Adds FT report on PRA and FCA summons in paragraph 3, updates shares, bond prices, additional context throughout

By Sinead Cruise and Iain Withers

LONDON, Oct 5 (Reuters) - Metro Bank MTRO.L shares plunged more than 25% on Thursday following reports the British lender was exploring options to raise as much as 600 million pounds ($728 million) in debt and equity to bolster its finances.

Shares in the bank have lost about two thirds of their value since mid-February. As of Wednesday's close, the lender, which reported around 15.5 billion pounds in customer deposits at June 30, was valued at 87 million pounds.

Metro Bank's chair and CEO have been summoned to urgent talks with officials from Britain's top financial regulators, the Bank of England's Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), the Financial Times reported, citing unidentified sources.

The PRA and FCA declined to comment. Metro Bank did not immediately respond to a request for comment.

Metro Bank's fundraising could include more than 100 million pounds from selling shares to bolster capital, three sources familiar with the matter told Reuters on Wednesday.

Metro Bank said in a statement on Thursday it was considering its options, adding that it met its minimum capital requirements and had not made a decision on fundraising plans.

"The company is evaluating the merits of a range of options, including a combination of equity issuance, debt issuance and/or refinancing and asset sales," it said.

Shares in the bank dropped as much as 29.4% on Thursday, triggering two brief automatic suspensions in trading. They were last down 24.2% at 1002 GMT.

Metro Bank bonds continued falling sharply, hitting deep distressed price levels. The 350 million pounds notes due to mature in 2025 were down by over 14 pence in the pound to 62 on Thursday at 1004 GMT, according to MarketAxess. XS206349239=1M

Meanwhile, the 250 million pounds bonds due to mature in 2028 fell by 18 pence in the pound to 34, data from Tradeweb showed. XS1844097987=TE

Metro Bank recently brought in Morgan Stanley as adviser, the sources said.

Jefferies recently stepped away as broker to the firm, a person familiar with the move said. A Jefferies spokesperson had no immediate comment.

Some analysts were unconvinced by the bank's prospects.

"Supporting a further capital raise for this struggling bank would be akin to throwing good money after bad, in our view," Gary Greenwood, banking analyst at Shore Capital said in a note, but added he believed the bank's issues were company-specific.

MULTIPLE SETBACKS

Metro Bank grew rapidly after its launch in Britain in 2010, following a blueprint that founder Vernon Hill had honed in the United States with Commerce Bank that prioritised customer service in-branch while rivals were slashing their networks.

It won attention and business quickly with its gaudy red-and-blue coloured outlets, typically located on street corners in busy retail areas, as well as gimmicks such as a dog-friendly policy inspired by Hill's own pet Duffy.

However, Metro Bank's challenge to the dominance of Britain's top lenders encountered a slew of challenges since its 2016 stock market listing.

Metro Bank was forced to raise shareholder equity in 2019 after an accounting error led to a misreporting of its risk-weighted assets, spooking investors and regulators and wiping hundreds of millions of pounds off its market value.

The ensuing fallout also ultimately led to the departure of the bank's top management team, including chairman Hill and CEO Craig Donaldson.

Metro Bank's shares also dipped last month after the PRA signalled it was unlikely to allow the lender to use its own internal risk models for some mortgages.

The bank is subject to higher capital requirements set by the regulator if unable to use its own models, a concern that has been weighing on the stock.

The Gilinski Group - an investment firm owned by Colombian billionaire Jamie Gilinski, which holds a 9% stake in Metro Bank - declined to comment on Wednesday.

Metro Bank said on Thursday it expected its forthcoming third quarter trading update to show growth in personal and business current accounts, in line with expectations.

"The board retains conviction in the merits of Metro Bank's customer-centric model and strongly believes that there is a significant opportunity set that the company can capitalise on, subject to renewed balance sheet strength," it said in September.

($1 = 0.8239 pounds)

(Additional reporting by Danilo Masoni, Chiara Elisei, Lawrence White and Anousha Sakoui
Editing by Mark Potter)

((Danilo.Masoni@TR.com))