Ann: COVID-19 Trading Update 88 - Week Ended 19 November 2021, page-34

I don't think you understand CET1 is and how it operates as you are quoting the regulatory floor. Any bank which gets anywhere close to that level is in severe trouble. In addition most banks also hold CET2 which Tyro has none. A normal bank operating range is 20%. It is arguable if Tyro is more or less risky than the big 4, but I believe it is more risky as it has no diversification benefits a full service bank has.
That being said:
- Tyro's overall capital ratio dropped 18% for the quarter ended 30 Sept. I believe this will further deteriorate as business returns to normal. This itself is the key red flag.
- The capital ratio has been impacted favourably in prior periods during COVID due to the reasons quoted above.
- If Tyro continues to burn cash (make a loss) at a rate of $15m pa. and needs to fund other 'unexpected' capital requirements (incl. the dongle), it no longer has any surplus capital to move.
Sure, it can operate with a lower capital ratio but it means that Tyro is carrying a lot more risk than previously planned.
The big issue I understand from analysts is if management can't demonstrate that the strategy is paying off and at minimum, show they have arrested the cash burn, then Tyro will/is being rerated.
I personally think the SP is undervalued atm, but I no longer ascribe to the view that it should return to $4+.