Metro Bank - H125 results see underlying PBT treble

Metro Bank reported underlying PBT of £45.1m in H125 (+246% half-on-half) due to a strong exit net interest margin (NIM) of 2.95% and costs down by 8% year-on-year. The repositioning of the business model towards higher-return commercial and specialist mortgage lending, coupled with the lowest exit cost of deposits on the UK high street (1.02%), has proved effective. Management expects revenue growth to continue apace in H225, with an £800m corporate and commercial credit pipeline already in place (vs £700m of gross new lending in H224). Management guidance remains the same for FY25 given the macro uncertainty prevalent in the UK. However, by delivering a 'mid- to upper-single-digit' return on tangible equity (RoTE) and a double-digit RoTE in FY26, with mid- to upper teens thereafter, Metro's strong growth trajectory remains on track. Metro shares traded at 0.57x tangible book value per share (TBVPS) of 217p at the end of June. Given there has been no change in guidance, our FY25-27 estimates are unchanged.

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