Image copyright Bill Cramer © Wonderful Machine Inc. Image caption Vernon Hill with his wife Shirley and their dog Duffy

Metro Bank has announced that its controversial chairman and co-founder Vernon Hill will leave the embattled lender by the end of the year.

The bank said in July that Mr Hill would be stepping down as chairman but had initially said he would stay on as a non-executive director and president.

His departure was announced after last week's share price crash when it abandoned plans to raise £250m.

But those fundraising plans were revived on Wednesday.

The bank confirmed it had raised £350m in the bond markets. It is more than the original plan but Metro Bank has offering better terms to attract investors.

Its share price soared by 22% in afternoon trade.

The fundraising comes as the bank remains under pressure since revealing a £900m accounting error at the beginning of the year.

Analysis:

Kevin Peachey, BBC personal finance reporter

American Vernon Hill recently said in an interview that he would "probably die" before leaving the bank which he co-founded in 2010. His departure has now been confirmed but not in the way he expected.

He leaves an embattled bank desperate for investment, but one which remains hugely popular among its own customers.

Metro was joint top with First Direct in official rankings, with 82% of personal British customers saying they would recommend the banks to their family and friends.

Customers may like its airy, dog-friendly branches, the very fact it even opens branches and the customer service they receive but the business reality is that Metro is struggling.

Meanwhile, supermarkets have been pulling out of mortgage lending and digital banks have yet to prove customers will trust them with their main current account.

All this raises the wider question over how much of challenge to the big names so-called challenger banks can create.

The lender has already begun searching for Mr Hill's replacement, which it said was "progressing well".

It added that if it does not find a new chair by the time Mr Hill is scheduled to leave, it will appoint one of its non-executive directors to the role on an interim basis.

In January, Metro Bank disclosed it had misclassified loans that it made to companies and landlords.

The Bank of England's regulatory arm and the Financial Conduct Authority, the City watchdog, both began investigations into Metro Bank.

Since then, its profits have fallen sharply after customers withdrew £2bn worth of deposits over the six months to June.

The lender subsequently admitted in the prospectus for its now failed £250m debt issue that both probes had been expanded to include senior members of management and warned that they could lead to "criminal and/or civil liability for the bank".

It also said that "making redress, and the cost of any regulatory sanctions may involve significant expense".

Investor criticism

When Mr Hill co-founded Metro Bank, it was the first High Street bank to open in the UK for 100 years.

It has proved popular with customers and is ranked highly in terms of its service by the likes of the consumer group Which?.

However, the bank has also faced criticism from its shareholders, most notably over its ties to an architecture and design firm owned by Mr Hill's wife, Shirley.

Her firm, InterArch, has received about £25m from Metro Bank for design services. The company has now cut ties with InterArch.

John Cronin, financials analyst at stockbrokers Goodbody, said: "Hill's vision and experience in building banking businesses will undoubtedly be missed at a board level and may have short-term negative consequences in a morale context.

"However, more broadly, change at a senior director level is often constructive in terms of driving (necessary) strategic reorientation."

He said the new fundraising effort would "stabilise the situation" as the bonds are required for regulatory purposes.