DJ Metro Bank Holdings PLC: Interim results for half year ended 30 June 2024
Metro Bank Holdings PLC (MTRO) Metro Bank Holdings PLC: Interim results for half year ended 30 June 2024 31-Jul-2024 / 07:00 GMT/BST =---------------------------------------------------------------------------------------------------------------------- Metro Bank Holdings PLC Interim results Trading update H1 2024 31 July 2024 Metro Bank Holdings PLC (LSE: MTRO LN) Interim results for half year ended 30 June 2024 Highlights Financial Results: -- Underlying loss before tax of GBP26.8 million (H2 2023: loss GBP33.0 million) is primarily driven by a lower net interest margin of 1.64% (H2 2023: 1.85%, Q2 2024 NIM of 1.74%) due to a transient higher cost of deposits at 2.18% following the successful deposit campaign in Q4 2023 (H2 2023:1.29%). -- Upgraded Guidance includes profitability during Q4 2024, mid-to-upper single digit RoTE in 2025, double digit RoTE in 2026 and mid-to-upper teens thereafter. This is driven by cost discipline, asset rotation and the mortgage portfolio sale. -- New stores: Began construction in Chester and signed lease in Gateshead. Looking for more new store sites in North of England and East Midlands. -- Total underlying operating expenses reduced 6% or GBP17 million HoH to GBP255 million (H2 2023: GBP272 million) , with GBP80 million of annualised run-rate savings on track to be delivered by December 2024. -- Total net loans as at 30 June 2024 were GBP11.5 billion, down 6% compared to full year position (31 December 2023: GBP12.3 billion) as the bank strategically repositions its balance sheet towards higher yielding commercial, corporate, SME and specialist mortgage lending. -- Metro Bank has a solid credit approved commercial pipeline across H1 2024 equivalent to 116% of total new lending in 2023, with H1 2024 drawdowns c.81% of total new lending in 2023. -- Customer deposits of GBP15.7 billion at 30 June 2024, down GBP0.8 billion on February 2024 peak of c.GBP16.5 billion (31 December 2023: GBP15.6 billion), reflecting the deliberate focus on reducing liquidity and cost of deposits. -- Metro Bank's MREL ratio was 22.2% as at 30 June 2024, up 20bps from 22.0% as at 31 December 2023, reflecting ongoing focus on capital management whilst optimising risk-adjusted returns on regulatory capital. Year-on-year MREL increased c.410bps from 18.1% as at 30 June 2023. On completion[1] of the mortgage sale, there is a pro forma improvement in Metro Bank's total capital plus MREL ratio of c.122bps from 22.2% to 23.4%, c.530bps higher than 30 June 2023. Post-period end developments: -- GBP2.5 billion mortgage portfolio sale, announced post-period end, with the transaction earnings, NIM and capital ratio accretive. The additional lending capacity created by this sale enables a continued shift into higher yielding assets. -- TFSME to be repaid from proceeds of mortgage sale eliminating any industry wide deposit funding headwinds going forward. Upgraded Guidance: -- Expect return to profitability during Q4 2024 -- RoTE guidance increased to mid-to-upper single digit in 2025, double digit in 2026 and mid-to-upper teens thereafter -- Continued NIM expansion driven by asset rotation, and expect NIMs in 2024, 2025 and 2026 to be approaching 2.50%, 3.25% and 4.00% respectively -- Continued cost discipline and control, with cost to income ratios in 2026, 2027 and 2028 to be approaching 70%, 60% and 50% respectively
Daniel Frumkin, Chief Executive Officer at Metro Bank, said:
"Metro Bank has made significant underlying progress during the first half of 2024. We have built real momentum in credit approved pipelines across commercial, corporate and SME lending, whilst expanding spreads in retail mortgages and repricing deposits. At the same time, our continued cost discipline is creating a simpler, more agile bank that is fit for the future."
"Our upgraded guidance today reflects progress against our strategy, including the recent residential mortgage portfolio sale. We expect these actions to positively impact on our balance sheet in the fourth quarter of the current financial year, delivering a return to profitability."
"We look to the future with renewed confidence, as we continue to strengthen and deepen our people-people banking and relationship-led services in areas our FANS value the most."
Key Financials
30 Jun 31 Dec Change from 30 Jun Change from
GBP in millions 2024 2023 H2 2023 2023 H1 2023
Assets GBP21,489 GBP22,245 (3%) GBP21,747 (1%)
Loans GBP11,543 GBP12,297 (6%) GBP12,572 (8%)
Deposits GBP15,726 GBP15,623 1% GBP15,529 1%
Loan to deposit ratio 73% 79% (6pp) 81% (8pp)
CET1 capital ratio 12.9% 13.1% (20bps) 10.4% 250bps
Total capital ratio (TCR) 15.0% 15.1% (10bps) 13.2% 180bps
MREL ratio1 22.2% 22.0% 20bps 18.1% 410bps
Liquidity coverage ratio 365% 332% 33pp 214% 151pp
H1 H2 Change from H1 Change from
GBP in millions 2024 2023 H2 2023 2023 H1 2023
Total underlying revenue2 GBP234.0 GBP260.9 (10%) GBP285.6 (18%)
Underlying profit/(loss) before tax3 (GBP26.8) (GBP33.0) 19% GBP16.1 (266%)
Statutory profit/(loss) before tax (GBP33.5) GBP15.1 (322%) GBP15.4 (318%)
Net interest margin 1.64% 1.85% (21bps) 2.14% (50bps)
Lending yield 5.18% 4.91% 27bps 4.50% 68bps
Cost of deposits 2.18% 1.29% 89bps 0.66% 152bps
Cost of risk 0.10% 0.34% (24bps) 0.18% (8bps)
Underlying EPS (3.9p) (12.2p) 8.3p 7.8p (11.7p)
Tangible book value per share GBP1.37 GBP1.40 (2%) GBP4.42 (69%) 1. The mortgage portfolio sale has been excluded from this figure. Pro forma on completion of theresidential mortgage portfolio sale is estimated to result in a 23.4% total capital plus MREL ratio. Completion ofthe transaction is conditional on a satisfactory response from the Competition & Markets Authority 2. Underlying revenue excludes grant income recognised relating to the Capability & Innovation fund. 3. Underlying loss before tax is an alternative performance measure and excludes impairment and write-off ofproperty, plant & equipment (PPE) and intangible assets, transformation costs, remediation costs, costs incurred aspart of the holding company insertion and costs of the capital raise and refinancing in H2 2023.
Investor presentation
A presentation for investors and analysts will be held at 9AM (UK time) on 31 July 2024. The presentation will be webcast on:
https://webcast.openbriefing.com/metrobank-jul24/
For those wishing to dial-in:
From the UK dial: 0800 358 1035
From the US dial: +1 855 979 6654
Access code: 191899
Other global dial-in numbers: https://www.netroadshow.com/events/global-numbers?confId=67110
Financial performance for the half year ended 30 June 2023
Deposits
30 Jun 31 Dec Change from 30 Jun Change from
GBP in millions
2024 2023 H2 2023 2023 H1 2023
Demand: current accounts GBP5,662 GBP5,696 (1%) GBP7,106 (20%)
Demand: savings accounts GBP8,108 GBP7,827 4% GBP7,218 12%
Fixed term: savings accounts GBP1,956 GBP2,100 (7%) GBP1,205 62%
Deposits from customers GBP15,726 GBP15,623 1% GBP15,529 1%
Deposits from customers includes:
Retail customers (excluding retail partnerships) GBP7,170 GBP7,235 (1%) GBP5,647 27%
SMEs4 GBP4,224 GBP3,782 12% GBP5,066 (17%)
GBP11,394 GBP11,017 3% GBP10,713 6%
Retail partnerships GBP1,734 GBP1,708 2% GBP1,910 (9%)
Commercial customers (excluding SMEs4) GBP2,598 GBP2,898 (10%) GBP2,906 (11%)
GBP4,332 GBP4,606 (6%) GBP4,816 (10%)
4. SME defined as enterprises which employ fewer than 250 persons and which have an annual turnover not
exceeding EUR50 million, and/or an annual balance sheet total not exceeding EUR43 million and have aggregate deposits
less than EUR1 million.
-- Customer deposits reduced by 1% at H1 2024 to GBP15.7 billion, down GBP0.8 billion on February 2024 peak of
GBP16.5 billion (31 December 2023: GBP15.6 billion) reflecting the deliberate focus on reducing liquidity and cost of
deposits. The core customer deposit base continues to be predominantly Retail and SME. Fixed term deposits have
increased 62% year-on-year reflecting the success of the Q4 2023 deposit campaign.
-- Cost of deposits was 2.18% for H1 2024 (H2 2023: 1.29%) reflecting the impact of the deposit campaign in
Q4 2023. Monthly cost of deposits has been reducing since its peak in February 2024 and is 2.12% in Q2 2024.
-- Stores remain a key element to the Group's service offering and Metro Bank has changed store hours and
reprioritised in-store services to align with customer activity.
-- Metro Bank plans to open two new stores in Q2 2025 in Chester and Gateshead for further market coverage
in the North of England. Locations are being prioritised to support Metro Bank's commercial, corporate and SME
banking offering.
Loans
30 Jun 31 Dec Change from 30 Jun Change from
GBP in millions
2024 2023 H2 2023 2023 H1 2023
Gross loans and advances to customers GBP11,739 GBP12,496 (6%) GBP12,769 (8%)
Less: allowance for impairment (GBP196) (GBP199) 2% (GBP197) 1%
Net loans and advances to customers GBP11,543 GBP12,297 (6%) GBP12,572 (8%)
Gross loans and advances to customers consists of:
Retail mortgages GBP7,512 GBP7,818 (4%) GBP7,591 (1%)
Commercial lending5 GBP2,437 GBP2,443 0% GBP2,659 (8%)
Consumer lending GBP1,003 GBP1,297 (23%) GBP1,410 (29%)
Government-backed lending6 GBP787 GBP938 (16%) GBP1,109 (29%)
5. Includes CLBILS.
6. BBLS, CBILS and RLS.
-- Total net loans as at 30 June 2024 were GBP11.5 billion, down 6% compared to GBP12.3 billion at 31 December
2023 as focus remains on optimising the mix for risk-adjusted return on regulatory capital. The Consumer and
Government-backed lending portfolios are in run-off as the Group continues to pivot its strategy towards
commercial, corporate and SME lending, and specialist mortgages. Yields continue to improve despite the Bank of
England base rate remaining stable. The loan to deposit ratio reduced to 73% (31 December 2023: 79%).
-- Retail mortgages decreased 4% to GBP7.5 billion (31 December 2023: GBP7.8 billion) and remain the largest
component of the lending book at 64% (31 December 2023: 63%). The Debt to Value (DTV) of the portfolio at 31 June
2024 was 61% (31 December 2023: 58%) as a result of observed house price falls over the period. The pivot towards
more specialist mortgages continues following recent investment to enhance product offerings. Metro Bank's
operating model is tailored to more complex underwriting which enables the Group to meet the needs of more
customers and scale underserved markets whilst offering improved risk-adjusted returns.
-- Commercial loans (excluding BBLS, CBILS and RLS) remained stable during H1 2024 at GBP2,437 million (31
December 2023: GBP2,443 million) reflecting continued focus on commercial customers whilst shrinking commercial real
estate to GBP440 million (31 December 2023: GBP509 million) and portfolio buy-to-let to GBP365 million (31 December 2023:
GBP465 million). The DTV of the portfolio at 31 June 2024 was 57% (31 December 2023: 55%) and the portfolio has a
coverage ratio of 2.08% (31 December 2023: 2.13%). Metro Bank is committed to supporting local businesses as we
continue to pivot towards commercial, corporate and SME lending.
-- Cost of risk decreased to 0.10% for the half year (H2 2023: 0.34%). The overall impact of risk profile,
credit performance and macroeconomic outlook has resulted in a lower cost of risk in the first half. The credit
quality of new lending continues to be strong through the current macro-economic environment and the bank retains
its prudent approach to provisioning.
-- Overall arrears levels have remained broadly stable and there have been no material signs of increased
stress. Non-performing loans increased to 3.75% (31 December 2023: 3.11%) driven largely by the maturity profile of
the consumer portfolio that is in run off and reduced commercial lending volumes, partly offset by successful BBLS
claims and repayments of a few large commercial and mortgage exposures. Excluding government-backed lending,
non-performing loans were 3.13% at 31 June 2024 (31 December 2023: 2.58%).
-- The loan portfolio remains highly collateralised and prudently provisioned. The ECL provision as at 30
June 2024 was GBP196 million with a coverage ratio of 1.67%, compared to GBP199 million with a coverage ratio of 1.59%
as at 31 December 2023. The level of post-model overlays remained at 10% of the ECL stock, or GBP20 million which has
reduced since 31 December 2023 (12% of ECL stock, or GBP23.4 million) is mainly due to a more up to date impact
assessment of the new IFRS9 commercial models.
Profit and Loss Account
-- Net interest margin (NIM) of 1.64% for the half is down 21bps compared to 1.85% in H2 2023 as a result of a higher cost of deposits at 2.18% (H2 2023: 1.29%, H1 2023: 0.66%) and reduction of lower yielding assets. -- Underlying net interest income decreased by 10% HoH at GBP172 million (H2 2023: GBP190 million) driven by reductions in net interest margin (NIM) reflecting the impact of increased cost of deposits following the successful deposit campaign in Q4 2023, and the lag between underwrite to completion; as the bank pivots its lending towards higher yielding lending assets. -- Underlying net fee and other income decreased HoH to GBP62 million (H2 2023: GBP69 million). The HoH decrease of 10% reflects the seasonal nature of fee income largely driven by customer activity and transactional volumes. -- Underlying costs reduced 6% to GBP255 million (H2 2023: GBP272 million). The Group has delivered GBP50 million of annualised run-rate cost savings and is on track to deliver the additional GBP30 million cost savings on an annualised run-rate basis by December 2024. -- Underlying loss before tax of GBP27 million achieved in the first half (H2 2023: loss of GBP33 million) reflecting the NIM and cost of funding impact in the first half of the year. -- Statutory loss before tax of GBP34 million (H2 2023: profit of GBP15 million) HoH movement a function of the GBP74 million one-off benefit resulting from the capital raise and refinancing in H2 2023.
Capital, Funding and Liquidity
Position Position Minimum Minimum
30 June 31 December requirement requirement
2024 2023 including buffers7 excluding buffers
Common Equity Tier 1 (CET1) 12.9% 13.1% 9.2% 4.7%
Tier 1 12.9% 13.1% 10.8% 6.3%
Total Capital 15.0% 15.1% 12.9% 8.4%
Total Capital + MREL 22.2% 22.0% 21.2% 16.7% 7. CRD IV buffers
-- Total RWAs as at 30 June 2024 were GBP7.2 billion (31 December 2023: GBP7.5 billion). The movement reflectsthe actions taken to optimise the balance sheet, with a lag between pipeline to conversion as we pivot our lendingmix. RWA density was 29.7% compared to 30.2% as at 31 December 2023 and the movement HoH continues to reflect theelevated liquidity position.
-- The GBP2.5 billion mortgage asset sale post-period is expected to reduce RWAs by c. GBP824 million andresults in a pro forma improvement in total capital plus MREL of c122 bps to 23.4% (31 December 2023: 22.0%, 30June 2023: 18.1%).
-- Strong liquidity and funding position maintained. All customer loans are fully funded by customerdeposits with a loan-to-deposit ratio of 73% compared to 79% at the end of 2023. Liquidity Coverage Ratio (LCR) was365% compared to 332% as at 31 December 2023, with cash balances at cGBP4 billion. Net Stable Funding Ratio (NSFR)was 153% compared to 145% as at 31 December 2023.
-- The Treasury portfolio of GBP8.8 billion includes GBP4.7 billion of investment securities, of which 79% arerated AAA and 21% are rated AA. Of the total investment securities, 93% is held at amortised cost and 7% is held atfair value through other comprehensive income.
-- Over the next 3 years more than GBP2.0 billion of fixed rate treasury assets will mature at an averageblended yield of just over 1%, these will be replaced by asset with yields in line with or greater than theprevailing base rate.
-- UK leverage ratio was 5.5% as at 30 June 2024 (31 December 2023: 5.3%).
Outlook revised upwards
Updated Guidance
ROTE -- Increased to mid-to-upper single digit in 2025, double digit in 2026 and mid-to-upper teens
thereafter
-- Continued NIM expansion driven by asset rotation, and NIMs in 2024, 2025 and 2026 to be
approaching 2.5%, 3.25% and 4.00%, respectively
-- Mortgage lending originations > 200bps above prevailing reference rate SWAP from H1 2025
NIM
-- Commercial lending originations already > 350bps above prevailing Bank of England base rate
-- Benefit from fixed rate treasury and mortgage maturities across 2025-2028
-- GBP80m of annualised run-rate cost savings on track to be delivered by Q4 2024
-- 2024 costs are expected to be below 2023, with further reductions in 2025 reflecting the
Costs benefit of the full GBP80 million annualised cost savings
-- Cost to income ratios in 2026, 2027 and 2028 to be approaching 70%, 60% and 50%,
respectively
-- Total lending to grow at an 8 - 11% CAGR (after drop due to mortgage portfolio sale) over
the next few years
-- Future lending book composition by early 2029:
Lending - Back book mortgages (c.GBP5bn) will run-off
- Mortgages as a % of total lending balances reduces to c.30%
- Commercial as a % of total lending balances grows to c.70%
- All other lending broadly runs-off during the period
-- Ongoing optimisation on deposits to reduce cost of funding continues, with CoD expected to
Deposits consistently reduce across H2 2024
-- Deposits broadly flat from 2024 to 2026, followed by mid-to-upper single digit growth
thereafter
Metro Bank Holdings PLC
Summary Balance Sheet and Profit & Loss Account
(Unaudited)
HoH 30 Jun 31 Dec 30 Jun
Balance Sheet
change 2024 2023 2023
GBP'million GBP'million GBP'million
Assets
Loans and advances to customers (6%) GBP11,543 GBP12,297 GBP12,572
Treasury assets8 1% GBP8,819 GBP8,770 GBP8,023
Other assets9 (4%) GBP1,127 GBP1,178 GBP1,152
Total assets (3%) GBP21,489 GBP22,245 GBP21,747
Liabilities
Deposits from customers 1% GBP15,726 GBP15,623 GBP15,529
Deposits from central banks 0% GBP3,050 GBP3,050 GBP3,800
Debt securities (3%) GBP675 GBP694 GBP573
Other liabilities (46%) GBP934 GBP1,744 GBP875
Total liabilities (3%) GBP20,385 GBP21,111 GBP20,777
Total shareholder's equity (3%) GBP1,104 GBP1,134 GBP970
Total equity and liabilities (3%) GBP21,489 GBP22,245 GBP21,747 8. Comprises investment securities and cash & balances with the Bank of England. 9. Comprises property, plant & equipment, intangible assets and other assets.
Half year ended
HoH
30 Jun 31 Dec 30 Jun
Profit & Loss Account change
2024 2023 2023
GBP'million GBP'million GBP'million
Underlying net interest income (10%) GBP171.9 GBP190.4 GBP221.5
Underlying net fee and other income (10%) GBP62.0 GBP68.6 GBP63.3
Underlying net gains on sale of assets GBP0.1 GBP1.9 GBP0.8
Total underlying revenue (10%) GBP234.0 GBP260.9 GBP285.6
Underlying operating costs (6%) (GBP254.6) (GBP272.0) (GBP258.2)
Expected credit loss expense (GBP6.2) (GBP21.9) (GBP11.3)
Underlying profit/(loss) before tax (GBP26.8) (GBP33.0) GBP16.1
Impairment and write-off of property plant & equipment and intangible assets (GBP0.3) (GBP4.6) -
Transformation costs (GBP4.5) (GBP20.2) -
Remediation costs (GBP1.8) (GBP0.8) GBP0.8
Capital raise and refinancing - GBP74.0 -
Holding company insertion (GBP0.1) (GBP0.3) (GBP1.5)
Statutory profit/(loss) before tax (GBP33.5) GBP15.1 GBP15.4
Statutory taxation GBP0.4 GBP1.7 (GBP2.7)
Statutory profit/(loss) after tax (GBP33.1) GBP16.8 GBP12.7
Half year ended
30 Jun 31 Dec 30 Jun
Key metrics
2024 2023 2023
Underlying earnings per share - basic (3.9p) (12.2p) 7.8p
Number of shares 672.7m 672.7m 172.6m
Net interest margin (NIM) 1.64% 1.85% 2.14%
Cost of deposits 2.18% 1.29% 0.66%
Cost of risk 0.10% 0.34% 0.18%
Arrears rate 3.8% 3.8% 3.5%
Underlying cost: income ratio 109% 104% 90%
Tangible book value per share GBP1.37 GBP1.40 GBP4.42
Enquiries
For more information, please contact:
Metro Bank PLC Investor Relations
Paul Beaumont / Stella Gavaletakis
+44 (0) 20 3402 8900
IR@metrobank.plc.uk
Metro Bank PLC Media Relations
Mona Patel
+44 (0) 7815 506845
pressoffice@metrobank.plc.uk
Teneo
Haya Herbert-Burns/ Anthony Di Natale
+44 (0) 7342 031051/ +44 (0) 7880 715975
Metrobank@teneo.com
ENDS
About Metro Bank
Metro Bank services over three million customer accounts and is celebrated for its exceptional customer experience. It remains one of the highest rated high street banks for overall service quality for personal customers, the best bank for service in-store for business customers and joint top for service in-store for personal customers, in the Competition and Markets Authority's Service Quality Survey in February 2024.
Metro Bank has also been awarded "Large Loans Mortgage Lender of the Year", 2024 and 2023 Mortgage Awards, accredited as a top ten Most Loved Workplace 2023, "2023 Best Lender of the Year - UK" in the M&A Today, Global Awards, the "Inclusive Culture Initiative Award" in the 2023 Inclusive Awards, "Diversity, Equity & Inclusion Award" and "Leader of the Year Award 2023" at the Top 1% Workplace Awards, "Best Women Mortgage Leaders in the UK" from Elite Women 2023, "Diversity Lead of the Year", 2023 Women in Finance, Best Large Loan Lender, 2023 Mortgage Strategy Awards" "Best Business Credit Card", Forbes Advisor Best of 2023 Awards, "Best Business Credit Card", 2023 Moneynet Personal Finance Awards.
The community bank offers retail, business, commercial and private banking services, and prides itself on giving customers the choice to bank however, whenever and wherever they choose, and supporting the customers and communities it serves. Whether that's through its network of 76 stores; on the phone through its UK-based contact centres; or online through its internet banking or award-winning mobile app, the bank offers customers real choice.
Metro Bank Holdings PLC (registered in England and Wales with company number 14387040, registered office: One Southampton Row, London, WC1B 5HA) is the listed entity and holding company of Metro Bank PLC.
Metro Bank PLC (registered in England and Wales with company number 6419578, registered office: One Southampton Row, London, WC1B 5HA) is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. 'Metrobank' is a registered trademark of Metro Bank PLC. Eligible deposits are protected by the Financial Services Compensation Scheme. For further information about the Scheme refer to the FSCS website www.fscs.org.uk. All Metro Bank products are subject to status and approval. Metro Bank is an independent UK bank - it is not affiliated with any other bank or organisation (including the METRO newspaper or its publishers) anywhere in the world. Please refer to Metro Bank using the full name.
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ISIN: GB00BMX3W479 Category Code: IR TIDM: MTRO LEI Code: 984500CDDEAD6C2EDQ64 Sequence No.: 337467 EQS News ID: 1957493 End of Announcement EQS News Service =------------------------------------------------------------------------------------
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(END) Dow Jones Newswires
July 31, 2024 02:00 ET (06:00 GMT)
