bank closed at 59p per share on Monday, with the stock down 71% year-to-date.

Rising bad loans piles on pressure for UK lenders

The UK banking sector is braced for Brexit and continues to wrestle with the economic fallout from Covid-19, with lenders strengthening balance sheets to cope with a rise in bad debts, while low interest rates squeeze margins ever tighter.

The central bank predicts unemployment will hit 7.5% by the end of the year, which would be relatively low considering how deeply the crisis has impacted the UK economy. It also forecasts credit losses of around £80 billion, though the actual figure could be much higher if localised lockdowns persist and a reopening of the economy is intermittently interrupted.

FTSE 100: technical analysis

The FTSE 100 has been on the rise over the course of the past three-trading days, with the index pushing beyond the 61.8% and 200-SMA resistance this morning, according to Josh Mahony, senior market analyst at IG.

‘That rise takes us back towards the 76.4% Fibonacci level, at 5980,’ he said. ‘With a wider bearish trend in place since the June high, there is a good chance we are looking at a retracement, where a break through 6041 is required to negate that trend.’

‘Until then, there is a good chance we will see a turn lower before long, with that 5980 level providing the most interesting area to watch,’ he added.

How to trade stocks with IG

Looking to trade Metro Bank and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

1. Create an IG trading account or log in to your existing account
2. Enter ‘Metro Bank PLC’ in the search bar and select it
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade