[LONDON] British lender Metro Bank Plc raised £278 million(S$493.5 million) by selling new shares to investors and also generated a pretax profit in the first half of the year.

Metro Bank, the first new high street bank in Britain in over 100 years when it launched in 2010, said the proceeds of the share placing would be used for growth and to replace funds used for its acquisition of a mortgage portfolio last month for £597 million.

"The fact that we've actually raised 10 pct of the stock at the market price with no discount is a fantastic result. We were massively oversubscribed," Chief Executive Craig Donaldson told Reuters.

The lender, which offers retail, business and private banking, said underlying profit before tax was £6 million in the six months ended June, compared with a loss of £13 million a year earlier, driven by growth in lending and customer deposits.

Metro Bank, which listed in London in March last year with the aim of challenging Britain's big lenders, boosted its loans and deposit book, shrugging off concerns over slowing economic growth, a faltering housing market, high levels of consumer debt and rising inflation.

Rival Virgin Money flagged a weaker housing market and pressure on margins on Tuesday, adding to signs of tougher trading for British lenders.

Metro shares traded 4 per cent higher at £36.25 by 0930 GMT and have risen from a flotation price of £20 last year.

Britain's banking sector is dominated by the established might of Barclays, HSBC, Lloyds Banking Group , Nationwide, Santander UK and Royal Bank of Scotland.

"In a small island with a lot of people, to have 6 banks dominate the market cannot be good for competition... it's important that we have growing organisations challenging the cartel of the big banks," Mr Donaldson said.

John Cronin, analyst at Goodbody, said the placing will boost Metro Bank's core capital ratio by 590 basis points.

"Executing the transaction at yesterday's closing price will be likely welcomed by existing investors - though more capital will be needed in time," Mr Cronin said.

REUTERS