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 £26.8 million (H2 2023: loss £33.0 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 £17 million HoH to £255 million (H2 2023: £272 million), with £80 million of annualised run-rate savings on track to be delivered by December 2024.
- Total net loans as at 30 June 2024 were £11.5 billion, down 6% compared to full year position (31 December 2023: £12.3 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 £15.7 billion at 30 June 2024, down £0.8 billion on February 2024 peak of c.£16.5 billion (31 December 2023: £15.6 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: - £2.5 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
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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 £ in millions | 30 Jun 2024 | 31 Dec 2023 | Change from H2 2023 | 30 Jun 2023 | Change from H1 2023 | | | | | | | Assets | £21,489 | £22,245 | (3%) | £21,747 | (1%) | Loans | £11,543 | £12,297 | (6%) | £12,572 | (8%) | Deposits | £15,726 | £15,623 | 1% | £15,529 | 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 |
£ in millions | H1 2024 | H2 2023 | Change from H2 2023 | H1 2023 | Change from H1 2023 | | | | | | | Total underlying revenue2 | £234.0 | £260.9 | (10%) | £285.6 | (18%) | Underlying profit/(loss) before tax3 | (£26.8) | (£33.0) | 19% | £16.1 | (266%) | Statutory profit/(loss) before tax | (£33.5) | £15.1 | (322%) | £15.4 | (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 | £1.37 | £1.40 | (2%) | £4.42 | (69%) |
- The mortgage portfolio sale has been excluded from this figure. Pro forma on completion of the residential mortgage portfolio sale is estimated to result in a 23.4% total capital plus MREL ratio. Completion of the transaction is conditional on a satisfactory response from the Competition & Markets Authority
- Underlying revenue excludes grant income recognised relating to the Capability & Innovation fund.
- Underlying loss before tax is an alternative performance measure and excludes impairment and write-off of property, plant & equipment (PPE) and intangible assets, transformation costs, remediation costs, costs incurred as part 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 £ in millions | 30 Jun 2024 | 31 Dec 2023 | Change from H2 2023 | 30 Jun 2023 | Change from H1 2023 | | | | | | | Demand: current accounts | £5,662 | £5,696 | (1%) | £7,106 | (20%) | Demand: savings accounts | £8,108 | £7,827 | 4% | £7,218 | 12% | Fixed term: savings accounts | £1,956 | £2,100 | (7%) | £1,205 | 62% | Deposits from customers | £15,726 | £15,623 | 1% | £15,529 | 1% | | |
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