REG-Metro Bank Holdings PLC Metro Bank Holdings PLC: Interim results for half year ended 30 June 2023
01/08/2023 07:15
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Metro Bank Holdings PLC (MTRO)
Metro Bank Holdings PLC: Interim results for half year ended 30 June 2023
01-Aug-2023 / 07:00 GMT/BST
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Metro Bank Holdings PLC
Interim results
Trading update H1 2023
1 August 2023
Metro Bank Holdings PLC (LSE: MTRO LN)
Interim results for half year ended 30 June 2023
Highlights
Underlying profit before tax of £16.1 million (H2 2022: loss of £2.6 million) represents the third consecutive quarter
• of underlying profitability, reflecting improved operating margins driven by the actions taken as part of the
turnaround plan to optimise the balance sheet and control cost inflation for sustainable profitability.
• Statutory profit before tax of £15.4 million (H2 2022: loss of £10.5 million) reflects the significant reduction in
exceptional items and has supported capital accretion in the half.
Total underlying revenue was up 21% YoY but remained flat HoH at £285.6 million (H2 2022: £285.9 million, H1 2022:
• £236.2 million) reflecting improved lending yields offset by increased cost of deposits and limited loan growth given
capital availability.
Total underlying operating expenses reduced 3% both YoY and HoH to £258.2 million (H2 2022: £266.5 million, H1 2022:
• £266.3 million), driving positive jaws of 24% YoY and 3% HoH, despite persistent high inflation, as a result of the
continued focus on cost discipline and the successful implementation of initiatives that enable the bank to scale
appropriately.
The bank’s service-led core deposit franchise remains resilient to increased competition in the market and continues to
• attract new customers, opening 106,000 Personal Current Accounts and 23,000 Business Current Accounts in the half. The
bank remained ranked first for customer service in Stores in the CMA survey.
• Customer deposits reduced 3% HoH to £15.5 billion (31 December 2022: £16.0 billion) in line with prevailing market
conditions, though the bank saw net deposit inflows in June, a trend that continued in July.
• The bank’s MREL ratio was 18.1% as at 30 June 2023, up 40bps from 17.7% as at 31 December 2022 and up 70bps from 17.4%
as at 1 January 2023, reflecting the disciplined origination strategy and statutory profit for the half.
Daniel Frumkin, Chief Executive Officer at Metro Bank, said:
“I am encouraged by the activity across the business. Our statutory profitability in H1, making this the third consecutive
quarter of underlying profitability, demonstrates that our strategy is working. We continue to win new customers every day
through our service-led franchise, at the same time as showing ongoing cost discipline and pursuing our targeted store
expansion. Whilst we remain watchful of macro-economic headwinds, we have the expertise, capability and infrastructure in
place to unlock our future growth potential.”
Key Financials
30 Jun 31 Dec Change from 30 Jun Change from
£ in millions 2023 2022 FY 2022 2022 H1 2022
Assets £21,747 £22,119 (2%) £22,566 (4%)
Loans £12,572 £13,102 (4%) £12,364 2%
Deposits £15,529 £16,014 (3%) £16,514 (6%)
Loan to deposit ratio 81% 82% (1pp) 75% 6pps
CET1 capital ratio 10.4% 10.3% 10bps 10.6% (20bps)
Total capital ratio (TCR) 13.2% 13.4% (20bps) 13.8% (60bps)
MREL ratio 18.1% 17.7% 40bps 18.3% (20bps)
Liquidity coverage ratio 214% 213% 1pp 257% (43pps)
H1 H2 Change from H1 Change from
£ in millions 2023 2022 H2 2022 2022 H1 2022
Total underlying revenue1 £285.6 £285.9 - £236.2 21%
Underlying profit/(loss) before tax2 £16.1 (£2.6) n.m. (£48.0) n.m.
Statutory profit/(loss) before tax £15.4 (£10.5) n.m. (£60.2) n.m.
Net interest margin 2.14% 2.11% 3bps 1.73% 41bps
Lending yield 4.50% 3.93% 57bps 3.40% 110bps
Cost of deposits 0.66% 0.25% 41bps 0.14% 52bps
Cost of risk 0.18% 0.33% (15bps) 0.29% (11bps)
Coverage ratio 1.54% 1.41% 13bps 1.36% 18bps
Underlying EPS 7.8p (2.0p) n.m. (28.5p) n.m.
Tangible book value per share £4.42 £4.29 3% £4.30 3%
1. Underlying revenue excludes grant income recognised relating to the Capability & Innovation fund.
2. Underlying profit/(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 and costs incurred as
part of the holding company insertion.
Investor presentation
A presentation for investors and analysts will be held at 9.30AM (UK time) on 1 August 2023. The presentation will be webcast
on:
1 https://webcast.openbriefing.com/mb23h1/
For those wishing to dial-in:
From the UK: 0800 358 1035
From the US: +1 855 979 6654
Access code: 332501
Other global dial-in numbers: 2 https://www.netroadshow.com/events/global-numbers?confId=52736
Financial performance for the half year ended 30 June 2023
Deposits
30 Jun 31 Dec Change from 30 Jun Change from
£ in millions
2023 2022 FY 2022 2022 H1 2022
Demand: current accounts £7,106 £7,888 (10%) £7,770 (9%)
Demand: savings accounts £7,218 £7,501 (4%) £7,817 (8%)
Fixed term: savings accounts £1,205 £625 93% £927 30%
Deposits from customers £15,529 £16,014 (3%) £16,514 (6%)
Deposits from customers includes:
Retail customers (excluding retail £5,647 £5,797 (3%) £6,267 (10%)
partnerships)
SMEs3 £5,066 £5,080 - £4,892 4%
£10,713 £10,877 (2%) £11,159 (4%)
Retail partnerships £1,910 £1,949 (2%) £1,871 2%
Commercial customers (excluding £2,906 £3,188 (9%) £3,484 (17%)
SMEs3)
£4,816 £5,137 (6%) £5,355 (10%)
3. SME defined as enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding €50
million, and/or an annual balance sheet total not exceeding €43 million, and have aggregate deposits less than €1
million.
• Total deposits of £15.5 billion as at 30 June 2023 reduced by 3% from the full year position reflecting the impact of the
cost of living crisis as well as seasonal factors such as tax payments in January, partially offset by growth in June, a
trend that continued in July. The core customer deposit base continues to be predominantly Retail and SME with low
average balances, and therefore a significant majority of customer deposits are protected by the Financial Services
Compensation Scheme.
• The strength of the underlying service-led core deposit franchise is highlighted by continued growth in customer numbers
in the first half, opening 106,000 new Personal Current Accounts and 23,000 new Business Current Accounts, representing
HoH growth in account openings of 8% for PCA and 20% for BCA. Average customer deposit balances have however reduced from
the full year position, a theme consistent across the industry as customers manage impacts of the cost of living crisis.
• The bank re-entered the Fixed Term Deposit (FTD) market in the first half as guided at full year, adding additional
duration to the book, FTDs now make up 8% of the total deposit base (31 December 2022: 4%) and non-interest bearing
deposits now total 46% (31 December 2022: 49%). Cost of deposits has increased to 0.66% (H2 2022: 0.25%), reflecting the
increase in FTDs, higher pass-through rates on interest bearing liabilities and increased price competition in the
market.
• The bank’s market share of Cash ISAs, Retail Easy Access and Business Easy Access is well below its current natural
market share of Personal and Business Current Accounts, representing significant opportunity for organic deposit growth
supported by recent and continuing investments in digital and switching capabilities.
• Stores remain at the heart of the bank’s service offering and while geographic expansion is planned in areas where
significant opportunity exists, the bank is disciplined in the cost that it will attach to future store openings and
their operation. The bank remains committed to opening stores in the North of England and these stores are still expected
to be opened in 2024 and 2025. The store proposition and the deposit franchise it underpins are increasingly valuable in
a more normalised interest rate environment.
Loans
30 Jun 31 Dec Change from 30 Jun Change from
£ in millions
2023 2022 FY 2022 2022 H1 2022
Gross loans and advances to customers £12,769 £13,289 (4%) £12,535 2%
Less: allowance for impairment (£197) (£187) 5% (£171) 15%
Net loans and advances to customers £12,572 £13,102 (4%) £12,364 2%
Gross loans and advances to customers
consists of:
Retail mortgages £7,591 £7,649 (1%) £6,785 12%
Commercial lending4 £2,659 £2,847 (7%) £2,993 (11%)
Consumer lending £1,410 £1,480 (5%) £1,269 11%
Government-backed lending5 £1,109 £1,313 (16%) £1,488 (25%)
4. Includes CLBILS.
5. BBLS, CBILS and RLS.
• Total net loans as at 30 June 2023 were £12.6 billion, down 4% compared to £13.1 billion at 31 December 2022 as the bank
continues to focus on optimising risk-adjusted return on regulatory capital through the strategic allocation of RWAs,
noting that unfulfilled demand exists across all lending products. Yields continue to improve reflecting further rate
rises and decisions on mix optimisation. The loan to deposit ratio remained stable at 81% (31 December 2022: 82%).
• Retail mortgages of £7.6 billion remained flat compared to the full year position (31 December 2022: £7.6 billion) as
they were constrained to replacement levels. Owner occupied mortgages represent 72% of total portfolio (31 December 2022:
72%). £779 million of retail mortgages matured in the first half at an average yield of 2.28% and a further £1.1 billion
is expected to mature in the second half at an average yield of 2.38%. The DTV of the portfolio was 58% (31 December
2022: 56%) reflecting updated valuations. The bank has signed up to the Mortgage Charter to provide additional support
and ensure the best outcomes are achieved for customers potentially requiring support.
• Commercial lending reduced by 7% to £2.7 billion reflecting the continued reduction in the buy-to-let and real estate
portfolios. 90% of term lending excluding Professional-Buy-To-Let and Bounce Back Loan Scheme (BBLS) is floating rate and
the book remains highly collateralised. Commercial real estate is down 9% compared to 31 December 2022 and now makes up
23% of the book.
• Consumer lending reduced by 5% to £1.4 billion (31 December 2022: £1.5 billion) as the bank continued to optimise lending
mix and capital allocation. High quality application volumes remain strong and for originations in the first half the
average customer income was £49,000 (H2 2022: £48,000, H1 2022: £46,000). Non-performing loans for consumer unsecured
were 4.8% at 30 June 2023 (31 December 2022: 3.4%) in line with the expected maturity profile, and the portfolio has
prudent ECL coverage of 6.6% (31 December 2022: 5.1%).
• Government backed lending is now closed to new borrowers and continues to reduce as loans are repaid. The bank continues
to have a strong record of claims made to the British Business Bank being upheld.
• The loan portfolio remains highly collateralised and prudently provisioned. In H1 2023 the average DTV for retail
mortgages was 58% (31 December 2022: 56%) and for commercial lending 55% (31 December 2022: 55%). The ECL provision as at
30 June 2023 was £197 million with a coverage ratio of 1.54%, compared to £187 million with a coverage ratio of 1.41% as
at 31 December 2022. The level of Post-Model Overlays and Adjustments remained appropriate at 12% of the ECL stock, or
£24 million.
• Cost of risk decreased to 0.18% for the half (H2 2022: 0.33%). The bank has seen several months in the first half where
repayments and ECL releases from the commercial book lowered the risk costs. The credit quality of new lending continues
to be strong although the macro-economic environment remains uncertain and the bank has retained its prudent approach to
provisioning.
• Overall arrears levels have remained broadly stable and there have been no significant signs of increased stress.
Non-performing loans increased to 2.9% (31 December 2022: 2.6%) driven by maturation of the consumer portfolio and
impacts of cost of living on the retail mortgages book, partly offset by successful BBLS claims and repayments of a
number of large commercial exposures. Excluding government-backed lending, non-performing loans were 2.5% as at 30 June
2023 (31 December 2022: 2.0%).
Profit and Loss Account
• Underlying profit before tax of £16.1 million achieved in the first half (H2 2022: loss of £2.6 million) following
completion of the turnaround plan that set out to return the bank to profitability. The balance sheet optimisation
strategy has transformed the balance sheet to maximise return on regulatory capital whilst margins have been improved
through disciplined cost control. Growth in profitability from here remains constrained as the bank assertively manages
its capital position.
• Statutory profit before tax of £15.4 million (H2 2022: loss of £10.5 million) reflects significantly reduced exceptional
items as one-off remediation programs have been delivered and the holding company was successfully inserted.
• Net interest margin (NIM) of 2.14% for the half is up 3bps compared to 2.11% in H2 2022 and 1.73% in H1 2022 reflecting
the strategy to optimise lending mix for risk adjusted return on regulatory capital and continued rate rises. NIM growth
is limited by continued pressure on deposit pricing, the increased mix of FTDs and the capital constraints on asset
growth.
• Underlying net interest income remained broadly flat HoH at £221.5 million (H2 2022: £223.3 million) as the bank’s
ability to grow lending remains constrained by capital and benefits seen from assets maturing into higher rate
environments are offset by increased deposit costs.
• Underlying net fee and other income increased marginally HoH to £63.3 million (H2 2022: £62.6 million, H1 2022: £55.3
million). The YoY increase of 14% better reflects the seasonal nature of fee income largely driven by customer activity,
the second half includes higher FX income as customers travel more and we have seen growth in safe deposit box income as
more customers return to using stores post-pandemic.
• Underlying costs reduced 3% to £258.2 million (H2 2022: £266.5 million) despite rising inflation, reflecting the bank’s
continued focus on cost discipline, automation initiatives and investment in infrastructure to enable the bank to deliver
significant increases in volume with only marginal increases in cost, and therefore improve operational leverage.
Capital, Funding and Liquidity
Position Position Minimum Minimum
Capital ratios 30 June 31 December requirement requirement
2023 2022 including buffers6 excluding buffers
Common Equity Tier 1 (CET1) 10.4% 10.3% 8.2% 4.7%
Tier 1 10.4% 10.3% 9.8% 6.3%
Total Capital 13.2% 13.4% 11.9% 8.4%
Total Capital + MREL 18.1% 17.7% 20.2% 16.7%
6. Based on capital requirements at 30 June 2023 plus buffers, excluding any confidential PRA buffer, if applicable.
• As at 1 January 2023 the bank’s MREL ratio was 17.4% following a step down in the IFRS 9 ECL relief on 1 January 2023, as
such the current position reflects the capital accretion of net 70bps as the bank achieved statutory profitability in the
half and assertively managed asset origination volumes and RWA.
• Total capital ratio reduced by 20bps in the half reflecting the impact of the haircut to the Tier 2 instrument, arising
from implementation of the holding company in May 2023.
• Effective 1 January 2023 the Prudential Regulation Authority (PRA) reduced the bank’s Pillar 2A capital requirement from
0.50% to 0.36%.
• Effective 5 July 2023 the Countercyclical Buffer (CCyB) increased from 1% to 2%. Following the CCyB increase, the bank is
now operating within both the Tier 1 and MREL buffers and continues to strategically manage RWA allocation to ensure all
regulatory minimum requirements are met and the group is able to gradually accrete capital headroom.
• On 28 July 2023 the Bank of England’s Resolution Directorate agreed to a further extension of the eligibility of the £250
million 9.139% Tier 2 Notes (the “Notes”) issued by Metro Bank PLC with respect to MREL for Metro Bank Holdings PLC for
the remaining life of the instrument (June 2028).
• Total RWAs as at 30 June 2023 were £7.8 billion (31 December 2022: £8.0 billion) reflecting the bank’s decision to
strategically limit asset and liability growth to accrete capital in the near term.
• Strong liquidity and funding position maintained. Customer loans continued to be funded fully by customer deposits with a
loan to deposit ratio of 81% compared to 82% at the end of 2022. The Liquidity Coverage Ratio (LCR) was 214% compared to
213% at 31 December 2022, and the Net Stable Funding Ratio (NSFR) was 132% compared to 134% at 31 December 2022, both
remain significantly above their respective requirements.
• The Treasury portfolio of £8.0 billion includes £5.3 billion of investment securities, of which 77% are rated AAA and 23%
rated AA. The average repricing duration excluding cash is 1.1 years and £560 million of securities are due to mature in
H2 2023 at an average yield of 3.7%. Of the total investment securities, 91% is held at amortised cost and 9% is held at
fair value through other comprehensive income.
• UK leverage ratio was 4.4% as at 30 June 2023 (31 December 2022: 4.2%).
• The bank’s AIRB application is still in progress. As previously highlighted, the bank continues to review its options,
across the capital stack, to strengthen its capital base.
Outlook and Guidance
• Guidance for 2023 has been re-affirmed including the ROTE target of mid-single digit by 2024.
2022 2023
NIM 1.92% NIM accretion over 2023 tempered by limited ability to leverage balance sheet
Lending yield 3.67% Continue optimising mix for maximum risk-adjusted returns on regulatory capital
Cost of deposits 0.20% Pricing will reflect rate environment and competitive pressures, expect strong account acquisition
to offset lower average customer balances
Underlying costs £533m Inflationary pressures expected to moderately outweigh cost initiatives
Cost of risk 0.32% Watchful of economic cycle but not yet seeing significant signs of stress
RWA £8.0b Managed for optimal risk-adjusted returns on regulatory capital as lending growth constrained by
capital availability
MREL 17.7% Continue to operate within buffers with increasing headroom to regulatory minima
Metro Bank Holdings PLC
Summary Balance Sheet and Profit & Loss Account
(Unaudited)
YoY HoH 30 Jun 31 Dec 30 Jun
Balance Sheet
change change 2023 2022 2022
£'million £'million £'million
Assets
Loans and advances to customers 2% (4%) £12,572 £13,102 £12,364
Treasury assets7 £8,023 £7,870 £9,036
Other assets8 £1,152 £1,147 £1,166
Total assets (4%) (2%) £21,747 £22,119 £22,566
Liabilities
Deposits from customers (6%) (3%) £15,529 £16,014 £16,514
Deposits from central banks £3,800 £3,800 £3,800
Debt securities £573 £571 £577
Other liabilities £875 £778 £706
Total liabilities (4%) (2%) £20,777 £21,163 £21,597
Total shareholder's equity £970 £956 £969
Total equity and liabilities £21,747 £22,119 £22,566
7. Comprises investment securities and cash & balances with the Bank of England.
8. Comprises property, plant & equipment, intangible assets and other assets.
YoY Half year ended
HoH 30 Jun 31 Dec 30 Jun
Profit & Loss Account change
change 2023 2022 2022
£'million £'million £'million
Underlying net interest income 22% (1%) £221.5 £223.3 £180.9
Underlying net fee and other income 14% 1% £63.3 £62.6 £55.3
Underlying net gains on sale of assets £0.8 - -
Total underlying revenue 21% - £285.6 £285.9 £236.2
Underlying operating costs (3%) (3%) (£258.2) (£266.5) (£266.3)
Expected credit loss expense (£11.3) (£22.0) (£17.9)
Underlying profit/(loss) before tax £16.1 (£2.6) (£48.0)
Impairment and write-off of property plant & equipment and intangible assets - (£1.5) (£8.2)
Transformation costs - (£2.3) (£1.0)
Remediation costs £0.8 (£2.3) (£3.0)
Holding company insertion (£1.5) (£1.8) -
Statutory profit/(loss) before tax £15.4 (£10.5) (£60.2)
Statutory taxation (£2.7) (£0.5) (£1.5)
Statutory profit/(loss) after tax £12.7 (£11.0) (£61.7)
Half year ended
30 Jun 31 Dec 30 Jun
Key metrics
2023 2022 2022
Underlying earnings per share – basic 7.8p (2.0p) (28.5p)
Number of shares 172.6m 172.5m 172.4m
Net interest margin (NIM) 2.14% 2.11% 1.73%
Cost of deposits 0.66% 0.25% 0.14%
Cost of risk 0.18% 0.33% 0.29%
Arrears rate 3.5% 3.2% 3.1%
Underlying cost:income ratio 90% 93% 113%
Tangible book value per share £4.42 £4.29 £4.30
Enquiries
For more information, please contact:
Metro Bank PLC Investor Relations
Jo Roberts
+44 (0) 20 3402 8900
3 IR@metrobank.plc.uk
Metro Bank PLC Media Relations
Tina Coates / Mona Patel
+44 (0) 7811 246016 / +44 (0) 7815 506845
4 pressoffice@metrobank.plc.uk
Teneo
Charles Armitstead / Haya Herbert Burns
+44 (0) 7703 330269 / +44 (0) 7342 031051
5 Metrobank@teneo.com
ENDS
About Metro Bank
Metro Bank services 2.8 million customer accounts and is celebrated for its exceptional customer experience. It is the
highest rated high street bank for overall service quality for personal customers and the best bank for service in-store for
personal and business customers, in the Competition and Markets Authority’s Service Quality Survey in February 2023. Metro
Bank has also been awarded “2023 Best Lender of the Year – UK” in the M&A Today, Global Awards, “Best Mortgage Provider of
the Year” in 2022 MoneyAge Mortgage Awards, “Best Business Credit Card” in 2022 Moneynet Personal Finance Awards, “Best
Business Credit Card 2022”, Forbes Advisor, “Best Current Account for Overseas Use” by Forbes 2022 and accredited as a top
ten Most Loved Workplace 2022. It was “Banking Brand of The Year” at the Moneynet Personal Finance Awards 2021 and received
the Gold Award in the Armed Forces Covenant’s Employer Recognition Scheme 2021.
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 open seven days a week, 362 days a year; 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.
METRO BANK HOLDINGS PLC
Interim report for the half year ended 30 June 2023
Forward-looking statements
This interim report contains statements that are, or may be deemed to be, forward-looking statements. Forward-looking
statements typically use terms such as ‘believes’, ‘projects’, ‘anticipates’, ‘expects’, ‘intends’, ‘plans’, ‘may’, ‘will’,
‘would’, ‘could’ or ‘should’ or similar terminology. Any forward-looking statements in this interim report are based on Metro
Bank Holdings PLC’s (“the Group”, “the Bank”, “we” or “our”) current expectations. By their nature, forward-looking
statements are subject to a number of risks and uncertainties, many of which are beyond our control, that could cause our
actual results and performance to differ materially from any expected future results or performance expressed or implied by
any forward-looking statements. As a result, you are cautioned not to place undue reliance on such forward-looking
statements. Past performance should not be taken as an indication or guarantee of future results, and no representation or
warranty, expressed or implied, is made regarding future performance.
No assurances can be given that the forward-looking statements in this interim report will be realised. We undertake no
obligation to release the results of any revisions to any forward-looking statements in this interim report that may occur
due to any change in its expectations or to reflect events or circumstances after the date of this announcement and we
disclaim any such obligation.
Basis of preparation
Financial information in this interim report is prepared on a statutory (taken from our financial statements) and underlying
basis (which we use to assess performance on a management basis).
Further details on how we calculate underlying performance, as well as our other alternative performance measures can be
found later in this release.
To meet Bank of England’s resolution requirements, on 19 May 2023, Metro Bank Holdings PLC was inserted as the new ultimate
holding company and listed entity of the Group. Prior to this date Metro Bank PLC was both a banking entity and the ultimate
parent company of the Group but has subsequently become a 100% subsidiary of Metro Bank Holdings PLC. These financial
statements are have been prepared as if Metro Bank Holdings PLC had been the parent company throughout the current and prior
years, to treat the new structure as if it has always been in place. Further details on the insertion of Metro Bank Holdings
PLC can be found in note 1 to the condensed consolidated interim financial statements.
sumMarised interim results
Half year to Half year to Half year to
Change Change
30 Jun 2023 31 Dec 2022 30 Jun 2022
Profit and loss
Underlying profit/(loss) before tax1 £16.1m (£2.6m) n/a (£48.0m) n/a
Statutory profit/(loss) before tax £15.4m (£10.5m) n/a (£60.2m) n/a
Total income (statutory) £286.4m £287.0m - £236.5m 21%
Total operating expenses (statutory) £259.7m £275.5m (6%) £278.8m (7%)
Net interest margin 2.14% 2.11% 3bps 1.73% 41bps
Cost of deposits 0.66% 0.25% 41bps 0.14% 52bps
Return on tangible equity 2% (1%) 3pps (8%) 10pps
30 Jun 2023 31 Dec 2022 Change 30 Jun 2022 Change
Balance sheet
Customer deposits £15,529m £16,014m (3%) £16,514m (6%)
Customer loans £12,572m £13,102m (4%) £12,364m 2%
Loan to deposit ratio 81% 82% (1pp) 75% 6pps
Total assets £21,747m £22,119m (2%) £22,566m (4%)
Tangible book value per share £4.42 £4.29 3% £4.30 3%
Asset quality
Coverage ratio 1.54% 1.41% 13bps 1.36% 18bps
Cost of risk 0.18% 0.33% (15bps) 0.29% (11bps)
Capital ratios
Common Equity Tier 1 (CET1) ratio 10.4% 10.3% 10.6%
Total capital ratio 13.2% 13.4% 13.8%
Total regulatory capital plus MREL ratio 18.1% 17.7% 18.3%
Regulatory leverage ratio 4.4% 4.2% 4.3%
Customer metrics
Customer accounts 2.8m 2.7m 2.6m
Stores 76 76 76
1. Underlying profit/(loss) before tax is an alternative performance measure and excludes items considered to distort
period-on-period comparisons, in order to provide readers with a better and more relevant understanding of the underlying
trends in the business. A reconciliation between our statutory and underlying results can be found later in this release.
officers and external auditors
As at 30 June 2023
Board of Directors
Executive Directors
Daniel Frumkin Chief Executive Officer
James Hopkinson Chief Financial Officer
Non-executive Directors
Robert Sharpe Chair (N)
Anna (Monique) Melis Senior Independent Director (A,N)
Catherine Brown Independent Non-Executive Director (N,P,R)
Dorita Gilinski Shareholder-Nominated Non-Executive Director
Anne Grim Independent Non-Executive Director (P)
Ian Henderson Independent Non-Executive Director (A,R)
Paul Thandi CBE Independent Non-Executive Director (P,N)
Michael Torpey Independent Non-Executive Director (A,R)
Independent Non-Executive Director and Designated Non-Executive Director for
Nicholas Winsor MBE
Colleague Engagement (R)
(A) Member of the Audit Committee
(N) Member of the Nomination Committee
(P) Member of the People and Remuneration Committee
(R) Member of the Risk Oversight Committee
Company Secretary
Stephanie Wallace General Counsel and Company Secretary
On 31 July 2023 Clare Gilligan joined as our new Company Secretary, taking over from Stephanie Wallace (our General Counsel)
who was filling the role on a temporary basis following the departure of our previous Company Secretary, Melissa Conway in
December 2022.
Independent auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
BUSINESS review
The first six months of 2023 mark our first set of results since we completed our turnaround at the end of 2022 and has seen
us deliver our strongest financial performance in several years. I am pleased to report our first half year of statutory
profitability, with a profit before tax of £15.4 million (half year to 31 December 2022: loss of £10.5 million; half year to
30 June 2022: loss of £60.2 million), as well as our third successive quarter of profitability on an underlying basis. This
was delivered whilst retaining the top spot as the highest rated high street bank for overall service quality for personal
customers in the CMA’s latest Service Quality Survey, for the tenth time running.
This momentum is evidence that our business model works, and that combined with continued execution of our strategic
priorities is seeing us deliver on our ambition to be the number one community bank.
Progress against our strategic priorities
We have always been clear that we are building a business for the long-term, that can meaningfully scale and unleash its full
capabilities as and when we are able to access additional growth capital. Our return to profitability on a statutory basis is
an important milestone in this journey.
Key to this has been the continued delivery of our strategic priorities. At the start of the year, we refreshed these to move
our focus from fixing the problems of the past to leveraging the strengths of our business model for future growth, whilst
keeping the headline priorities the same.
Revenue
Total revenue increased year-on-year to £286.4 million from £236.5 million, but remained flat compared to the second half of
2022 (£287.0 million). We continued to see increased momentum in interest income as rate rises continued to flow through to
our variable rate and front book lending pricing, although net interest income was constrained by a rise in our cost of
deposits, which was impacted by our return to the fixed term deposit market, as previously guided. Fixed term deposits
increased to £1,205 million (31 December 2022: £625 million) and now represent 8% of balances (31 December 2022: 4%) and
provide additional duration into our deposit base.
Overall, we saw our total deposits fall 3% to £15,529 million (31 December 2022: £16,014 million) as cost of living pressures
saw customers draw down balances. Whilst the competitive savings environment put pressures on pricing, our service-led
proposition continues to ensure we maintain a high-quality deposit position. In the second quarter of the year we saw
balances stabilise with inflows in June, a trend that continued in July. Although average balances have reduced we continue
to win customers, with new personal and business currents of 106,000 and 23,000 respectively, demonstrating our proposition
continues to resonate in a competitive marketplace.
Costs
Our total operating expenses fell 7% year-on-year to £259.7 million (half year to 31 December 2022: £275.5 million; half year
to 30 June 2022: £278.8 million), despite a backdrop of persistently high inflation. This helped drive positive jaws of 28%
year-on-year and 6% half-on-half.
The cost reductions have been achieved through our continued focus on cost discipline and the successful implementation of
initiatives that enable the Bank to scale appropriately. Operating costs were aided by roll-off of legacy issues as well as
the ending of our transformation plan.
We incurred additional costs in the first half of the year from the insertion of our new holding company, Metro Bank Holdings
PLC. We completed this in May and it marks another key step in delivering our requirements under the Bank of England
Resolution Framework.
Balance sheet optimisation
Over the past three years we have built a suite of products that will allow us to compete in any interest rate environment,
allowing us to appropriately react to market conditions. A clear example of this is our RateSetter capabilities, where we
were able to appropriately scale this whilst interest rates were low. As rates have increased and the economic outlook
remains uncertain, we have been able to moderate originations within this portfolio. This has seen the average borrower
salary increase to £49,000 (half year to 30 June 2022: £46,000) ensuring we continue to maintain a strong level of credit
quality.
Our continued discipline to focus on return on regulatory capital has instead seen us put a greater emphasis on building our
mortgage pipeline as well as focus on the treasury portfolio, both of which provide meaningfully higher returns than at the
start of the year. As part of this focus we also continue to progress our AIRB application for residential mortgages.
We continue to let balances in our commercial book attrite, particularly in the commercial real estate sector, where we have
significantly reduced our exposure over the past few years. This combined with the run-off of COVID-related government backed
lending has seen commercial lending as a proportion of the total book fall marginally to 30% of total loans as at 30 June
2023 (31 December 2022: 31%; 30 June 2022: 36%). Despite this fall we continue to remain committed to maintaining a strong
commercial lending offering but are focused primarily on higher-quality relationship driven business. This includes the
strengthening of our business overdraft product which we launched in 2022 and a new business credit card offering that we
will launch in the second half of the year, which as well as supporting lending growth offers the potential for increased fee
income.
Infrastructure
We maintain our focus on building out our digital and physical infrastructure to both ensure that we keep the Bank safe and
secure today, and invest for the growth of tomorrow. The first half of the year has seen us lay the groundwork for the
expansion of our store network in the North of England. Whilst competitors continue to shrink their branch numbers and reduce
hours, we are continuing to see the benefits of being rooted in the communities we serve and believe this will continue to
differentiate our proposition in the years ahead.
Alongside our physical offering we have worked to enhance our digital infrastructure. This included a major transformation of
our mortgage origination platform, which will streamline the process for both mortgage intermediaries and customers. As well
as being beneficial for customers it will allow us to be much more flexible in the markets we choose to operate in, including
our upcoming products for shared ownership and limited company buy-to-let.
Alongside this we have continued our investment in automating customer journeys and working to deliver end-to-end digital
products. This includes our auto-finance proposition which we launched at the end of 2022 and our soon to be launched
business credit card. Ensuring this fully digital approach will allow us to scale these lending streams up as well as drive
greater productivity and efficiency across the Bank.
In addition to our investment in our lending streams we are focused on enhancing our deposit proposition, to ensure we retain
a competitive suite of products. This investment will improve our switching capabilities to better compete within the ISA
market as well as offer a broader range of savings accounts including a savings-boost propositions and RateSetter branded
savings account. Given earlier investment prioritisation elsewhere, our market share in these products is lower than for
other core products and therefore represents an opportunity for growth.
Communications
We continue to focus on engaging our colleagues, communities and other stakeholders to push forward our story.
I am pleased that in the first half of the year we have seen record levels in colleague engagement scores. We continue to
focus on our culture of promoting from within, with over 40% of the positions filled in the first half of the year, partly as
a result of colleagues being promoted or moving around the business. For the remaining hires we have amplified our community
focus when recruiting talent, increased opportunities available for apprentices from disadvantaged backgrounds into new areas
of the Bank, run a series of roadshows for professional returners trying to get back into the workplace, and engaged with
later in career populations to support our diverse workforce. We have also introduced a new optional shift pattern, whereby
store colleagues can now take a three-day break benefiting those colleagues who need more flexibility in their working week.
We have worked harder than ever for our local communities and become even more inclusive by rolling out our BSL Sign Language
service which customers can now access in any of our 76 stores, or on the phone, in app or online.
Our financial education programme Money Zone has now been delivered to 2,800 schools and 250,000 children – we were even
invited to deliver Money Zone to 1,100 children in just one day at the Hertfordshire Agricultural Society Food & Farming
Day. Later this year we are extending the scheme with bespoke programmes for our armed forces’ communities as well as to
teenagers aged 16-18.
52 of our stores are now designated as Safe Spaces – places where those suffering domestic abuse can go to safely go to start
the process of rebuilding their lives.
Our colleagues remain supportive of their local communities and have helped collect and donate thousands of items to local
foodbanks. Colleagues have also volunteered to feed the homeless, care for abandoned dogs, walked up hill and down dale for
charity, picked up litter, ran miles – sometimes over obstacle courses, celebrated Pride in London, Birmingham and Cardiff
and even organised our first charity golf day.
We continue to provide support to our customers who are struggling and during the year we signed up to the government’s
recently announced Mortgage Charter.
I’m also delighted that Metro Bank has become the first ever champion partner of women’s and girls’ cricket. It represents a
real partnership with purpose built on Metro Bank’s commitments to local communities and diversity and inclusion and will
help to deliver a lasting legacy for women’s and girls’ cricket.
Capital
I am pleased to say that in the first half of 2023, our return to profitability and our strategic management of risk-weighted
assets (RWAs) both supported organic capital accretion. Whilst we continue to operate in capital buffers, we remain in close
dialogue with the regulators regarding our future plans and also the ongoing work relating to our AIRB application.
The regulators remain supportive and on 1 January 2023 the Prudential Regulation Authority (PRA) reduced our Pillar 2A
capital requirement from 0.50% to 0.36%. This was followed by a further extension to the pre-existing adjustment (announced 9
December 2022) with respect to the existing £250 million 9.139% Tier 2 Notes issued by Metro Bank PLC regarding minimum
requirement for own funds and eligible liabilities (MREL) eligibility. The Bank of England’s Resolution Directorate has
agreed the adjustment now extends the MREL eligibility to the instrument’s maturity date on 26 June 2028.
On 5 July 2023, however, the scheduled increase in the Bank of England’s Countercyclical Buffer (CCyB) came into effect,
increasing the level from 1% to 2%. Accordingly, our Tier 1 requirement, including the combined public buffers, increased
from 9.8% to 10.8% and we are therefore now operating within buffers for Tier 1 capital as well as MREL, however we remain
above all of our minimum capital requirements.
We continue to consider all options, across the capital stack, that could strengthen our capital base.
Outlook
Over the past few years we have built a stable business foundation, fixing issues of the past whilst positioning ourselves
for the future. I am pleased our return to profitability in the first six months, the first since our transformation plan
completed, demonstrates that our approach is working. We have delivered this despite challenging headwinds and I would like
to acknowledge the dedication and unwavering hard work of each and every colleague who has helped us to get where we are
today.
Our proposition continues to resonate with customers and is providing a force for good in UK banking. We have created the
infrastructure and capability to enable us to provide a differentiated customer offering as well as meaningful alternative to
further communities in the years ahead.
Daniel Frumkin
Chief Executive Officer
31 July 2023
Finance review
Our results for the first six months of 2023 mark an important milestone in our journey, as we report our first full half
year of profitability since 2019. The statutory profit before tax of £15.4 million (half year to 31 December 2022: loss of
£10.5 million; half year to 30 June 2022: loss of £60.2 million) reflects the improved performance of the business, driven by
the actions taken as part of the turnaround plan and more recent measures to optimise the return on the balance sheet and
mitigate the impact of cost inflation.
The Bank’s return to profitability, combined with a reduction in RWAs, supported our capital ratios in the first half,
although were impacted by a step down in the IFRS 9 transition relief on 1 January 2023. We ended the period with CET1
capital ratio of 10.4% and an MREL ratio of 18.1%. These compared to the regulatory minima including buffers as at 30 June
2023 (excluding any confidential buffer) of 8.2% for CET1 and 20.2% for MREL. We therefore continue to operate within our
capital buffers, although remained above regulatory minima throughout the period.
The underlying business has continued to attract new customers, totalling 129,000 new business and personal current accounts
in the first half of the year. This inflow of new customers has partially offset the market-wide reduction in average
current account balances. We have started to see our deposits stabilise with increases in balances in June and July partially
offsetting the outflows seen earlier in the year, aided by our return to the fixed-term deposit market.
Whilst the performance for the first six months of the year is positive, we remain cautious given the continued volatile
external economic conditions, the impact of inflation on cost of living and the increasingly competitive deposit market as
interest rates rise.
Income statement review
Table 1: Summary income statement
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022 Year-on-year
(unaudited) (audited) (unaudited) change
£'million £'million £'million
Net interest income 221.5 223.3 180.8 23%
Net fee, commission and other income 64.1 63.7 55.7 15%
Net gains on sale of assets 0.8 - - n/a
Total income 286.4 287.0 236.5 21%
General operating expenses (221.4) (234.4) (233.2) (5%)
Depreciation and amortisation (38.3) (39.6) (37.4) 2%
Impairment and write-off of PPE and intangible assets - (1.5) (8.2) n/a
Expected credit loss expense (11.3) (22.0) (17.9) (37%)
Profit/(loss) before tax 15.4 (10.5) (60.2) n/a
Taxation (2.7) (0.5) (1.5) 80%
Profit/(loss) after tax 12.7 (11.0) (61.7) n/a
Net interest income
The continued increase in base rate over the past 18 months has driven growth in net interest income, which rose to £221.5
million, up 23% compared to a year ago (half year to 30 June 2022: £180.8 million) aided by a continued disciplined approach
with respect to both pricing and mix.
Half-on-half net interest income reduced marginally from £223.3 million, as a continued increase in asset yield was offset by
increased deposit pricing, in part due to our decision to re-enter the fixed term deposit market, and the market-wide
reduction in average current account balances. This trend was also reflected in muted net interest margin growth, which
increased slightly to 2.14% half-on-half (half year to 31 December 2022: 2.11%; half year to 30 June 2022: 1.73%).
The Bank of England base rate rises in the period have flowed through to our front book loan pricing and variable rate
lending. This has driven an increase in interest income both year-on-year and half-on-half to £400.1 million (half year to 31
December 2022: £324.0 million; half year to 30 June 2022: £239.7 million).
As at 30 June 2023 91% of our retail mortgages were fixed rate (31 December 2022: 90%, 30 June 2022: 87%) with a weighted
average life of 2.40 years before they reprice (31 December 2022: 2.45 years; 30 June 2022: 1.97 years). In our consumer term
lending and BBLS (closed to new borrowers) portfolios, all of the loans are fixed rate, limiting the impact of rising rates
on these portfolios. As our fixed-rate lending rolls-off it will be replaced with higher-yielding loans. We therefore
anticipate seeing continued interest income growth.
The rise in base rates has also partially flowed through to deposits, with cost of deposits increasing to 0.66% in the first
six months of the year, up from 0.14% in the first half, and 0.25% in the second half of 2022. This increase has been driven
in part by our return to the fixed-term deposit market as previously guided due to the market-wide decline in average
balances.
Interest expense was £178.6 million in the period, up from £58.9 million in the first half of last year and £100.7 million in
the six months to 31 December 2022. The rise in interest expense over the period also reflects the increase cost of wholesale
funding, notably the amounts borrowed from the Bank of England under the Term Funding Scheme for SMEs. As the cost of this
funding is directly linked to base rate it has increased significantly in the first half of the year to £78.0 million,
compared to £13.1 million in the first half of last year and £42.4 million in the last six-month of 2022. We do not rely on
this funding for operational activities and our lending remains entirely deposit funded. It does however provide an
additional form of stable funding which, whilst dilutive to net interest margin, can be deployed into high quality floating
rate securities or assets.
Fee, commission and other income
Statutory net fee, commission and other income has increased year-on-year to £64.1 million from £55.7 million and remained
broadly flat from the last six months (half year to 31 December 2022: £63.7 million).
Service charges and other fee income increased year-on-year as we continue to see increasing customer activity through
account acquisition, although growth slowed in comparison to the second half of the year as transaction volumes reduced,
driven by a decline in consumer spending, resulting from cost of living pressures.
Operating expenses
Total statutory operating expenses decreased to £259.7 million from £278.8 million in the first six months of 2022 and from
£275.5 million in the second half of 2022, reflecting our continued cost discipline despite high inflation conditions. The
reduction also reflects a continued lessening in our use of contractors, leading to a reduction in our spend on professional
fees. People-related costs at £120.4 million during the period were broadly flat compared to £119.9 million a year earlier
and £116.7 million in the second half of 2022, despite delivering an average pay rise across our workforce of 5% in April
2023.
The reduction in statutory operating expense was aided by the reduction in non-underlying expenses as we completed our
transformation program and closed outstanding legacy issues. Most of the non-underlying costs recognised during the period
related to the implementation of our holding company in May this year and as such are not forecast to recur going forward.
Expected credit loss expense
We recognised an expected credit loss (ECL) expense of £11.3 million for the period (half year to 30 June 2022: £17.9
million; half year to 31 December 2022: £22.0 million). The ECL charge in the period reflects the challenging external
economic conditions and the maturation of the loan books, offset by ECL releases from commercial repayments and management’s
actions to constrain lending growth. As part of our approach to calculating ECL we continue to maintain management overlays
and adjustments of £24.1 million (31 December 2022: £30.9 million) which represent 12% of the total ECL stock (31 December
2022: 17%). As at 30 June 2023 our coverage ratio increased to 1.54% (31 December 2022: 1.41%).
Despite the challenging external conditions, we have recognised fewer individual impairments in the first six months of the
year, particularly in the commercial space as customers remain resilient despite the economic environment and we have also
seen repayments which have resulted in ECL releases in the period. We continue to have high levels of collateral with average
debt to value for retail mortgages and commercial term loans as at 30 June of 58% and 55% respectively (31 December 2022: 56%
and 55% respectively). Within our consumer lending portfolio, we undertake a robust approach to credit decisioning and have
seen few signs of deterioration in credit quality. At a total level non-performing loans (NPLs) representing 2.86% of gross
lending (31 December 2022: 2.65%).
Balance sheet review
Table 2: Summary balance sheet
30 Jun 2023 31 Dec 2022
(unaudited) (audited) Change
£'million £'million
Assets
Cash and balances with the Bank of England 2,708 1,956 38%
Loans and advances to customers 12,572 13,102 (4%)
Investment securities held at fair value through other comprehensive income 489 571 (14%)
Investment securities held at amortised cost 4,826 5,343 (10%)
Financial assets held at fair value through profit and loss 1 1 -
Derivatives financial assets 26 23 13%
Property, plant and equipment 733 748 (2%)
Intangible assets 207 216 (4%)
Prepayments and accrued income 107 85 26%
Other assets 78 74 5%
Total assets 21,747 22,119 (2%)
Liabilities
Deposits from customers 15,529 16,014 (3%)
Deposits from central banks 3,800 3,800 -
Debt securities 573 571 -
Repurchase agreements 363 238 53%
Derivative financial liabilities 25 26 (4%)
Lease liabilities 238 248 (4%)
Deferred grant 17 17 -
Provisions 5 7 (29%)
Deferred tax liability 12 12 -
Other liabilities 215 230 (7%)
Total liabilities 20,777 21,163 (2%)
Total equity 970 956 1%
Deposits
The Bank remains highly liquid and deposit funded. The Bank’s loan to deposit ratio was 81% as at 30 June 2023 compared to
82% at the end of 2022. The Bank’s deposit mix remains focused on core deposits (covering current and interest-bearing
savings accounts), representing 92% of total deposits.
During the first six months of the year deposits reduced from £16,014 million to £15,529 million, primarily driven by a
reduction in average account balances. This reduction reflects increased costs of living, including interest costs, paying
down borrowing, as well as seasonal factors such as tax payments in January and a greater propensity to transfer surplus
current account balances into higher yielding accounts.
Although average balances have reduced our core deposit franchise remains resilient to increased competition in the market
and continues to attract new customers, opening 106,000 Personal Current Accounts and 23,000 Business Current Accounts in the
first half. The more recent deposit trajectory has been positive with net inflows towards the end of the period.
As guided at the full year we have started to re-enter the fixed term deposit market, after several years of letting these
balances reduce. As at 30 June 2023, fixed term deposits were £1,205 million (31 December 2022: £625 million) representing
only 8% (31 December 2022: 4%) of total deposits. We intend to continue to gradually increase fixed term deposits as we
introduce more tenure into our deposit profile.
During the period the Bank has invested in building out a competitive range of products for the current rate environment.
This investment will improve our switching capabilities to better compete within the ISA market as well as offer a broader
range of savings accounts including savings-boost propositions. Given earlier investment prioritisation elsewhere, our
market share in these products is lower than for other core products and therefore represents an opportunity for growth.
Lending
As previously guided the Bank is actively constraining the new lending to around or below replacement levels. Accordingly,
net lending decreased during the period to £12,572 million compared to £13,102 million at the end of 2022.
Gross commercial lending made up the largest component of the reduction, decreasing 9% to £3,768 million from £4,160 million
at 31 December 2022. This reflects the continued reduction in the professional buy-to-let portfolio and commercial real
estate portfolios which reduced by 13% from £1,412 million to £1,234 million in the period. We also continue to see a
reduction in government-backed lending, which are closed to new borrowers, as these loans are paid back, with balances
reducing from £1,313 million as at 31 December 2022 to £1,109 million at the end of June 2023.
Gross consumer lending reduced to £1,410 million (£1,480 million at 31 December 2022) Whilst the Bank has not sought to build
the consumer lending portfolio during the period, it remains an important product area through the cycle and we continue to
build out the breadth of our offering including through the launch of a new motor finance proposition towards the end of
2022.
Gross mortgage balances also reduced slightly to £7,591 million from £7,649 million at 31 December 2022 as originations were
kept broadly in line with repayments. Our retail mortgage portfolio continues to be primarily focused on owner occupied
loans. These make up 72% of balances at 30 June 2023 (31 December 2022: 72%) and continue to have a low loan to value
profile. We continue to progress our AIRB application in respect of our retail mortgages portfolio.
Property, plant & equipment and intangibles
Non-current assets and intangible asset balances continued to decrease during the period as depreciation and amortisation
charges exceeded the level of additions. Property plant and equipment ended the first half of the year at £733 million, down
from £748 million at year end, as we did not open any additional stores in the period. Stores remain core to our service
offering and we continue to evaluate a pipeline of sites to deliver on our commitment of 11 new stores in the North of
England, which we expected to open in 2024 and 2025, expanding our reach into new markets.
Intangible assets also continued to decrease to £207 million from £216 million as at 31 December 2022, reflecting how we have
reduced the levels of investment from the peaks during the turnaround period. Alongside key regulatory enhancement projects
we have invested more recently in our deposit proposition as well as enhancing our core service offering, which includes the
delivery of confirmation of payee which was launched in July 2023, enhanced business overdrafts which are delivered entirely
electronically and the roll out of our new mortgage platform.
Capital
Our return to profitability in the first half of the year combined with moderated asset origination, and therefore moderated
RWA deployment, has seen us generate organic capital through the period. Risk weighted assets ended the period at £7,802
million, a reduction of 2% from £7,990 million as at 31 December 2022. The reduction has been driven by a decrease in lending
volumes partly offset by an increase to our annual operational risk adjustment.
Table 3: Capital ratios and requirements
30 Jun 2023
(unaudited) Minimum requirement excluding buffers¹ Minimum requirement including buffers¹
£’million
CET1 10.4% 4.7% 8.2%
Tier 1 10.4% 6.3% 9.8%
Total regulatory capital 13.2% 8.4% 11.9%
Total regulatory capital plus MREL 18.1% 16.7% 20.2%
1. Excluding any confidential buffer, where applicable. Countercyclical buffer increased by 1% to 2% on 5 July 2023
The MREL requirement of 16.7% reflects the reduction of our Pillar 2A requirements from 0.50% to 0.36%, from the 1 January
2023, and the decision by the Bank of England to set our binding MREL requirement as the lower of 18% and two times the sum
of Pillar 1 and Pillar 2A, which were announced in June 2022.
On 5 July 2023 the scheduled increase in the CCyB came into effect, increasing the level from 1% to 2%. Accordingly, the
Bank’s Tier 1 requirement, including the combined public buffers, increased from 9.8% to 10.8%. The Bank’s Tier 1 ratio as at
30 June 2023 (including profits) was 10.4% and we are therefore now operating within buffers for Tier 1 capital as well as
MREL, however the Bank remains above all of its minimum capital requirements.
In May we completed the implementation of our holding company marking an important milestone in meeting our requirements in
respect of the Bank of England’s resolution framework. Upon the implementation of the holding company our existing MREL debt
moved up to sit within the new holding company entity. This consists of £350 million of 9.5% Senior Non preferred notes which
have a call date on 8 October 2024. The Board continues to review our options, across the capital stack, to strengthen our
capital base, including the refinancing of this MREL debt.
Our Tier 2 notes however have remained within the existing banking entity (Metro Bank PLC), although following the agreement
by the Bank of England’s Resolution Directorate on 28 July 2023, these will continue to contribute to our MREL requirements
up until their maturity on 26 June 2028. The Tier 2 notes had a call date during the first six months of the year and we took
the decision not to exercise this. As a result the coupon on this instrument reset from 5.500% to 9.139%. By not calling the
notes their Tier 2 eligibility will amortise over their remaining life at a rate of 20% each year, calculated on a daily
basis. Following the insertion of the new holding company, these notes are also now subject to a haircut at the Group level.
Liquidity and wholesale funding
We continue to maintain strong levels of liquidity. We ended 30 June 2023 with a Liquidity Coverage Ratio (LCR) of 214% (31
December 2022: 213%) which continues to be significantly in excess of the regulatory requirements of 100%.
We remain primarily deposit funded with our loan to deposit ratio at the 30 June 2023 being 81% (31 December 2022: 82%).
Whilst we utilise wholesale funding in the form of the Bank of England’s Term Funding Scheme (TFSME) and repurchase
agreements, these act as additional stable forms of funding and liquidity.
As at 30 June 2023 the Bank held £2,708 million in cash and balances at the Bank of England (31 December 2022: £1,956
million) with a further £5,315 million in high quality investment securities (31 December 2022: £5,914 million), which nearly
all are AAA rated or are UK Gilts. Of our total investment securities £4,826 million, 91% are held at amortised cost (31
December 2022 £5,343 million; 90%). Given the rising rate environment the fair value of these securities is £4,502 million
(31 December 2022: £5,009 million). As we have no intention to sell these securities, their fair value will pull back to
carrying value as they approach maturity.
The weighted-average repricing duration on the portfolio (excluding cash) is 1.1 years and virtually all the securities are
Bank of England eligible so are available for entering into repurchase agreements, should we need additional liquidity. The
remaining £489 million of our investment securities are held at fair value and therefore market movements on these assets are
already reflected in our reserves and capital ratios.
Going concern and outlook
These condensed consolidated interim financial statements are prepared on a going concern basis, as the Directors are
satisfied that the Group has the resources to continue to operate for a period of at least twelve months from when the
interim financial statements are authorised for issue. In making this assessment, the Directors considered a wide range of
information relating to present and future conditions, including future projections of profitability, liquidity and capital
resources as well as factoring in the uncertainties relating to the economic and market outlook and future financing
requirements.
Given the Bank’s year to date performance and taking account of the external environment, we reiterate the guidance that we
are targeting mid-single digit return on tangible equity by 2024.
James Hopkinson
Chief Financial Officer
31 July 2023
RISK review
As at 30 June 2023, our business model, risk management framework and risk appetites remain consistent with our 2022 Annual
Report and Accounts. The key risks we face (our ‘principal risks’) are unchanged:
• Credit risk - The risk of financial loss should our borrowers or counterparties fail to fulfil their contractual
obligations in full and on time.
• Capital risk - The risk that we fail to meet minimum regulatory capital (and MREL) requirements.
• Liquidity and Funding risk - The risk that we fail to meet our short-term obligations as they fall due or that we cannot
fund assets that are difficult to monetise at short notice (i.e. illiquid assets) with funding that is behaviourally or
contractually long term (i.e. stable funding).
• Market risk - The risk of loss arising from movements in market prices. Market risk is the risk posed to earnings,
economic value or capital that arises from changes in interest rates, market prices or foreign exchange rates.
• Operational risk - The risk that events arising from inadequate or failed internal processes, people and systems, or from
external events cause regulatory censure, reputational damage, financial loss, service disruption and/or detriment to our
customers.
• Financial crime - The risk of financial loss or reputational damage due to regulatory fines, restriction or suspension of
business, or cost of mandatory corrective action as a result of failing to comply with prevailing legal and regulatory
requirements relating to financial crime.
• Regulatory risk - The risk of regulatory sanction, financial loss and reputational damage as a result of failing to
comply with relevant regulatory requirements.
• Conduct risk - The risk that our behaviours or actions result in unfair outcomes or detriment to customers and/ or
undermines market integrity.
• Model risk - The risk of potential loss, poor strategic decision making and regulatory non-compliance due to decisions
that could be principally based on the output of models, due to errors in the assumptions, development, implementation or
use of such models.
• Strategic risk - The risk of having an insufficiently defined, flawed or poorly implemented strategy, a strategy that
does not adapt to political, environmental, business and other developments and/or a strategy that does not meet the
requirements and expectations of our stakeholders.
• Legal risk - The risk of loss, including to reputation, which can result from lack of awareness or misunderstanding of,
ambiguity in, or reckless indifference to, the way law applies to the Directors, the business, its relationships,
processes, products and services.
We continue to actively monitor and regularly reassess our exposure to each of these risks, with particular focus on those
that could result in events or circumstances that might harm our customers, threaten our business model, solvency or
liquidity, and reputation.
Top risks
Our top risks are defined as risks which are considered to be the most material to the Bank with the potential for the
greatest impact during the forthcoming 12 months and currently consist of:
• Macroeconomic risk (credit risk)
• Capital risk
• Financial crime risk
• Regulatory risk
• Technology risk
Further information on our top and emerging risks are outlined below.
Credit risk
Credit portfolio performance has remained resilient during the first half of 2023 despite a challenging external environment
for our customers. Notwithstanding the recent increases in market expectations for interest rates, the overall macroeconomic
outlook has improved since the end of 2022. The overall impact of risk profile, credit performance and macroeconomic outlook
has resulted in a cost of risk of 0.18% (six months to 31 December 22: 0.33%).
Expected credit losses
Table 4: Expected credit loss allowances
30 Jun 2023 31 Dec 2022
Change
£’million £’million
£’million
(unaudited) (audited)
Retail mortgages 21 20 1
Consumer lending 93 75 18
Commercial lending 83 92 (9)
Total expected credit loss allowances 197 187 10
ECL have increased during the year by £10 million to £197 million (31 December 2022: £187 million) predominantly driven by
maturation of the consumer portfolio, offset by repayments in commercial and improvements in macroeconomic scenarios. As part
of our ECL we continue to hold overlays to reflect the continued macroeconomic uncertainty given the high inflation and cost
of living pressures as well as anticipated interest rate increases not fully captured in the latest macroeconomic scenarios
and IFRS 9 models.
Non-performing loans
Table 5: Non-performing loans
30 Jun 2023 (unaudited) 31 Dec 2022 (unaudited)
NPLs NPL ratio NPLs NPL ratio
£’million % £’million %
Retail mortgages 139 1.83% 111 1.45%
Consumer lending 68 4.82% 50 3.38%
Commercial lending 158 4.19% 191 4.59%
Total 365 2.86% 352 2.65%
NPLs increased to £365 million (31 December 2022: £352 million) with the overall NPL ratio increasing to 2.86% (31 December
2022: 2.65%). The NPL ratio for mortgages has increased to 1.83% (31 December 2022: 1.45%), driven largely by our legacy
acquired mortgage portfolios. These portfolios were not written under our organic credit criteria, and we have seen poorer
arrears performance, exacerbated in the recent period as these have on average poorer risk scores and are more likely to be
on a variable rate. The NPL ratio for consumer customers has increased to 4.82% (31 December 2022: 3.38%) driven by the
maturation of the RateSetter loans portfolio. The NPL ratio for Commercial has reduced to 4.19% (31 December 2022: 4.59%)
driven by successful BBLS claims and repayments as well as the write-off of a small number of large commercial exposures.
Cost of risk
Table 6: Cost of risk and coverage ratios
Cost of risk Coverage ratios
Half year to Full year to
30 Jun 2023 31 Dec 2022
30 Jun 2023 31 Dec 2022
(unaudited) (unaudited)
(unaudited) (unaudited)
% %
% %
Retail mortgages 0.02% 0.02% 0.28% 0.26%
Consumer lending 2.95% 2.26% 6.60% 5.07%
Commercial lending (0.52%) 0.11% 2.20% 2.21%
Cost of risk 0.18% 0.32% 1.54% 1.41%
The change in overall cost of risk is primarily driven by increased ECL for consumer lending (resulting from maturation of
this portfolio) which now equates to 11% of our total lending (31 December 2022: 11%) and carries a higher cost of risk than
retail mortgages and commercial. As at the 30 June 2023 our coverage ratio on our consumer lending portfolio stood at 6.60%,
up from 5.07% as the year-end. The cost of risk for retail mortgages has remained flat. The cost of risk for commercial has
reduced due to improvements in macroeconomic scenarios and repayments of a small number of large commercial exposures.
Stage 2 balances
Stage 2 balances are identified using quantitative and qualitative tests that determine the significant increase in credit
risk (SICR) criteria. In addition, customers that trigger the 30 days back stop classification are also reported in Stage 2,
in line with IFRS 9 standards.
Table 7: Stage 2 balances1
30 Jun 2023 (unaudited) 31 Dec 2022 (unaudited)
Gross carrying amount Loss allowance Gross carrying amount Loss allowance
£’million £’million £’million £’million
Quantitative 1,414 36 1,845 38
Qualitative 160 5 189 7
30 days past due backstop 51 6 54 6
Total Stage 2 1,625 47 2,088 51
1. Where an account satisfies more than one of the Stage 2 criteria above, the gross carrying amount and loss allowance has
been assigned in the order presented. For example, an account that triggers both quantitative and qualitative SICR
criteria will only be reported as quantitative SICR.
Stage 2 balances have decreased in the first half of 2023, with the quantitative SICR criteria continuing to be the primary
driver and improvements in macroeconomic outlook resulting in customers no longer triggering SICR and transferring back to
Stage 1. Marginal decreases in Stage 2 balances have also been observed in the qualitative and 30 days past due backstop
criteria. As at 30 June 2023, 87% (31 December 2022: 88%) of Stage 2 balances triggered quantitative SICR criteria, 10% (31
December 2022: 9%) triggered qualitative SICR and the remaining 3% (31 December 2022: 3%) triggered the 30 days past due
backstop criteria.
Credit risk exposure by internal PD rating
Table 8: Credit risk exposure, by IFRS 9 12-month PD rating and stage allocation1
30 Jun 2023 (unaudited)
Gross lending Loss allowance
£’million £’million
PD Range % Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Coverage
ratio
Band 1 0.00 – 2.99 8,937 380 - 9,317 33 3 - 36 0.39%
Band 2 3.00 – 16.99 1,346 994 - 2,340 27 25 - 52 2.22%
Band 3 17.00 - 99.99 496 251 - 747 1 19 - 20 2.68%
Band 4 100 - - 365 365 - - 89 89 24.38%
Total 10,779 1,625 365 12,769 61 47 89 197 1.54%
31 Dec 2022 (audited)
Gross lending Loss allowance
£’million £’million
PD Range % Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Coverage
ratio
Band 1 0.00 – 2.99 8,042 549 - 8,591 32 5 - 37 0.43%
Band 2 3.00 – 16.99 2,209 1,313 - 3,522 33 29 - 62 1.76%
Band 3 17.00 - 99.99 598 226 - 824 1 17 - 18 2.18%
Band 4 100 - - 352 352 - - 70 70 19.89%
Total 10,849 2,088 352 13,289 66 51 70 187 1.41%
1. IFRS 9 12-month PD excludes post model overlays (PMO).
The migration observed across bandings, in particular band 1, is primarily driven by the improvement in macroeconomic
scenarios feeding through the IFRS 9 models resulting in customers moving to lower PD bands.
Retail mortgage lending
Mortgage balances have been broadly stable in the first six months of 2023 at £7,591 million (31 December 2022: £7,649
million) with modest organic book growth offsetting the run-off of our back book portfolios.
Despite the challenging economic environment, the credit performance of the portfolio during the first half of 2023 has
remained broadly stable. Debt-to-value (DTV) has increased by 2% to 58% as at 30 June 2023 (31 December 2022: 56%) as a
result of falling house prices. Early arrears cases (one to less than three months in arrears) have remained stable at 0.63%
at 30 June 2023 (31 December 2022: 0.63%). Accounts that are three or more months in arrears have increased from 0.73% at 31
December 2022 to 0.91% at 30 June 2023, mainly driven by increases in arrears in the legacy acquired portfolios that are in
run-off and have greater sensitivity to interest rate rises.
Loan-to-value has been restricted to <=90% resulting in a small reduction in average loan-to-value for new lending (30 June
2023: 67%; 31 December 2022: 68%).
Table 9: Residential mortgage lending by repayment type
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Retail owner Retail Total retail Retail owner Retail Total retail
occupied mortgages occupied mortgages
buy-to-let buy-to-let
£’million £’million £’million £’million
£’million £’million
Interest 1,936 1,998 3,934 2,005 2,047 4,052
Capital and 3,565 92 3,657 3,502 95 3,597
interest
Total 5,501 2,090 7,591 5,507 2,142 7,649
Table 10: Retail mortgage lending by DTV banding
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Retail owner Retail Total retail Retail owner Retail
occupied mortgages occupied Total retail mortgages
buy-to-let buy-to-let
£’million £’million £’million £’million
£’million £’million
Less than 50% 1,853 453 2,306 2,007 568 2,575
51-60% 875 386 1,261 961 463 1,424
61-70% 1,078 633 1,711 1,088 660 1,748
71-80% 1,037 595 1,632 990 434 1,424
81-90% 517 23 540 374 13 387
91-100% 141 - 141 87 - 87
More than 100% - - - - 4 4
Total 5,501 2,090 7,591 5,507 2,142 7,649
Table 11: Residential mortgage lending by geographic exposure
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Retail owner Retail Total retail Retail owner Retail Total retail
occupied mortgages occupied mortgages
buy-to-let buy-to-let
£’million £’million £’million £’million
£’million £’million
Greater London 1,937 1,167 3,104 1,937 1,201 3,138
South East 1,442 401 1,843 1,435 408 1,843
East of England 531 158 689 531 163 694
South West 463 93 556 476 99 575
North West 256 68 324 263 68 331
West Midlands 231 76 307 226 76 302
East Midlands 172 54 226 168 54 222
Yorkshire and the 180 34 214 184 34 218
Humber
Scotland 121 12 133 115 11 126
Wales 107 18 125 109 18 127
North East 61 9 70 63 10 73
Total 5,501 2,090 7,591 5,507 2,142 7,649
All of our loan exposures which are secured on property are secured on UK-based assets. Our current retail mortgages
portfolio is concentrated within London and the South-East, which is representative of our original customer base and store
footprint.
Consumer lending
Consumer balances have reduced to £1,410 million as at 30 June 2023 (31 December 2022: £1,480 million). The portfolio is now
comprised 95% of lending through the RateSetter brand, including £5 million in secured motor originations, with the remaining
of the portfolio being £45 million of overdrafts and £23 million of credit cards. The performance of this portfolio is
aligned with expectations with continual enhancements being performed in relation to the affordability and creditworthiness
assessment in light of the economic environment. Increases in arrears and non-performing loans have been observed but are in
line with the growth of the book as well as historical cohorts and our internal forecasts.
The total ECL coverage position for consumer has increased to 6.6% as a result of the continued maturation of the portfolio
and a post model overlay to reflect the uncertainty due to high inflation (31 December 2022: 5.1%).
Commercial lending
Our commercial lending remains largely comprised of term loans secured against property and government supported lending. In
addition, commercial lending includes facilities secured by other forms of collateral (such as debentures and guarantees) as
well as asset and invoice financing.
Our commercial balances have decreased from £4,160 million to £3,768 million in the first six months of 2023. This reflects
the business strategy to reduce our professional buy to let and real estate lending, and run-offs in government supported
lending.
Our commercial real estate book covers property investment lending against both residential and commercial property, with
repayment reliant on rental income from the underlying property. As at 30 June 2023 35% of the book is covered by residential
property, 20% by retail property and 18% by offices. The average DTV for our commercial real estate loans is 45%, unchanged
from 31 December 2022 (31 December 2022: 45%).
Commercial customers are managed through an early warning categorisation where there are early signs of financial difficulty,
thereby allowing timely engagement and appropriate corrective action to be taken. Early Warning categories support our IFRS 9
stage classification. Total lending in Early Warning categories has remained broadly flat since December 2022, However, some
deterioration within early warning categories has been observed. Close customer management is key to identify issues and
supporting our customers.
Table 12: Commercial term lending (exc. BBLS) by DTV banding
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Professional Total commercial term Professional Total commercial term
Other term loans loans Other term loans loans
buy-to-let buy-to-let
£’million £’million £’million £’million
£’million £’million
Less than 50% 210 790 1,000 278 817 1,095
51-60% 110 340 450 158 433 591
61-70% 135 138 273 219 112 331
71-80% 95 90 185 62 76 138
81-90% 56 29 85 3 53 56
91-100% 6 32 38 5 12 17
More than 100% 3 502 505 6 587 593
Total 615 1,921 2,536 731 2,090 2,821
As of 30 June 2023, 75% of our commercial term lending (excluding BBLS) had a DTV of 80% or less (31 December 2022: 76%),
reflecting the prudent risk appetite historically applied. Lending with DTV >100% includes loans which benefit from
additional forms of collateral, such as debentures. The value of this additional collateral is not included in the DTV but
does provide an additional level of credit risk mitigation. DTV >100% also includes government backed lending where the
facility does not also benefit from property collateral. The decrease in DTV>100% in 2023 reflects a reduction in government
backed lending.
Table 13: Commercial term lending (exc. BBLS) by industry exposure
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Professional Total commercial Professional Total commercial
Other term loans term loans Other term loans term loans
buy-to-let buy-to-let
£’million £’million £’million £’million
£’million £’million
Real estate (rent, buy and 615 619 1,234 731 681 1,412
sell)
Hospitality - 346 346 - 372 372
Health & social work - 327 327 - 334 334
Legal, accountancy & - 170 170 - 196 196
consultancy
Retail - 147 147 - 161 161
Recreation, cultural and sport - 76 76 - 87 87
Construction - 50 50 - 62 62
Education - 21 21 - 17 17
Investment and unit trusts - 11 11 - 11 11
Real estate (development) - 10 10 - 6 6
Real estate (management of) - 7 7 - 9 9
Other - 137 137 - 154 154
Total 615 1,921 2,536 731 2,090 2,821
We manage credit risk concentration to individual borrowing entities and sectors. Our credit risk appetite includes limits
for individual sectors where we have higher levels of exposure.
The sector profile for commercial term lending is broadly consistent with the position as at 31 December 2022. There has been
an overall reduction in commercial real estate of 13%.
Table 14: Commercial term lending (exc. BBLS) by repayment type
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Professional Total commercial term Professional Total commercial term
Other term loans loans Other term loans loans
buy-to-let buy-to-let
£’million £’million £’million £’million
£’million £’million
Interest 577 221 798 691 253 944
Capital and 38 1,700 1,738 40 1,837 1,877
interest
Total 615 1,921 2,536 731 2,090 2,821
Table 15: Commercial term lending (exc. BBLS) by geographic exposure
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Professional Total commercial term Professional Total commercial term
Other term loans loans Other term loans loans
buy-to-let buy-to-let
£’million £’million £’million £’million
£’million £’million
Greater London 394 933 1,327 472 1,052 1,524
South East 124 365 489 149 377 526
East of England 42 140 182 45 147 192
North West 11 144 155 13 153 166
South West 18 122 140 22 143 165
West Midlands 7 105 112 8 112 120
East Midlands 10 43 53 12 43 55
Yorkshire and the 2 22 24 3 23 26
Humber
North East 3 21 24 3 19 22
Wales 3 13 16 3 11 14
Scotland - 8 8 - 7 7
Northern Ireland 1 5 6 1 3 4
Total 615 1,921 2,536 731 2,090 2,821
Capital risk
Capital remains the largest constraint on the business as we continue to operate within our publicly disclosed MREL buffers
and expect to continue to do so for a further period of time. Our return to profit in the first half of the year combined
with a slight reduction in RWAs has seen us generate organic capital growth between 1 January and 30 June 2023. As a result
we have seen increases across our regulatory ratios compared to 31 December 2022 except for total capital following the
haircut to Tier 2 arising from implementation of our holding company in May. These increases are notwithstanding the step
down of IFRS 9 transitional relief on 1 January 2023.
Capital requirements
We manage capital in accordance with prudential rules issued by the PRA and Financial Conduct Authority (FCA) and we are
committed to maintaining a strong capital base, under both existing and future regulatory requirements.
As at 30 June 2023 our CET1, Tier 1 and MREL requirements were 4.7%, 6.3% and 16.7%, respectively (excluding buffers).
Further details of which can be found in the finance review section above.
On 5 July 2023 the CCyB rate increased from 1% to 2%. The increase in the CCyB means we do not have sufficient CET1 resources
to meet the Combined Buffer Requirement for Tier 1. This subjects the Bank to maximum distributable amount (MDA) restrictions
in the PRA Rulebook, which limit the ability of the Bank to make certain payments, including dividends on ordinary shares and
coupon payments on Additional Tier 1 instruments as well as other cash/bonus payments. As we do not currently have any
AT1-eligible instruments and have no imminent plans to make dividend payments on our ordinary shares there are minimal
implications resulting from this, other than it acting as a limit on the level of variable remuneration we can pay
colleagues.
As set out in the finance review section, in May 2023, we implemented our new holding company, Metro Bank Holdings PLC, which
became the new listed entity in order to meet the Bank of England’s resolution requirements of having a single point of entry
for the purposes of resolution. There are no changes to our capital requirements as a result of the holding company insertion
other than that our main capital requirements will now be monitored at the new Group level.
As Metro Bank Holdings PLC is a clean holding company, it will primarily hold the Group’s external debt and equity and as
such there are limited impacts from its insertion, although the Tier 2 resources which continue to be held at the level of
Metro Bank PLC are now subject to a haircut at the level of the Group.
As part of the holding company insertion we undertook a process to create distributable reserves within both Metro Bank PLC
and Metro Bank Holdings PLC in line with the Companies Act 2006. The creation of distributable reserves will allow us to
issue and pay dividends on instruments including AT1 in the future (providing the MDA restrictions do not apply at the point
of payment).
Risk-weighted assets
Risk weighted assets ended the period at £7,802 million down from £7,990 million as at 31 December 2022. The reduction has
been driven by a decrease in lending volumes partly offset by an increase to our annual operational risk adjustment.
The increase in base rates over the period has allowed us to redeploy capital into low risk-weighted investment securities
and zero risk-weighted deposits at the Bank of England. These provide a strong return on regulatory capital, especially given
limited capital availability, which constrains our ability to increase lending on less risk weight efficient assets. We
continue to progress our AIRB application in respect of our retail mortgages.
We are also continuing to work through the implications of the implementation of Basel 3.1 on which the PRA published its
consultation at the end of November 2022.
Capital resources
Table 16: Capital resources
30 Jun 2023 31 Dec 2022
(unaudited) (audited)
£’million £’million
Ordinary share capital - -
Share premium - 1,964
Retained earnings1 962 (1,015)
Other reserves 8 7
Intangible assets (207) (216)
Other regulatory adjustments 50 79
Total Tier 1 capital (CET1) 813 819
Debt securities (Tier 2) 217 250
Total Tier 2 capital 217 250
Total regulatory capital 1,030 1,069
1. Retained earnings as at 30 June 2023 includes the profit of £12.7 million for the first half of the year.
As at 30 June 2023 our total regulatory capital stood at £1,030 million down from £1,069 million as at 31 December 2022, as
the profits for the first six months of the year were offset by a step down in the IFRS 9 transitional relief on the 1
January 2023. The continued accumulation of profit will allow us to accrete capital going forward. We also plan to access the
capital markets, as and when conditions allow, to allow us to exit our regulatory buffers as well as provide additional
growth capital.
Financial crime risk
Metro Bank maintains its low appetite for customer relationships or activity that poses a high financial crime risk and has
no appetite for customer relationships or activity that violate our sanctions obligations. We continue to invest in our
systems and controls as part of ongoing efforts to embed the Financial Crime Framework throughout the bank. This includes
activity to manage our ongoing sanctions compliance associated with the conflict in Ukraine. The skills and capability of our
colleagues to prevent and detect financial crime continues to be a key focus, with formal training delivered to all
colleagues and robust consequence management measures in place.
Regulatory risk
Progress continues to be made on key regulatory initiatives, including embedding customer-centric enhancements in response to
the new Consumer Duty requirements and other key developments including Basel 3.1 and the revised UK Corporate Governance
Code. Our risk appetite remains unchanged and subject to active oversight through targeted risk metrics that are calibrated
to reflect regulatory priorities. The bank’s regulatory risk framework and supporting policies have been revalidated and we
continue to maintain coordinated and proactive engagement with our key regulators.
Technology risk
We continue to invest and improve our key technology capabilities that underpin the bank’s customer service proposition and
maintain our operational resilience. The bank’s technology estate is continuously reviewed to ensure it remains fit for
purpose and the first half of the year has included prioritisation of required updates, risk and performance reviews of our
material third party technology providers and independent assessment of our technology resilience. We continue to patch and
upgrade our systems and platforms and keep an open dialogue with our regulators on actual or potential disruption events.
Emerging risks
We consider emerging risks to be evolving threats which cannot yet be fully quantified, with the potential to significantly
impact our strategy, financial performance, operational resilience and/or reputation. We keep our emerging risks under
review, informed by a horizon scanning process, with escalation and reporting to the Risk Oversight Committee and Board as
necessary.
The emerging risks reported in our 2022 Annual Report and Accounts have been updated below, many of which are components of
our principal risks, reflecting the rapidly evolving risk landscape and therefore level of future uncertainties. For
example, ongoing Cyber Risk is managed closely as a subset of Operational Risk on a day-to-day basis. As anticipated, the
macroeconomic and geopolitical environment has been challenging through the first half of 2023 and this is forecast to
continue for the remainder of the year. Rising interest rates are placing pressure on household finances and inflation
remains high.
Considered as part of Technological Change, artificial intelligence has been included as an emerging risk to be monitored in
light of the speed at which the threats and opportunities it offers are progressing.
Emerging risks Description Mitigating actions
The first half of 2023 has seen some deterioration in We continue to monitor economic and
macroeconomic outcomes, with falls in property prices in political developments in light of the
particular. Recent higher than expected inflation has led ongoing uncertainty, considering potential
to increases in market expectations for interest rates consequences for our customers, products
which is impacting on credit pricing. While it is and operating model. We actively monitor
anticipated that inflation will fall in 2023, levels are our credit portfolios and undertake
still likely to be high compared to recent history, internal stress testing to identify
Rapidly changing adding to pressure on household finances and business sectors that may come under stress as a
macroeconomic and costs. Alongside this, unemployment is forecast to rise, result of an economic slowdown in the UK.
geopolitical environment albeit from an historic low level, and house prices are We continue to focus on affordability and
predicated to continue falling back. The political and cost of living assumptions for new
central bank response to these issues continues to evolve lending, on back book monitoring, as well
and the continued inflationary environment will likely as focus on potential impacts on our
see base rates continue to rise through the second half customers. The latter includes pro-active
of 2023. There is a risk of further volatility within engagement with vulnerable customers and
financial markets, particularly in respect of yields. those that are considered most at risk of
payment difficulties prior to the
emergence of arrears.
We continue to invest in our cyber
security and resilience capabilities in
response to these rapidly evolving
threats. Key areas of focus relate to
Cyber attacks continue to grow in intensity and access controls, network security,
complexity, meaning that continuing to evolve our ability disruptive technology and the denial of
Cyber risk and methodologies used to safeguard the confidentiality, service capability. We actively
integrity and availability and our customers’ information participate in the sharing of threat
and services remains crucial. information with other organisations,
helping to ensure the continued
availability of our exceptional service
offering while also making banking safer
for all.
Changes in the use of technology by our customers, along
with rapid changes to technology provided by third We continue to review our use of
parties, requires us to continually assess the need to technology to prioritise enhancements
upgrade our technology estate. This in turn drives where required. We follow an Agile change
increasing demands on our people and our ability to methodology and remain focused on building
Technological change remain operationally resilient, in order to avoid causing out a strong digital offering.
harm to our customers.
We are closely monitoring the emergence of
The rapid emergence of artificial intelligence into artificial intelligence including the
mainstream commercial and individual applications poses regulatory, legal and industry response to
opportunities and threats that are currently being its application.
assessed.
We continue to monitor the regulatory
The regulatory landscape continues to evolve with the landscape for emerging regulatory
requirement to respond to both prudential and conduct initiatives and to identify potential
driven initiatives requiring ongoing prioritisation and impacts on our business model and ensure
Regulatory change implementation. Regulatory business plans and supervisory we are well placed to respond effectively
priorities are regularly assessed to identify emerging to regulatory change. Regular monthly
themes and ensure our control framework reporting on material regulatory change
remains appropriate. programmes ensures appropriate visibility
and escalation where required.
The UK banking industry is faced with an increasing We continue to enhance our approach to
volume and complexity of scams perpetrated on our identifying and preventing potential fraud
customers by threat actors who continue to develop more and are proactive in educating our
Fraud risk sophisticated tactics to commit fraud. The uncertain customers and colleagues in fraud
economic environment may also result in increased fraud prevention measures, alerting them
as companies and individuals struggle. This has resulted to changes in the threat landscape
in increased regulatory expectations across the financial as they occur.
services industry.
There remain significant uncertainties around the time Our ESG working groups and steering
horizon over which climate risks will materialise, as committee meet regularly to ensure our
well as the exact nature and impact of climate change on responses to emerging ESG risks are
Environment, social and our strategy, performance and operating model. There are continually enhanced. We continue to focus
governance (ESG) risk also risks associated with changing societal and on sustainability in all forms and take an
political requirements from a wide range of stakeholders ethical approach to doing business,
to which our risk and governance frameworks must evolve remaining committed to the communities
responses. we serve.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors confirm to the best of their knowledge these condensed interim financial statements have been prepared in
accordance with UK adopted International Accounting Standard 34, ‘Interim Financial Reporting’ giving a true and fair view of
the assets, liabilities, financial position and profit or loss as and as required by DTR 4.2.7R and DTR 4.2.8R, namely:
• An indication of important events that have occurred during the first six months ended 30 June 2023 and their impact on
the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining
six months of the financial year; and
• Material related-party transactions in the first six months ended 30 June 2023 and any material changes in the
related-party transactions described in the last annual report.
Signed on its behalf by:
Daniel Frumkin James Hopkinson Robert Sharpe
Chief Executive Officer Chief Financial Officer Chair
Independent review report to Metro Bank Holdings PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Metro Bank Holdings PLC’s condensed consolidated interim financial statements (the “interim financial
statements”) in the interim report of Metro Bank Holdings PLC for the 6 month period ended 30 June 2023 (the “period”).
Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are
not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct
Authority.
The interim financial statements comprise:
• the Condensed consolidated balance sheet as at 30 June 2023;
• the Condensed consolidated statement of comprehensive income for the period then ended;
• the Condensed consolidated cash flow statement for the period then ended;
• the Condensed consolidated statement of changes in equity for the period then ended; and
• the explanatory notes to the interim financial statements.
The interim financial statements included in the interim report of Metro Bank Holdings PLC have been prepared in accordance
with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, ‘Review of Interim
Financial Information Performed by the Independent Auditor of the Entity’ issued by the Financial Reporting Council for use
in the United Kingdom (“ISRE (UK) 2410”). A review of interim financial information consists of making enquiries, primarily
of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK)
and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going
concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim report, including the interim financial statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the interim report in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority. In preparing the interim report, including
the interim financial statements, the directors are responsible for assessing the group’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review.
Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than
audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom’s Financial Conduct Authority and for no other purpose. We do not, in giving this
conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
31 July 2023
CONDENSED Consolidated statement of comprehensive income (unaudited)
For the half year to 30 June 2023
Half year to Half year to Half year to
Note 30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Interest income 2 400.1 324.0 239.7
Interest expense 2 (178.6) (100.7) (58.9)
Net interest income 221.5 223.3 180.8
Net fee and commission income 42.2 42.3 39.5
Net gains on sale of assets 0.8 - -
Other income 21.9 21.4 16.2
Total income 286.4 287.0 236.5
General operating expenses 3 (221.4) (234.4) (233.2)
Depreciation and amortisation 7,8 (38.3) (39.6) (37.4)
Impairment and write-offs of PPE and intangible assets 7,8 - (1.5) (8.2)
Total operating expenses (259.7) (275.5) (278.8)
Expected credit loss expense (11.3) (22.0) (17.9)
Profit/(loss) before tax 15.4 (10.5) (60.2)
Tax expense 5 (2.7) (0.5) (1.5)
Profit/(loss) for the period 12.7 (11.0) (61.7)
Other comprehensive expense for the period
Items which will be reclassified subsequently to profit or loss where specific
conditions are met:
Movements in respect of investment securities held at fair value through other
comprehensive income (net of tax):
- changes in fair value (0.9) (0.9) (6.7)
Total other comprehensive expense (0.9) (0.9) (6.7)
Total comprehensive income/(loss) for the period 11.8 (11.9) (68.4)
Earnings per share
Basic earnings per share (pence) 13 7.4 (6.4) (35.8)
Diluted earnings per share (pence) 13 7.1 (6.4) (35.8)
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at 30 June 2023
30 Jun 2023 31 Dec 2022 30 Jun 2022
Note
£’million £’million £’million
Assets
Cash and balances with the Bank of England 2,708 1,956 2,862
Loans and advances to customers 6 12,572 13,102 12,364
Investment securities held at FVOCI 489 571 781
Investment securities held at amortised cost 4,826 5,343 5,393
Financial assets held at fair value through profit and loss 1 1 2
Derivative financial assets1 26 23 11
Property, plant and equipment 7 733 748 749
Intangible assets 8 207 216 227
Prepayments and accrued income 107 85 80
Assets classified as held for sale - 1 -
Other assets 78 73 97
Total assets 21,747 22,119 22,566
Liabilities
Deposits from customers 9 15,529 16,014 16,514
Deposits from central banks 3,800 3,800 3,800
Debt securities 10 573 571 577
Repurchase agreements 363 238 166
Derivative financial liabilities1 25 26 19
Lease liabilities 11 238 248 264
Deferred grants 17 17 19
Provisions 5 7 14
Deferred tax liabilities 5 12 12 12
Other liabilities 215 230 212
Total liabilities 20,777 21,163 21,597
Equity
Called up share capital 12 - - -
Share premium account 12 - 1,964 1,964
Retained earnings 962 (1,015) (1,004)
Other reserves 8 7 9
Total equity 970 956 969
Total equity and liabilities 21,747 22,119 22,566
1. Derivative financial assets and liabilities have been split out in the balance sheet as at 30 June 2022, having
previously been presented on a net basis.
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
These condensed consolidated interim financial statements were approved and authorised for issue by the Board of Directors on
31 July 2023 and were signed on its behalf by:
Daniel Frumkin James Hopkinson Robert Sharpe
Chief Executive Officer Chief Financial Officer Chair
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
For the half year to 30 June 2023
Half year to Half year to Half year to
Note 30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Reconciliation of profit/(loss) before tax to net cash flows from operating
activities
Profit/(loss) before tax 15 (11) (60)
Adjustments for non-cash items (173) (157) (116)
Interest received 392 318 235
Interest paid (149) (59) (65)
Changes in other operating assets 502 (751) (101)
Changes in other operating liabilities (405) (452) 34
Net cash inflows/(outflows) from operating activities1 182 (1,112) (73)
Cash flows from investing activities
Sales, redemptions and paydowns of investment securities 1,226 549 308
Purchase of investment securities (627) (291) (915)
Purchase of property, plant and equipment 7 (5) (28) (1)
Purchase and development of intangible assets 8 (12) (12) (12)
Net cash inflows/(outflows) from investing activities 582 218 (620)
Cash flows from financing activities
Repayment of capital element of leases 11 (12) (12) (13)
Net cash outflows from financing activities (12) (12) (13)
Net increase/(decrease) in cash and cash equivalents 752 (906) (706)
Cash and cash equivalents as at start of period 1,956 2,862 3,568
Cash and cash equivalents as at end of period 2,708 1,956 2,862
1. The presentation of the cash flows from operating activities for the period ended 30 June 2022 has been updated to align
to the cashflow statement within the 2022 Annual Report and Accounts.
Non-cash items
The table below sets out the non-cash items included in profit/(loss) before tax which been adjusted for in the cash flow
statements above.
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Interest income (400) (324) (240)
Interest expense 179 101 59
Depreciation and amortisation 38 40 37
Impairment and write-off of property, plant equipment and intangible assets - 2 8
Expected credit loss expense 11 22 18
Share option charge 2 - 2
Grant income recognised in the income statement - (2) -
Amounts provided for (net of amounts released) (2) 4 -
Gain on sale of assets (1) - -
Total adjustment for non-cash items (173) (157) (116)
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
For the half year to 30 June 2023
Called-up Share Retained FVOCI Share Total
Merger reserve
Share capital premium earnings reserve option reserve equity
£’million £’million
£’million £’million £’million £’million £’million
Balance as at 1 Jan 2023 - 1,964 - (1,015) (13) 20 956
Profit for the period - - - 13 - - 13
Other comprehensive expense (net of tax)
relating to investment securities - - - - (1) - (1)
designated at FVOCI
Total comprehensive income - - - 13 (1) - 12
Net share option movements - - - - - 2 2
Cancelation of Metro Bank PLC share - (1,964) - 1,964 - - -
capital and share premium1
Issuance of Metro Bank Holdings PLC share - - 965 (965) - - -
capital1
Bonus issuance 965 - (965) - - - -
Capital reduction of Metro Bank Holdings (965) - - 965 - - -
PLC share capital
Balance as at 30 Jun 2023 - - - 962 (14) 22 970
Balance as at 1 Jul 2022 - 1,964 - (1,004) (11) 20 969
Loss for the period - - - (11) - - (11)
Other comprehensive expense (net of tax)
relating to investment securities - - - - (2) - (2)
designated at FVOCI
Total comprehensive loss - - - (11) (2) - (13)
Net share option movements - - - - - - -
Balance as at 31 Dec 2022 - 1,964 - (1,015) (13) 20 956
Balance as at 1 Jan 2022 - 1,964 - (942) (5) 18 1,035
Loss for the period - - - (62) - - (62)
Other comprehensive expense (net of tax)
relating to investment securities - - - - (6) - (6)
designated at FVOCI
Total comprehensive loss - - - (62) (6) - (68)
Net share option movements - - - - - 2 2
Balance as at 30 Jun 2022 - 1,964 - (1,004) (11) 20 969
Note 12 12
1. The cancelled called up share capital of Metro Bank PLC and new share capital of Metro Bank Holdings PLC amount to £172
and as such have been rounded to £nil.
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of preparation and accounting policies
1.1 General information
Metro Bank Holdings PLC ("our" or "we") is the holding company of Metro Bank PLC, which provides retail and commercial
banking services in the UK. Metro Bank Holdings PLC is a public limited liability company incorporated and domiciled in
England and Wales and is listed on the London Stock Exchange (LON:MTRO). The address of its registered office is: One
Southampton Row London WC1B 5HA.
1.2 Basis of preparation
The condensed consolidated interim financial statements of Metro Bank Holdings PLC and its subsidiaries for the half year
ended 30 June 2023 were authorised for issue in accordance with a resolution of the Directors on 31 July 2023.
These condensed consolidated interim financial statements for the six months ended 30 June 2023 have been prepared in
accordance with UK adopted International Accounting Standards (IAS 34 ‘Interim Financial Reporting’) and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.
The comparative financial information as at and for the periods ending 31 December 2022 and 30 June 2022 do not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended
31 December 2022 has been delivered to the Registrar of Companies. These accounts are for Metro Bank PLC, the former listed
entity and ultimate parent company of the Group up until 19 May 2023.
The auditor’s report on those accounts was not qualified, did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of
the Companies Act 2006.
Insertion of Metro Bank Holdings PLC
To meet Bank of England’s resolution requirements, on 19 May 2023, Metro Bank Holdings PLC was inserted as the new ultimate
holding company and listed entity of the Group. Prior to this date Metro Bank PLC was both a banking entity and the ultimate
parent company of the Group, but has subsequently become a 100% subsidiary of Metro Bank Holdings PLC. In addition to the
insertion of a new holding company the Group undertook a reduction in capital to provide the Group with distributable
reserves.
The insertion of Metro Bank Holdings PLC has been treated as a business combination under common control, with the Group
controlled by the same parties both before and after the insertion. Combinations under common control are outside the scope
of IFRS 3 ‘Business Combinations’ and accordingly, the insertion has not been recognised at fair value and no goodwill or
fair value acquisition adjustments have been recognised. The Group has instead applied predecessor accounting approach as
this most faithfully represents the substance of the facts and circumstances of the series of transactions that comprise the
insertion of Metro Bank Holdings PLC. This is on the basis that those transactions are not designed to deliver economic
benefits, but represent a re-arrangement of the organisation of business activities across legal entities in order to be
compliant with the relevant regulations.
In applying this approach, the Group has used the carrying amounts in Metro Bank PLC’s consolidated financial statements at
the date of transfer to determine the value of the assets and liabilities transferred. These financial statements are
therefore prepared as if Metro Bank Holdings PLC had been the parent company throughout the current and prior years, to treat
the new structure as if it has always been in place. Hedge accounting continues to be applied to the transferred designated
hedge relationships as if they have originally been designated by the Group.
Further details on the insertion of Metro Bank Holdings PLC can be found in note 12.
Going concern
The Directors have adopted the going concern basis in preparing these condensed consolidated interim financial statements.
This assessment has been reached after assessing our principal risks, which remain unchanged from those disclosed in the risk
report of the 2022 Annual Report and Accounts. As with the assessment undertaken at the year end the Directors placed
additional consideration of the risk that we may have insufficient capital given that we continue to utilise regulatory
buffers.
In reaching their conclusion the Directors considered the performance over the period against our Long-Term Plan as well as
the continued delivery of our strategy, an update on which is provided within the Business Review section of this report. As
part of their assessment the Directors have considered a wide range of information relating to present and future conditions,
including projected future profitability, and capital resources and requirements as well as liquidity. The Directors have
prepared a 'severe but plausible' downside scenario which involves a significant deterioration in the economy and deposit
outflows over a period of 12 months from the date of this report. In this scenario we fell below regulatory minima during
the period at a total regulatory capital plus MREL level, prior to any assumed actions that could be taken. The Directors
considered the actions that could reasonably be deployed should such a scenario materialise. This involved making reasonable
adjustments to our operating plans. While these mitigating actions did not in of themselves constitute any additional risk,
they would involve us operating in our capital buffers for longer than envisaged. These actions centred around cost
reductions, reducing lending origination as well as not seeking to raise any further regulatory capital.
The Directors believe the Group to remain a going concern and has sufficient resources to be able to continue to operate for
a period of at least 12 months from when the interim financial statements are authorised for issue. They have also concluded
that there are no material uncertainties that could cast significant doubt over this assessment.
Although outside the going concern period of assessment, the Directors have also considered the refinancing of our £350
million senior non preferred note issuance which is MREL eligible and which has a call date in October 2024. In order to
continue to meet its minimum capital requirements we will need to refinance this debt. The Directors consider this
refinancing to be achievable at a satisfactory cost based on the Long-Term Plan and as such concluded this does not pose an
additional risk to going concern.
Operating segments
We provide retail and commercial banking services. The Board considers the results of the Group as a whole when assessing the
performance of the business and allocating resources. Accordingly, we have only a single operating segment.
We operate solely in the UK and as such no geographical analysis is required.
Accounting policies
The accounting policies applied in these condensed consolidated interim financial statements are the same as those applied in
the Group’s consolidated financial statements as at and for the year ended 31 December 2022.
1.3 Future accounting developments
There are no known future accounting developments that are likely to have a material impact on the Group.
1.4 Critical accounting judgements
In our 2022 Annual Report and Accounts we identified the following critical accounting judgements:
• Measurement of the expected credit loss allowance - significant increase in credit risk.
• Measurement of the expected credit loss allowance - use of post model overlays and adjustments.
No new critical accounting judgements have been identified during the period.
Measurement of the expected credit loss allowance -significant increase in credit risk
IFRS 9 ‘Financial Instruments’ requires accounts to be allocated into one of three stages. Stage 3 reflects accounts in
default. Stage 2 are the accounts which have shown a significant increase in credit risk since origination (SICR), and Stage
1 is everything else. IFRS 9 requires a higher level of ECL to be recognised for underperforming loans. For loans in Stage 2
and Stage 3 a lifetime ECL is recognised compared to a 12-month ECL for performing loans (Stage 1).
Judgement is required to determine when a significant increase in credit risk has occurred. An assessment of whether credit
risk has increased significantly since initial recognition is performed at each reporting period by considering the change in
the probability of default (PD) over the remaining life of the financial instrument.
The assessment for a retail financial instrument compares the PD occurring at the reporting date to that at initial
recognition, considering reasonable and supportable information, including information about past events, current conditions,
and future economic conditions.
The assessment for a commercial financial instrument is based on quantitative and qualitative assessment, including current
and forecast financial performance, future economic conditions, and our internal credit risk rating grade.
IFRS 9 requires a higher level of expected credit loss to be recognised for underperforming loans. This is considered based
on a staging approach:
Stage Description ECL recognised
12-month ECL
Financial assets that have had no significant
Total losses expected on defaults which may
increase in credit risk since initial recognition or occur
Stage 1
that have low credit risk (high-quality investment within the next 12 months. Losses are
adjusted for
securities only) at the reporting date.
probability-weighted macroeconomic
scenarios.
Financial assets that have had a significant increase
in credit risk since initial recognition but that do
not have objective evidence of impairment. Lifetime ECL
For Commercial counterparties, Early Warning List Losses expected on defaults which may occur
at
is used to inform qualitative triggers for SICR.
Stage 2 any point in a loan’s lifetime. Losses are
The IFRS 9 standard also provides a rebuttable adjusted for
presumption which states that financial instruments probability-weighted macroeconomic
scenarios.
falling 30 days past due on contractually defined
payments are to be considered as having
deteriorated significantly since origination.
Lifetime ECL
Financial assets that are credit impaired at Losses expected on defaults which may occur
the reporting date. A financial asset is credit impaired at any point in a loan’s lifetime. Losses
when it has met the definition of default. We define are adjusted for probability-weighted
Stage 3 default to have occurred when a loan is greater than 90 macroeconomic scenarios.
days past due (non-performing loan) or where the
borrower is considered unlikely to pay, this includes
customers who are categorised as Early Warning List 3.
Interest income is calculated on the
carrying amount of the loan net of credit
allowance.
Lifetime ECL
At initial recognition, POCI assets do not
carry an
Financial assets that have been purchased and impairment allowance. Lifetime ECL is
Purchased or originated incorporated
credit impaired (POCI) had objective evidence of being non-performing
assets into the calculation of the asset’s
or credit impaired at the point of purchase effective interest
rate. Subsequent changes to the estimate of
lifetime
ECL is recognised as part of the ECL
expense.
In light of the above-described classification, our stage allocation criteria must include:
• A relative measure of creditworthiness deterioration since origination.
• An absolute measure of creditworthiness deterioration since origination.
There are three main criteria driving the SICR assessment identified as follows:
• Quantitative criteria – where the numerically calculated probability of default on a Retail financial instrument has
increased significantly since initial recognition. This is determined when the lifetime PD at observation is greater than
the lifetime PD at origination by a portfolio specific threshold. Given the different nature of the products and the
dissimilar level of lifetime PDs at origination, different thresholds are used by sub-products within each portfolio
(term loans, revolving loan facilities and mortgages). The assessment for a Commercial financial instrument uses the
internal credit risk rating grade. The Commercial approach recognises that historic credit rating grades are not
available.
• Qualitative criteria – Early Warning List is used to inform allocation to Stage 2, regardless of the results of the
quantitative analysis.
• Backstop criteria - instruments that are 30 days past due or more are allocated to Stage 2, regardless of the results of
the quantitative and qualitative analysis.
There are additional SICR rules utilised across portfolios. These rules, as well as more granular detail of both quantitative
and qualitative criteria, are captured within the IFRS 9 model methodology and are approved as part of the annual model
review process at Model Governance and Model Oversight Committees. The low credit risk exemption allowed under IFRS 9 has not
been applied across the retail mortgage or consumer portfolios to identify SICR.
Measurement of the expected credit loss allowance - use of post model adjustments and post model overlays
We have applied Post Model Adjustments (PMAs) and Post Model Overlays (PMOs) in the assessment of ECL. PMAs supplement the
models to account for where there are limitations in model methodology or data inputs and PMOs accounts for downsides risks
which are not fully captured through the economic scenarios. The appropriateness of PMAs and PMOs is subject to rigorous
review and challenge, including review by our Model Governance, Impairment Committee and Audit Committee.
PMAs and PMOs are defined as follows:
Post model adjustments refer to increases/decreases in ECL to address known model limitations, either
in model methodology or model inputs. These rely on analysis of model inputs and parameters to determine the
change required to improve model accuracy. These may be applied at an aggregated level however, they will usually
be applied at account level.
Post model overlays reflect management judgement. These rely more heavily on expert judgement and will
usually be applied at an aggregated level. For example, where recent changes in market and economic conditions
have not yet been captured in the macroeconomic factor inputs to models (e.g., industry specific stress event).
Given the ongoing economic uncertainty we continue to maintain conservative levels of PMOs. The level of PMAs and PMOs has
reduced during 2023 with the total percentage of ECL stock comprised of PMAs and PMOs reducing to 12% as at 30 June 2023 (31
December 2022: 17%).
PMAs totalling (£2.0 million) were in place as at 30 June 2023 (31 December 2022: £0.4 million). These negative PMAs are held
in anticipation of IFRS 9 commercial models planned for implementation in the second half of 2023:
• IFRS 9 commercial unsecured LGD model (30 June 2023: (£0.9 million); 31 December 2022: £nil).
• IFRS 9 commercial revolving EAD model (30 June 2023: (£1.1 million); 31 December 2022: £nil).
• IFRS 9 retail mortgage secured LGD model (30 June 2023: £nil; 31 December 2022: £0.1 million).
• IFRS 9 commercial business loans lifetime PD model (30 June 2023: £nil; 31 December 2022: £0.3 million).
PMOs have been reassessed during the period to ensure an appropriate level of ECL to account for the high level of
macroeconomic uncertainty, following the high inflation environment and cost of living pressures, and anticipated property
price falls further exacerbated by the expected base rate increases.
PMOs made up £26.1 million of the ECL stock as at 30 June 2023 (31 December 2022: £30.5 million) and comprised:
• High inflation environment and cost of living risks – Management overlays were introduced in 2022 to reflect high
inflation and cost of living pressures, which are not fully captured through the economic scenarios and IFRS 9 models (30
June 2023: £18.1 million; 31 December 2022: £22.5 million). The reduction in 2023 is driven by underlying credit risk
profile movements on some individual cases resulting in previously held overlays now being released. This reflects the
associated risks across retail mortgage, consumer, and commercial portfolios. For commercial, the inflation PMO has been
assessed based on potential future individual customer migration of current Stage 1 lending migrating into Stage 2 and 3,
based on an inflationary stress scenario.
• Significant increase in credit risk (SICR) adjustment overlay – A negative overlay introduced in 2022 is being held as at
30 June 2023. The SICR model is resulting in a significant overstatement of stage 2 assets and the negative PMO is in
place to account for this. These overlays will be removed once the IFRS 9 PD Annual Model Reviews for both portfolios are
validated and implemented into production, which is scheduled to happened in the second half of 2023 (30 June 2023: (£7.2
million); 31 December 2022: (£3.4 million)).
• House price index and commercial real estate index adjustment – An overlay raised in 2022 is still being held at 30 June
2023 to reflect further downside risk in property price indices beyond the latest scenarios for the retail mortgage and
commercial property portfolios (30 June 2023: £4.7 million; 31 December 2022: £6.1 million). A release has been observed
for this overlay in the first half of 2023 to offset the observed reduction in house price index and commercial real
estate index. However, management has continued to maintain an overlay to reflect the risk of further deterioration in
property price falls exacerbated by recent changes in expectations for base rate increases.
• Climate change impact – An expert judgement overlay raised in 2021 has been revised in the first half of 2023 and
reflects the impact of climate change on property values for the mortgage and commercial portfolios (30 June 2023: £3.4
million; 31 December 2022: £3.5 million). The slight reduction in the overlay since December 2022 is due to the updated
balance movements for all portfolios across the period.
• An expert judgement overlay for the mortgage portfolio – A management overlay has been introduced in the first half of
2023 to reflect additional model and forecast risks as a result of economic uncertainty, in particular increases to
mortgage rates (30 June 2023: £3.6 million; 31 December 2022: £nil).
• Commercial model enhancements – An overlay is held in anticipation of remaining model adjustments for the commercial
portfolio (30 June 2023: £0.5 million; 31 December 2022: £1.2 million). The reduction in the overlay over the period is
due to the implementation of the new IFRS 9 commercial unsecured LGD model as a PMA and therefore this removes this
figure from the PMO.
• An expert judgement overlay for the commercial portfolio – This overlay reflects additional downside risks as a result of
economic uncertainty (30 June 2023: £3.0 million; 31 December 2022: £0.6 million).
1.5 Critical accounting estimates
In our 2022 Annual Report and Accounts we identified the following critical accounting estimate:
• Measurement of the expected credit loss allowance - multiple forward-looking macroeconomic scenarios
No new critical accounting estimates have been identified during the period.
Measurement of the expected credit loss allowance - Multiple forward-looking macroeconomic scenarios
The ECL recognised in the financial statements reflects the effect on expected credit losses of a range of possible outcomes,
calculated on a probability-weighted basis, based on a number of economic scenarios, and including management overlays where
required. These scenarios are representative of our view of forecasted economic conditions, sufficient to calculate unbiased
ECL, and are designed to capture material ‘non-linearities’ (i.e., where the increase in credit losses if conditions
deteriorate, exceeds the decrease in credit losses if conditions improve).
In line with our approved IFRS 9 models, macroeconomic scenarios provided by Moody’s Analytics are used in the assessment of
provisions. The use of an independent supplier for the provision of scenarios helps to ensure that the estimates are
unbiased. The macroeconomic scenarios are assessed and reviewed monthly to ensure appropriateness and relevance to the ECL
calculation. The selection of scenarios and the appropriate weighting to apply are considered and discussed internally and
proposed recommendations for use in the IFRS 9 models are made to the monthly Impairment Committee (designated Executive Risk
Committee for impairments) for formal approval.
Our credit risk models are subject to internal model governance including independent validation. We undertake annual model
reviews and have regular model performance monitoring in place. The impairment provisions recognised during the year reflect
our best estimate of the level of provisions required for future credit losses as calibrated under our conservative weighted
economic assumptions and following the application of expert credit risk judgement overlays.
Scenarios and probability weights used as at 30 June 2023 are as follows are as follows:
Half year to Half year to Half year to
Scenario weighting
30 Jun 2023 31 Dec 2022 30 Jun 2022
Baseline 50% 50% 40%
Upside 20% 20% 20%
Downside 25% 25% 30%
Severe Downside 5% 5% 10%
The macroeconomic scenarios reflect the current macroeconomic environment as follows:
• Baseline scenario (50% weight) - Reflects the projection of the median, or “50%” scenario, meaning that in the assessment
there is an equal probability that the economy might perform better or worse than the baseline forecast.
• Upside scenario (20% weight): This above-baseline scenario is designed so there is a 10% probability the economy will
perform better than in this scenario, broadly speaking, and a 90% probability it will perform worse.
• Downside scenario (25% weight): In this recession scenario, in which a deep downturn develops, there is a 90% probability
the economy will perform better, broadly speaking, and a 10% probability it will perform worse.
• Severe Downside scenario (5% weight): In this recession scenario, in which a deep downturn develops, there is a 96%
probability the economy will perform better, broadly speaking, and a 4% probability it will perform worse.
A wide range of potential economic variables have been considered in our ECL models, representing drivers of credit losses on
our lending portfolios. Statistical methods are used to choose the subset of drivers which have the greatest significance and
predictive fit to our data. This includes variables which impact GDP, unemployment, interest rates, inflation, stock prices,
borrower income and the UK housing market.
30 Jun 2023
Macroeconomic variable Scenario 2024 2025 2026 2027
Baseline 5.6% 4.4% 4.3% 4.3%
Adjusted UK five years mortgage interest rates (%) Upside 6.0% 4.4% 4.3% 4.3%
Downside 4.2% 3.0% 3.3% 3.4%
Severe Downside 4.2% 2.8% 3.0% 3.0%
Baseline 4.5% 4.5% 4.6% 4.6%
Unemployment (%) Upside 3.8% 3.7% 3.8% 4.1%
Downside 7.2% 7.3% 7.1% 6.5%
Severe Downside 8.5% 8.2% 8.1% 7.6%
Baseline (3.1%) 4.7% 2.9% 0.8%
Adjusted house price index (YoY%)1 Upside 6.5% 4.6% (1.1%) (2.6%)
Downside (14.7%) (0.1%) 4.3% 4.3%
Severe Downside (21.5%) (0.9%) 4.0% 2.9%
Baseline 1.0% 1.3% 1.2% 1.4%
UK GDP (YoY%) Upside 2.5% 1.3% 1.1% 1.5%
Downside (2.8%) 3.1% 1.7% 1.3%
Severe Downside (4.6%) 3.1% 3.3% 1.6%
Baseline (4.4%) 2.6% 0.1% (1.6%)
Adjusted commercial real estate index (YoY%)1 Upside 4.2% 2.3% (3.8%) (4.9%)
Downside (14.7%) 0.5% 2.7% 2.6%
Severe Downside (22.7%) 2.6% 2.9% 2.0%
31 Dec 2022
Macroeconomic variable Scenario 2023 2024 2025 2026
Baseline 5.5% 4.4% 4.0% 4.0%
UK five years mortgage interest rates (%) Upside 5.3% 4.3% 4.0% 4.0%
Downside 5.5% 4.4% 3.6% 3.1%
Severe Downside 5.8% 4.0% 3.4% 3.0%
Baseline 4.3% 4.5% 4.5% 4.6%
Unemployment (%) Upside 3.9% 3.6% 3.7% 4.0%
Downside 6.2% 7.2% 7.2% 6.8%
Severe Downside 7.4% 8.3% 8.2% 7.9%
Baseline (4.4%) 2.3% 4.8% 2.9%
House price index (YoY%) Upside 9.0% 5.4% 2.1% (1.2%)
Downside (14.9%) (7.0%) 4.0% 5.7%
Severe Downside (20.7%) (10.9%) 4.4% 4.3%
Baseline (0.8%) 1.2% 1.4% 1.2%
UK GDP (YoY%) Upside 1.9% 1.2% 1.1% 1.2%
Downside (6.9%) 1.3% 2.5% 1.2%
Severe Downside (8.3%) (0.3%) 3.5% 2.1%
Baseline (8.2%) (6.0%) 2.0% 1.4%
Commercial real estate index (YoY%) Upside 3.2% (3.6%) (0.3%) (2.2%)
Downside (23.2%) (11.9%) 5.1% 4.2%
Severe Downside (30.5%) (14.8%) 6.9% 3.5%
30 Jun 2022
Macroeconomic variable Scenario 2023 2024 2025 2026
Baseline 3.6% 4.0% 4.1% 4.2%
UK five years mortgage interest rates (%) Upside 3.9% 4.2% 4.3% 4.3%
Downside 2.3% 2.8% 3.0% 3.1%
Severe Downside 2.2% 2.8% 2.9% 3.0%
Baseline 4.4% 4.6% 4.7% 4.8%
Unemployment (%) Upside 3.7% 3.8% 4.0% 4.2%
Downside 7.1% 7.4% 7.2% 6.6%
Severe Downside 8.4% 8.1% 8.2% 7.7%
Baseline 2.9% 4.8% 2.2% 0.9%
House price index (YoY%) Upside 13.1% 4.6% (1.8%) (2.5%)
Downside (8.8%) 0.3% 3.7% 4.4%
Severe Downside (15.7%) (0.5%) 3.3% 3.0%
Baseline 1.6% 1.4% 1.2% 1.0%
UK GDP (YoY%) Upside 2.7% 1.2% 1.0% 1.2%
Downside (2.2%) 2.9% 1.7% 0.9%
Severe Downside (4.0%) 2.6% 2.9% 1.3%
1. We have applied a further stress to the five year mortgage rate, house price index and commercial real estate index on top
of the independent forecasts received to account for economic uncertainty.
The base case macroeconomic outlook throughout 2023 reflects the inflationary and cost of living pressures resulting in
higher interest rate and recessionary environment, which have been exacerbated by the latest base rate increase. Monthly
reductions in property prices have begun to be observed, although the annual growth rate is still positive, and the labour
market remains tight with low unemployment.
Key assumptions underpinning the baseline June 2023 scenarios:
• The UK economy continues to struggle but avoids recession. GDP grows at an unimpressive pace throughout 2023 but starts
to slowly recover in 2024.
• Inflation has peaked in the fourth quarter of 2022 but remains above target for several quarters because of elevated wage
pressures and second-round effects.
• Global oil prices remain around current levels until mid-2023. Natural gas prices stay well below their summer peaks and
slightly above pre-pandemic levels. Thanks to liquefied natural gas imports, warmer-than-average weather, and
conservation by businesses and households, gas supplies are sufficient for next winter.
• Supply-chain bottlenecks continue to normalise.
The following variables are the key drivers of ECL:
• UK interest rate (five-year mortgage rate) (adjusted across all scenarios to reflect market expectations due to expected
base rate increases not accounted for in the latest macroeconomic scenarios).
• UK unemployment rate.
• UK house price index change, year-on-year (adjusted across all scenarios to reflect further uncertainty in residential
property values)
• UK GDP change, year-on-year.
• UK commercial real estate index change, year-on-year (adjusted across all scenarios to reflect further uncertainty in
commercial property values).
We have also assessed the IFRS 9 ECL sensitivity impact at a total portfolio level, by applying a 100% weighting to each of
the four chosen scenarios.
ECL
Scenario Variance to reported weighted ECL
£’million
30 Jun 23
Baseline 182 (8%)
Upside 166 (16%)
Downside 235 19%
Severe Downside 274 39%
Weighted 197 n/a
31 Dec 22
Baseline 172 (8%)
Upside 156 (17%)
Downside 233 25%
Severe Downside 279 49%
Weighted 187 n/a
30 Jun 22
Baseline 155 (9%)
Upside 144 (16%)
Downside 193 13%
Severe Downside 223 31%
Weighted 171 n/a
We note that the sensitivities disclosed above represent example scenarios and may not represent actual scenarios which occur
in the future. If one of these scenarios did arise then at that time the ECL would not equal the amount disclosed above, as
the amounts disclosed do not take account of the alternative possible scenarios which would be considered at that time.
We also note that the sensitivities disclosed above do not consider movements in impairment stage allocations that would
result under the different scenarios.
2. Net interest income
Interest income
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Cash and balances held with the Bank of England 48.6 23.5 9.5
Loans and advances to customers 284.6 254.8 207.4
Investment securities held at amortised cost 54.8 41.0 21.9
Investment securities held at FVOCI 7.4 4.4 0.3
Interest expense calculated using the effective interest rate method 395.4 323.7 239.1
Derivatives in a hedging relationship 4.7 0.3 0.6
Total interest income 400.1 324.0 239.7
Interest expense
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Deposits from customers 51.0 20.5 12.4
Deposits from central banks 78.0 42.4 13.1
Repurchase agreements 10.3 2.6 0.8
Debt securities 24.4 24.3 24.4
Lease liabilities 6.6 6.8 7.6
Interest expense calculated using the effective interest rate method 170.3 96.6 58.3
Derivatives in a hedging relationship 8.3 4.1 0.6
Total interest expense 178.6 100.7 58.9
3. General operating expenses
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
People costs 120.4 116.7 119.9
Information technology costs 29.9 32.3 29.9
Money transmission and banking related costs 24.0 24.2 24.5
Occupancy expenses 14.3 15.8 15.0
Professional fees 12.0 18.2 20.2
Printing, postage and stationery costs 3.3 3.1 3.1
Legal and regulatory fees 3.2 3.7 3.3
Marketing and advertising costs 2.9 1.5 3.5
Holding company related insertion costs 1.5 1.8 -
Capability & Innovation fund (C&I) costs 0.8 1.0 0.3
Travel costs 0.8 0.8 0.8
Transformation costs - 2.3 1.0
Remediation costs (0.8) 2.3 3.0
Other 9.1 10.7 8.7
Total general operating expenses 221.4 234.4 233.2
4. People costs
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Wages and salaries 100.2 97.6 99.2
Social security costs 10.9 12.2 11.5
Pension costs 7.2 6.9 6.8
Equity-settled share-based payments 2.1 - 2.4
Total people costs 120.4 116.7 119.9
5. Taxation
Tax expense for the period
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Current tax
Current tax (2.2) - -
Total current tax expense (2.2) - -
Deferred tax
Origination and reversal of temporary differences - (0.6) (0.9)
Effect of changes in tax rates (0.5) (0.1) (0.6)
Adjustment in respect of prior periods - 0.2 -
Total deferred tax expense (0.5) (0.5) (1.5)
Total tax expense (2.7) (0.5) (1.5)
Reconciliation of the total tax expense
Half Half Half
Effective tax Effective tax
year to Effective tax rate year to rate year to rate
30 Jun 2023 % 31 Dec 2022 % 30 Jun 2022 %
£’million £’million £’million
Profit/(loss) before tax 15.4 (10.5) (60.2)
Tax credit at statutory income tax rate of (3.6) (23.5%) 2.0 19.0% 11.4 19.0%
23.5% (2022: 19%)
Tax effects of:
Non-deductible expenses - depreciation on (1.3) 8.2% (1.6) 15.2% (0.9) (1.5%)
non-qualifying fixed assets
Non-deductible expenses – investment - - (0.1) 1.0% - -
property impairment
Non-deductible expenses - other (0.1) 0.7% (1.0) 9.5% - -
Impact of intangible asset impairment on - - 0.1 (1.0%) 0.2 0.3%
R&D deferred tax liability
Share based payments (0.1) 0.5% 0.2 (1.9%) (0.1) (0.2%)
Adjustment in respect of prior years - - 0.2 (1.9%) - -
Current year losses to date for which no - - (0.2) 1.9% (11.5) (19.1%)
deferred tax asset has been recognised
Losses for the period for which no 2.8 (18.1%) - - - -
deferred tax asset has been recognised
Derecognition of tax losses arising in 0.1 (0.4%) - - - -
prior years
Effect of changes in tax rates (0.5) 2.9% (0.1) 1.0% (0.6) (0.9%)
Tax expense reported in the consolidated (2.7) 17.3% (0.5) 4.8% (1.5) (2.4%)
income statement
Effective tax rate
The effective tax rate for the period is 17.3% (half year to 31 December 2022: (4.8%); half year to 30 June 2022 (2.4%)) This
has been calculated by applying the effective tax rate which is expected to apply to the Group for the six months ended 30
June 2023 using rates substantively enacted by 30 June 2023 as required by IAS 34 'Interim Financial Reporting'.
Effect of changes in tax rates
This relates to the remeasurement of deferred tax balances following a change to the main UK corporation tax rate.
An increase in the UK corporation rate from 19% to 25% for taxable profits over £250,000 (effective 1 April 2023) was
substantively enacted on 24 May 2021.
Losses for which no deferred tax asset has been recognised
The tax effected value of current year losses for which no deferred tax asset has been recognised is £nil (31 December 2022:
£11.7 million; 30 June 2022: £11.5 million).
Deferred tax
A deferred tax asset must be regarded as recoverable and therefore recognised only when, on the basis of all available
evidence, it can be regarded as more likely than not there will be suitable tax profits from which the future of the
underlying timing differences can be deducted.
Investment
Unused tax losses securities & Property, plant & Intangible assets Total
impairments Share based equipment
£’million payments £’million £’million
£’million £’million
£’million
30 Jun 2023
Deferred tax 12 3 1 - - 16
assets
Deferred tax - 4 - (26) (6) (28)
liabilities
Deferred tax
liabilities 12 7 1 (26) (6) (12)
(net)
1 Jan 2023 12 7 1 (26) (6) (12)
Income - - - - - -
statement
At 30 Jun 12 7 1 (26) (6) (12)
2023
31 Dec 2022
Deferred tax 12 3 1 -
assets - 16
Deferred tax 4
liabilities - - (26) (6) (28)
Deferred tax
liabilities 12 7 1 (26) (6) (12)
(net)
At 1 Jul 2022 12 - (12)
7 (24) (7)
Income 1
statement - - (2) 1 -
Other
comprehensive - - - - - -
income
At 31 Dec 12 7 1 (12)
2022 (26) (6)
30 Jun 2022
Deferred tax 12 4 - - - 16
assets
Deferred tax - 3 - (24) (7) (28)
liabilities
Deferred tax
liabilities 12 7 - (24) (7) (12)
(net)
At 1 Jan 2022 13 5 - (23) (7) (12)
Income (1) - - (1) - (2)
statement
Other
comprehensive - 2 - - - 2
income
At 30 Jun 12 7 - (24) (7) (12)
2022
Unrecognised deferred tax assets
We have total unused tax losses of £896 million for which a deferred tax asset of £212 million has not been recognised. The
impact of recognising the deferred tax asset in the future would be material.
Although there is an expectation for profits in the near future, the tax benefits would be spread over a number of years. In
addition, the 50% corporate loss restriction in place extends the timeline over which we can offset losses against future
profits. This will be reassessed for the year ending 31 December 2023 in light of actual performance against management
forecasts and prevailing market conditions. There is no time limit beyond which these losses expire.
6. Loans and advances to customers
30 Jun 2023
Gross carrying amount ECL Net carrying amount
£’million allowance £’million £’million
Retail mortgages 7,591 (21) 7,570
Consumer lending 1,410 (93) 1,317
Commercial lending 3,768 (83) 3,685
Total loans and advances to customers 12,769 (197) 12,572
31 Dec 2022
Gross carrying amount ECL Net carrying amount
£’million allowance £’million £’million
Retail mortgages 7,649 (20) 7,629
Consumer lending 1,480 (75) 1,405
Commercial lending 4,160 (92) 4,068
Total loans and advances to customers 13,289 (187) 13,102
30 Jun 2022
Gross carrying amount ECL Net carrying amount
£’million allowance £’million £’million
Retail mortgages 6,785 (18) 6,767
Consumer lending 1,269 (56) 1,213
Commercial lending 4,481 (97) 4,384
Total loans and advances to customers 12,535 (171) 12,364
Loans and advances to customers by category
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Residential owner occupied 5,501 5,507 4,977
Retail buy-to-let 2,090 2,142 1,808
Total retail mortgages 7,591 7,649 6,785
Overdrafts 45 60 70
Credit cards 23 19 16
Motor finance 5 - -
Term loans 1,337 1,401 1,183
Total consumer lending 1,410 1,480 1,269
Total retail lending 9,001 9,129 8,054
Professional buy-to-let 615 731 853
Bounce back loans 638 801 984
Coronavirus business interruption loans 106 127 145
Recovery loan scheme 365 385 357
Other term loans 1,450 1,578 1,638
Commercial term loans 3,174 3,622 3,977
Overdrafts and revolving credit facilities 155 122 110
Credit cards 4 4 4
Asset and invoice finance 435 412 390
Total commercial lending 3,768 4,160 4,481
Total gross loans to customers 12,769 13,289 12,535
Credit risk exposures
Retail mortgages
30 Jun 2023
Stage 1 Stage 2 Stage 3 POCI Total
£’million £’million £’million £’million £’million
Up to date 6,632 763 41 - 7,436
1 to 29 days past due 2 26 10 - 38
30 to 89 days past due - 29 19 - 48
90+ days past due - - 69 - 69
Gross carrying amount 6,634 818 139 - 7,591
31 Dec 2022
Stage 1 Stage 2 Stage 3 POCI Total
£’million £’million £’million £’million £’million
Up to date 6,194 1,289 33 - 7,516
1 to 29 days past due 1 21 7 - 29
30 to 89 days past due - 33 15 - 48
90+ days past due - - 56 - 56
Gross carrying amount 6,195 1,343 111 - 7,649
30 Jun 2022
Stage 1 Stage 2 Stage 3 POCI Total
£’million £’million £’million £’million £’million
Up to date 5,420 1,226 27 - 6,673
1 to 29 days past due 1 18 10 - 29
30 to 89 days past due - 19 14 - 33
90+ days past due - - 50 - 50
Gross carrying amount 5,421 1,263 101 - 6,785
Consumer lending
30 Jun 2023
Stage 1 Stage 2 Stage 3 POCI Total
£’million £’million £’million £’million £’million
Up to date 1,020 304 3 - 1,327
1 to 29 days past due 3 2 - - 5
30 to 89 days past due - 13 6 - 19
90+ days past due - - 59 - 59
Gross carrying amount 1,023 319 68 - 1,410
31 Dec 2022
Stage 1 Stage 2 Stage 3 POCI Total
£’million £’million £’million £’million £’million
Up to date 1,172 235 3 - 1,410
1 to 29 days past due 8 2 - - 10
30 to 89 days past due - 13 5 - 18
90+ days past due - - 42 - 48
Gross carrying amount 1,180 250 50 - 1,480
30 Jun 2022
Stage 1 Stage 2 Stage 3 POCI Total
£’million £’million £’million £’million £’million
Up to date 1,089 133 2 - 1,224
1 to 29 days past due 3 2 - - 5
30 to 89 days past due - 10 4 - 14
90+ days past due - - 26 - 26
Gross carrying amount 1,092 145 32 - 1,269
Commercial lending
30 Jun 2023
Stage 1 Stage 2 Stage 3 POCI Total
£’million £’million £’million £’million £’million
Up to date 3,078 417 70 - 3,565
1 to 29 days past due 44 30 6 - 80
30 to 89 days past due - 41 9 - 50
90+ days past due - - 73 - 73
Gross carrying amount 3,122 488 158 - 3,768
31 Dec 2022
Stage 1 Stage 2 Stage 3 POCI Total
£’million £’million £’million £’million £’million
Up to date 3,453 419 67 - 3,939
1 to 29 days past due 21 36 5 - 62
30 to 89 days past due - 40 20 - 60
90+ days past due - - 99 - 99
Gross carrying amount 3,474 495 191 - 4,160
30 Jun 2022
Stage 1 Stage 2 Stage 3 POCI Total
£’million £’million £’million £’million £’million
Up to date 3,646 510 89 - 4,245
1 to 29 days past due 8 46 17 - 71
30 to 89 days past due - 56 14 - 70
90+ days past due - 3 92 - 95
Gross carrying amount 3,654 615 212 - 4,481
Total lending
30 Jun 2023
Stage 1 Stage 2 Stage 3 POCI Total
£’million £’million £’million £’million £’million
Up to date 10,730 1,484 114 - 12,328
1 to 29 days past due 49 58 16 - 123
30 to 89 days past due - 83 34 - 117
90+ days past due - - 201 - 201
Gross carrying amount 10,779 1,625 365 - 12,769
31 Dec 2022
Stage 1 Stage 2 Stage 3 POCI Total
£’million £’million £’million £’million £’million
Up to date 10,819 1,943 103 - 12,865
1 to 29 days past due 30 59 12 - 101
30 to 89 days past due - 86 40 - 126
90+ days past due - - 197 - 197
Gross carrying amount 10,849 2,088 352 - 13,289
30 Jun 2022
Stage 1 Stage 2 Stage 3 POCI Total
£’million £’million £’million £’million £’million
Up to date 10,155 1,869 118 - 12,142
1 to 29 days past due 12 66 27 - 105
30 to 89 days past due - 85 32 - 117
90+ days past due - 3 168 - 171
Gross carrying amount 10,167 2,023 345 - 12,535
Loss allowance
Retail mortgages
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
Balance at 1 Jan 6,195 1,343 111 - 7,649 (6) (11) (3) - (20) 6,189 1,332 108 - 7,629
2023
Transfers to/from 672 (670) (2) - - (5) 5 - - - 667 (665) (2) - -
stage 1
Transfers to/from (177) 177 - - - - - - - - (177) 177 - - -
stage 2
Transfers to/from (16) (24) 40 - - - - - - - (16) (24) 40 - -
stage 3
Net remeasurement - - - - - 3 (2) (1) - - 3 (2) (1) - -
due to transfers
New lending 425 58 - - 483 - (1) - - (1) 425 57 - - 482
Repayments,
additional drawdowns (95) (12) - - (107) - - - - - (95) (12) - - (107)
and interest accrued
Derecognitions (370) (54) (10) - (434) - - - - - (370) (54) (10) - (434)
Changes to - - - - - - - - - - - - - - -
assumptions
Balance at 30 Jun 6,634 818 139 - 7,591 (8) (9) (4) - (21) 6,626 809 135 - 7,570
2023
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
Balance at 1 Jul 5,421 1,263 101 - 6,785 (5) (10) (3) - (18) 5,416 1,253 98 - 6,767
2022
Transfers to/from 94 (92) (2) - - (1) 2 (1) - - 93 (90) (3) - -
stage 1
Transfers to/from 144 (141) (3) - - - - - - - 144 (141) (3) - -
stage 2
Transfers to/from (13) (12) 25 - - - 1 (1) - - (13) (11) 24 - -
stage 3
Net remeasurement - - - - - 2 - - - 2 2 - - - 2
due to transfers
New lending 1,155 402 1 - 1,558 - (5) - - (5) 1,155 397 1 - 1,553
Repayments,
additional drawdowns (73) (9) (4) - (86) - - - - - (73) (9) (4) - (86)
and interest accrued
Derecognitions (533) (68) (7) - (608) (2) 2 2 - 2 (535) (66) (5) - (606)
Changes to - - - - - - (1) - - (1) - (1) - - (1)
assumptions
Balance at 31 Dec 6,195 1,343 111 - 7,649 (6) (11) (3) - (20) 6,189 1,332 108 - 7,629
2022
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
Balance at 1 Jan 5,546 1,063 114 - 6723 (2) (12) (5) - (19) 5,544 1,051 109 - 6,704
2022
Transfers to/from 199 (189) (10) - - (3) 2 1 - - 196 (187) (9) - -
stage 1
Transfers to/from (343) 346 (3) - - - - - - - (343) 346 (3) - -
stage 2
Transfers to/from (3) (10) 13 - - - - - - - (3) (10) 13 - -
stage 3
Net remeasurement - - - - - 2 (1) - - 1 2 (1) - - 1
due to transfers
New lending 511 147 - - 658 (3) (2) - - (5) 508 145 - - 653
Repayments,
additional drawdowns (57) (13) (1) - (71) - - - - - (57) (13) (1) - (71)
and interest accrued
Derecognitions (432) (81) (12) - (525) 1 - 1 - 2 (431) (81) (11) - (523)
Changes to - - - - - - 3 - - 3 - 3 - - 3
assumptions
Balance at 30 Jun 5,421 1,263 101 - 6,785 (5) (10) (3) - (18) 5,416 1,253 98 - 6,767
2022
Consumer lending
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
Balance at 1 Jan 1,180 250 50 - 1,480 (21) (12) (42) - (75) 1,159 238 8 - 1,405
2023
Transfers to/from 29 (29) - - - (2) 2 - - - 27 (27) - - -
stage 1
Transfers to/from (180) 180 - - - 2 (2) - - - (178) 178 - - -
stage 2
Transfers to/from (17) (8) 25 - - 1 2 (3) - - (16) (6) 22 - -
stage 3
Net remeasurement - - - - - 1 (5) (16) - (20) 1 (5) (16) - (20)
due to transfers
New lending 240 7 1 - 248 (4) - (1) - (5) 236 7 - - 243
Repayments,
additional drawdowns (133) (62) (3) - (198) - - - - - (133) (62) (3) - (198)
and interest accrued
Derecognitions (96) (19) (5) - (120) 2 1 4 - 7 (94) (18) (1) - (113)
Changes to - - - - - (2) 2 - - - (2) 2 - - -
assumptions
Balance at 30 Jun 1,023 319 68 - 1,410 (23) (12) (58) - (93) 1,000 307 10 - 1,317
2023
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
Balance at 1 Jul 1,092 145 32 - 1,269 (20) (9) (27) - (56) 1,072 136 5 - 1,213
2022
Transfers to/from 3 (3) - - - - - - - - 3 (3) - - -
stage 1
Transfers to/from 12 (12) - - - - - - - - 12 (12) - - -
stage 2
Transfers to/from (12) (2) 14 - - 1 - (1) - - (11) (2) 13 - -
stage 3
Net remeasurement - - - - - 1 2 (6) - (3) 1 2 (6) - (3)
due to transfers
New lending 223 146 10 - 379 (5) (6) (8) - (19) 218 140 2 - 360
Repayments,
additional drawdowns (51) (15) (4) - (70) - - - - - (51) (15) (4) - (70)
and interest accrued
Derecognitions (87) (9) (2) - (98) 1 - - - 1 (86) (9) (2) - (97)
Changes to - - - - - 1 1 - - 2 1 1 - - 2
assumptions
Balance at 31 Dec 1,180 250 50 - 1,480 (21) (12) (42) - (75) 1,159 238 8 - 1,405
2022
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
Balance at 1 Jan 786 82 21 1 890 (18) (8) (16) - (42) 768 74 5 1 848
2022
Transfers to/from 16 (16) - - - (2) 2 - - - 14 (14) - - -
stage 1
Transfers to/from (108) 108 - - - 1 (1) - - - (107) 107 - - -
stage 2
Transfers to/from (9) (4) 13 - - - 2 (2) - - (9) (2) 11 - -
stage 3
Net remeasurement - - - - - 1 (5) (9) - (13) 1 (5) (9) - (13)
due to transfers
New lending 583 10 2 - 595 (10) (1) (1) - (12) 573 9 1 - 583
Repayments,
additional drawdowns (93) (26) (2) (1) (122) - - - - - (93) (26) (2) (1) (122)
and interest accrued
Derecognitions (83) (9) (2) - (94) 4 1 1 - 6 (79) (8) (1) - (88)
Changes to - - - - - 4 1 - - 5 4 1 - - 5
assumptions
Balance at 30 Jun 1,092 145 32 - 1,269 (20) (9) (27) - (56) 1,072 136 5 - 1,213
2022
Commercial lending
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
Balance at 1 Jan 3,474 495 191 - 4,160 (39) (28) (25) - (92) 3,435 467 166 - 4,068
2023
Transfers to/from 40 (39) (1) - - (2) 2 - - - 38 (37) (1) - -
stage 1
Transfers to/from (146) 148 (2) - - 2 (3) 1 - - (144) 145 (1) - -
stage 2
Transfers to/from (38) (34) 72 - - - 2 (2) - - (38) (32) 70 - -
stage 3
Net remeasurement - - - - - 2 (4) (3) - (5) 2 (4) (3) - (5)
due to transfers
New lending 253 5 4 - 262 (5) - - - (5) 248 5 4 - 257
Repayments,
additional drawdowns (191) (25) (9) - (225) - - - - - (191) (25) (9) - (225)
and interest accrued
Derecognitions (270) (62) (97) - (429) 4 3 3 - 10 (266) (59) (94) - (419)
Changes to - - - - - 8 2 (1) - 9 8 2 (1) - 9
assumptions
Balance at 30 Jun 3,122 488 158 - 3,768 (30) (26) (27) - (83) 3,092 462 131 - 3,685
2023
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
Balance at 1 Jul 3,654 615 212 - 4,481 (33) (33) (31) - (97) 3,621 582 181 - 4,384
2022
Transfers to/from 41 (41) - - - (1) 1 - - - 40 (40) - - -
stage 1
Transfers to/from (21) 20 - - (1) - - - - - (21) 20 - - (1)
stage 2
Transfers to/from 11 63 (74) - - - - - - - 11 63 (74) - -
stage 3
Net remeasurement - - - - - 1 (1) - - - 1 (1) - - -
due to transfers
New lending 258 (17) 16 - 257 (5) - (1) - (6) 253 (17) 15 - 251
Repayments,
additional drawdowns (150) (19) (10) - (179) - - - - - (150) (19) (10) - (179)
and interest accrued
Derecognitions (319) (126) 47 - (398) 2 6 8 - 16 (317) (120) 55 - (382)
Changes to - - - - - (3) (1) (1) - (5) (3) (1) (1) - (5)
assumptions
Balance at 31 Dec 3,474 495 191 - 4,160 (39) (28) (25) - (92) 3,435 467 166 - 4,068
2022
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
Balance at 1 Jan 3,739 780 327 - 4,846 (27) (29) (52) - (108) 3,712 751 275 - 4,738
2022
Transfers to/from 164 (163) (1) - - (6) 6 - - - 158 (157) (1) - -
stage 1
Transfers to/from (135) 137 (1) - 1 1 (1) - - - (134) 136 (1) - 1
stage 2
Transfers to/from (98) (108) 206 - - - 4 (4) - - (98) (104) 202 - -
stage 3
Net remeasurement - - - - - 3 (4) - - (1) 3 (4) - - (1)
due to transfers
New lending 427 54 2 - 483 (7) (2) (1) - (10) 420 52 1 - 473
Repayments,
additional drawdowns (180) (25) (5) - (210) - - - - - (180) (25) (5) - (210)
and interest accrued
Derecognitions (263) (60) (316) - (639) 1 1 22 - 24 (262) (59) (294) - (615)
Changes to - - - - - 2 (8) 4 - (2) 2 (8) 4 - (2)
assumptions
Balance at 30 Jun 3,654 615 212 - 4,481 (33) (33) (31) - (97) 3,621 582 181 - 4,384
2022
Total lending
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage POCI Total
3
Balance at 1 Jan 10,849 2,088 352 - 13,289 (66) (51) (70) - (187) 10,783 2,037 282 - 13,102
2023
Transfers to/from 741 (738) (3) - - (9) 9 - - - 732 (729) (3) - -
stage 1
Transfers to/from (503) 505 (2) - - 4 (5) 1 - - (499) 500 (1) - -
stage 2
Transfers to/from (71) (66) 137 - - 1 4 (5) - - (70) (62) 132 - -
stage 3
Net remeasurement - - - - - 6 (11) (20) - (25) 6 (11) (20) - (25)
due to transfers
New lending 918 70 5 - 993 (9) (1) (1) - (11) 909 69 4 - 982
Repayments,
additional drawdowns (419) (99) (12) - (530) - - - - - (419) (99) (12) - (530)
and interest accrued
Derecognitions (736) (135) (112) - (983) 6 4 7 - 17 (730) (131) (105) - (966)
Changes to - - - - - 6 4 (1) - 9 6 4 (1) - 9
assumptions
Balance at 30 Jun 10,779 1,625 365 - 12,769 (61) (47) (89) - (197) 10,718 1,578 276 - 12,572
2023
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage Stage POCI Total
2 3
Balance at 1 Jul 10,167 2,023 345 - 12,535 (58) (52) (61) - (171) 10,109 1,971 284 - 12,364
2022
Transfers to/from 138 (136) (2) - - (2) 3 (1) - - 136 (133) (3) - -
stage 1
Transfers to/from 135 (133) (3) - (1) - - - - - 135 (133) (3) - (1)
stage 2
Transfers to/from (14) 49 (35) - - 1 1 (2) - - (13) 50 (37) - -
stage 3
Net remeasurement - - - - - 4 1 (6) - (1) 4 1 (6) - (1)
due to transfers
New lending 1,636 531 27 - 2,194 (10) (11) (9) - (30) 1,626 520 18 - 2,164
Repayments,
additional drawdowns (274) (43) (18) - (335) - - - - - (274) (43) (18) - (335)
and interest accrued
Derecognitions (939) (203) 38 - (1,104) 1 8 10 - 19 (938) (195) 48 - (1,085)
Changes to - - - - - (2) (1) (1) - (4) (2) (1) (1) - (4)
assumptions
Balance at 31 Dec 10,849 2,088 352 - 13,289 (66) (51) (70) - (187) 10,783 2,037 282 - 13,102
2022
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage Stage POCI Total
2 3
Balance at 1 Jan 10,071 1,925 462 1 12,459 (47) (49) (73) - (169) 10,024 1,876 389 1 12,290
2022
Transfers to/from 379 (368) (11) - - (11) 10 1 - - 368 (358) (10) - -
stage 1
Transfers to/from (586) 591 (4) - 1 2 (2) - - - (584) 589 (4) - 1
stage 2
Transfers to/from (110) (122) 232 - - - 6 (6) - - (110) (116) 226 - -
stage 3
Net remeasurement - - - - - 6 (10) (9) - (13) 6 (10) (9) - (13)
due to transfers
New lending 1,521 211 4 - 1,736 (20) (5) (2) - (27) 1,501 206 2 - 1,709
Repayments,
additional drawdowns (330) (64) (8) (1) (403) - - - - - (330) (64) (8) (1) (403)
and interest accrued
Derecognitions (778) (150) (330) - (1,258) 6 2 24 - 32 (772) (148) (306) - (1,226)
Changes to - - - - - 6 (4) 4 - 6 6 (4) 4 - 6
assumptions
Balance at 30 Jun 10,167 2,023 345 - 12,535 (58) (52) (61) - (171) 10,109 1,971 284 - 12,364
2022
7. Property, plant and equipment
Investment Leasehold Freehold land & Fixtures Right of use
property improvements buildings fittings & IT hardware assets Total
equipment
£’million £’million £’million £’million £’million £’million
£’million
Cost
1 Jan 2023 12 261 372 22 8 283 958
Additions - - 5 - - - 5
Disposals - - - - - (4) (4)
Write offs (2) - - - - - (2)
Transfers - (5) 5 - - - -
30 Jun 2023 10 256 382 22 8 279 957
Accumulated
depreciation
1 Jan 2023 8 69 34 20 2 77 210
Charge for the - 6 3 1 1 6 17
period
Disposal - - - - - (1) (1)
Write offs (2) - - - - - (2)
Transfers - (2) 2 - - - -
30 Jun 2023 6 73 39 21 3 82 224
Net book value as
at 4 183 343 1 5 197 733
30 Jun 2023
Cost
1 Jul 2022 18 270 342 22 1 295 948
Additions - - 21 - 7 1 29
Disposals - - - - - (13) (13)
Transfers - (9) 9 - - - -
Moved to held for (6) - - - - - (6)
sale
31 Dec 2022 12 261 372 22 8 283 958
Accumulated
depreciation
1 Jul 2022 12 64 31 18 - 74 199
Charge for the - 6 2 2 2 6 18
period
Impairments 1 - - - - - 1
Disposals - - - - - (3) (3)
Moved to held for (5) - - - - - (5)
sale
Transfers - (1) 1 - - - -
31 Dec 2022 8 69 34 20 2 77 210
Net book value as
at 4 192 338 2 6 206 748
31 Dec 2022
Cost
1 Jan 2022 18 280 341 24 1 295 959
Additions - - 1 - - - 1
Write-offs - (10) - (2) - - (12)
30 Jun 2022 18 270 342 22 1 295 948
Accumulated
depreciation
1 January 2022 12 68 28 19 - 67 194
Charge for the - 6 3 1 - 7 17
period
Write-offs - (10) - (2) - - (12)
30 Jun 2022 12 64 31 18 - 74 199
Net book value as
at 6 206 311 4 1 221 749
30 Jun 2022
8. Intangible assets
Goodwill Brands Software Total
£’million £’million £’million £’million
Cost
1 Jan 2023 10 2 338 350
Additions - - 12 12
30 Jun 2023 10 2 350 362
Accumulated amortisation
1 Jan 2023 - - 134 134
Charge for the period - - 21 21
30 Jun 2023 - - 155 155
Net book value as at 30 Jun 2023 10 2 195 207
Cost
1 Jul 2022 10 2 332 344
Additions - - 12 12
Write-offs - - (6) (6)
31 Dec 2022 10 2 338 350
Accumulated amortisation
1 Jul 2022 - - 117 117
Charge for the period - - 22 22
Write-offs - - (5) (5)
31 Dec 2022 - - 134 134
Net book value as at 31 Dec 2022 10 2 204 216
Cost
1 January 2022 10 2 336 348
Additions - - 12 12
Write-offs - - (16) (16)
30 June 2022 10 2 332 344
Accumulated amortisation
1 January 2022 - - 105 105
Charge for the period - - 20 20
Write-offs - - (8) (8)
30 June 2022 - - 117 117
Net book value as at 30 June 2022 10 2 215 227
9. Deposits from Customers
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Deposits from retail customers 7,557 7,851 8,138
Deposits from commercial customers 7,972 8,163 8,376
Total deposits from customers 15,529 16,014 16,514
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Demand: current accounts 7,106 7,888 7,770
Demand: savings accounts 7,218 7,501 7,817
Fixed term: savings accounts 1,205 625 927
Deposits from customers 15,529 16,014 16,514
10. Debt securities
Name Issue date Currency Amount issued £’million Coupon rate Call date Maturity date
Fixed Rate Reset Callable Subordinated Notes 26/06/2018 GBP 250 9.139% n/a 26/06/2028
Fixed Rate Reset Senior Non-Preferred Notes 08/10/2019 GBP 350 9.500% 08/10/2024 08/10/2025
During the first six months of the year we took the decision not to call our Fixed Rate Reset Callable Subordinated Notes
(the ‘Notes’) issued by Metro Bank PLC, which had a call date on 26 June 2023. As a result, the interest rate on the Notes
reset from 5.500% to 9.139%.
In December 2022 the Bank of England’s Resolution Directorate agreed to provide a temporary, time-limited, adjustment for the
Notes with respect to MREL eligibility until 26 June 2025. This came into effect upon the implementation of our holding
company on 19 May 2023. The adjustment permitted the Notes to remain eligible to count towards our MREL requirement until 26
June 2025. On 28 July 2023 the Bank of England’s Resolution Directorate agreed to a further extension, permitting the Notes
to remain eligible to count towards our MREL requirement until their maturity date on 26 June 2028. The eligibility of the
Notes for Tier 2 capital will amortise over the final five years of their term to maturity.
11. Lease liabilities
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
At beginning of the period 248 264 269
Additions and modifications (1) 1 -
Disposals (4) (11) -
Lease payments made (12) (12) (13)
Interest on lease liabilities 7 6 8
At the end of the period 238 248 264
12. Share capital
As at 30 June 2023 we had 172.6 million ordinary shares of 0.0001 pence (31 December 2022: 172.4 million, 30 June 2022: 172.4
million) in issue.
Called up ordinary share capital (issued and fully paid)
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
At beginning of the period - - -
Cancellation of Metro Bank PLC share capital1 - - -
Issuance of Metro Bank Holdings PLC share capital1 - - -
Bonus issue 965 - -
Capital reduction (965) - -
At end of the period - - -
1. The cancelled called up share capital of Metro Bank PLC and new share capital of Metro Bank Holdings PLC amount to £172
and as such have been rounded to £nil.
Share premium
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
At beginning of the period 1,964 1,964 1,964
Cancelation of Metro Bank PLC share premium (1,964) - -
At end of the period - 1,964 1,964
Redeemable preference shares
In addition to the share capital set out above Metro Bank Holdings PLC has £50,000 of redeemable preference shares which were
issued to Robert Sharpe (Chair) and Daniel Frumkin (Chief Executive Officer) upon the initial incorporation of the legal
entity on 29 September 2022. These shares are in the process of being redeemed.
New holding company
As set out in note 1, on 19 May 2023, Metro Bank Holdings PLC became the listed entity and new holding company of Metro Bank
PLC. As part of the insertion of Metro Bank Holdings PLC, the existing listed share capital and share premium of Metro Bank
PLC was cancelled and the share capital and share premium amounts transferred to retained earnings. Metro Bank PLC
subsequently issued the same number of new unlisted 0.0001p ordinary shares to Metro Bank Holdings PLC. Each existing holder
of Metro Bank PLC share was issued with an equivalent number of new shares in Metro Bank Holdings PLC, with the nominal value
of 0.0001p, as part of a share for share exchange.
The difference between the new nominal share capital in Metro Bank Holdings PLC and the net assets of Metro Bank PLC was
recognised in a merger reserve. This merger reserve was capitalised through the allotment of 964,505,616 million special
shares of 0.0001p each, which were then subsequently reduced to provide the Metro Bank Holdings PLC with distributable
reserves.
As at 30 June 2023 all of Metro Bank Holdings PLC’s retained earnings are distributable other than £50,000 which it is
required to retain as a publicly listed company.
13. Earnings per share
Basic earnings per share (EPS) is calculated by dividing the profit/(loss) attributable to our ordinary equity holders by the
weighted average number of ordinary shares in issue during the period.
Diluted EPS has been calculated by dividing the profit/(loss) attributable to our ordinary equity holders by the weighted
average number of ordinary shares in issue during the year plus the weighted average number of ordinary shares that would be
issued on the conversion to shares of options granted to colleagues. As we were loss making during the six months periods to
31 December 2022 and 30 June 2022, the share options would be antidilutive, as they would reduce the loss per share.
Therefore, all the outstanding options have been disregarded in the calculation of dilutive EPS for these periods.
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
Profit/(loss) attributable to ordinary equity holders (£’million) 12.7 (11.0) (61.7)
Weighted average number of ordinary shares in issue (thousands)
Basic 172,583 172,464 172,421
Adjustment for share awards 6,790 - -
Diluted 179,373 172,464 172,421
Earnings per share (pence)
Basic 7.4 (6.4) (35.8)
Diluted 7.1 (6.4) (35.8)
14. Fair value of financial instruments
Carrying Quoted market price Using observable inputs With significant Total
value Level 1 Level 2 unobservable inputs
Level 3 fair value
£’million £’million £’million
£’million £’million
30 Jun 2023
Assets
Loan and advances to customers 12,572 - - 11,782 11,782
Investment securities held at FVOCI 489 489 - - 489
Investment securities held at amortised 4,826 3,174 1,295 33 4,502
cost
Financial assets held at FVTPL 1 - - 1 1
Derivative financial assets 26 - 26 - 26
Liabilities
Deposits from customers 15,529 - - 15,517 15,517
Deposits from central banks 3,800 - - 3,800 3,800
Debt securities 573 - - 440 440
Derivative financial liabilities 25 - 25 - 25
Repurchase agreements 363 - - 363 363
31 Dec 2022
Assets
Loan and advances to customers 13,102 - - 12,321 12,321
Investment securities held at FVOCI 571 533 38 - 571
Investment securities held at amortised cost 5,343 3,834 1,135 40 5,009
Financial assets held at FVTPL 1 - - 1 1
Derivative financial assets 23 - 23 - 23
Liabilities
Deposits from customers 16,014 - - 16,004 16,004
Deposits from central banks 3,800 - - 3,800 3,800
Debt securities 571 423 - - 423
Derivative financial liabilities 26 - 26 - 26
Repurchase agreements 238 - - 238 238
30 Jun 2022
Assets
Loan and advances to customers 12,364 - - 12,498 12,498
Investment securities held at FVOCI 781 743 38 - 781
Investment securities held at amortised cost 5,393 3,685 1,482 53 5,220
Financial assets held at FVTPL 2 - - 2 2
Derivative financial assets 11 - 11 - 11
Liabilities
Deposits from customers 16,514 - - 16,377 16,377
Deposits from central banks 3,800 - - 3,800 3,800
Debt securities 577 447 - - 447
Derivative financial liabilities 19 - 19 - 19
Repurchase agreements 166 - - 166 166
Cash and balances with the Bank of England, trade and other receivables, trade and other payables, assets classified as held
for sale and other assets and liabilities which meet the definition of financial instruments are not included in the tables.
Their carrying amount is a reasonable approximation of fair value.
An inverse relationship exists between interest rates and fair value and therefore as base rates have continued to rise this
has seen the fair value of our fixed-rate financial instruments continue to remain below their carrying amount. As these
financial instruments approach maturity their fair value will pull back to their carrying value.
The significant majority of our investment securities held at amortised cost are Bank of England eligible so are available
for entering into repurchase agreements, should we need additional liquidity. The remainder of our investment securities are
held at fair value and therefore market movements on these assets are already reflected in our reserves and capital ratios.
Information on how fair values are calculated is explained below.
Loans and advances to customers
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market
rate of interest at the balance sheet date, adjusted for future credit losses and prepayments, if considered material.
Investment securities
The fair value of investment securities is based on either observed market prices for those securities that have an active
trading market (Level 1 assets), or using observable inputs (in the case of Level 2 assets).
Financial assets held at fair value through profit and loss
The financial assets at fair value through profit and loss relate to the loans and advances previously assumed by the
RateSetter provision fund.
Deposits from customers
Fair values are estimated using discounted cash flows, applying current rates offered for deposits of similar remaining
maturities. The fair value of a deposit repayable on demand is approximated by its carrying value.
Debt securities
Fair values are determined using the quoted market price at the balance sheet date. Whilst previously classified as a Level 1
instrument, as at 30 June 2023 this was reclassified as a Level 3 instrument due to low trading volumes on these instruments.
Deposits from central banks/repurchase agreements
Fair values approximate carrying amounts as their balances are generally short-dated.
Derivative financial assets and liabilities
The fair values of derivatives are obtained from discounted cash flow models as appropriate.
15. Legal proceedings and regulatory matters
As part of the normal course of business we are subject to legal and regulatory matters. The matters outlined below represent
contingent liabilities and as such at the reporting date no provision has been made for any of these cases within the
financial statements. This is because, based on the facts currently known, it is not practicable to predict the outcome, if
any, of these matters or reliably estimate any financial impact. Their inclusion does not constitute any admission
of wrongdoing or legal liability.
Financial Crime
The FCA is currently undertaking enquiries regarding our financial crime systems and controls. We continue to engage and
co-operate fully with the FCA in relation to these matters.
Magic Money Machine litigation
In 2022 Arkeyo LLC, a software company based in the United States, filed a civil suit with a stated value of over £24 million
against us in the English High Court alleging, among other matters, that we infringed their copyright and misappropriated
their trade secrets relating to money counting machines (i.e. our Magic Money Machines). We believe Arkeyo LLC’s claims are
without merit and are vigorously defending the claim.
16. Post balance sheet events
Tier 2 MREL eligibility
As set out in Note 10, on 28 July 2023 the Bank of England’s Resolution Directorate agreed to a further extension to the
pre-existing adjustment with respect to our £250 million 9.139% Tier 2 Notes regarding their MREL eligibility.
The adjustment permits the Tier 2 Notes to remain eligible to count towards our MREL requirement until their maturity date of
26 June 2028. Their eligibility as Tier 2 regulatory capital will continue to amortise from the call date (26 June 2023) over
their remaining life.
Early repayment of TFSME
On 28 and 31 July we made early repayments totalling £550 million to the Bank of England in respect of amounts we had drawn
down under TFSME. The repayment was financed using long-dated repurchase agreements. Following these repayments, the amount
remaining due under the scheme total £3,250 million. These will mature in 2025 and 2027 in the amounts of £1,860 million and
£1,390 million respectively.
There have been no other material post balance sheet events.
END OF the condensed consolidated interim financial statements
ALTERNATIVE PERFORMANCE MEASURES (UNAUDITED)
In the reporting of financial information, we use certain measures that are not required under IFRS, the Generally Accepted
Accounting Principles under which we report. These measures are consistent with those used by management to assess underlying
performance. These alternative performance measures have been defined below, where a measure relates to a half year any
financial statement lines marked with an * have been annualised in the calculation.
Cost of deposits
Interest expense on customer deposits divided by the average deposits from customers for the period.
Half year to Half year to Half year to Full year to
30 Jun 2023 31 Dec 2022 30 Jun 2022 31 Dec 2022
£’million £’million £’million £’million
Interest on customer deposits* 51.0 20.5 12.4 32.9
Average deposits from customer 15,580 16,509 16,444 16,351
Cost of deposits (annualised) 0.66% 0.25% 0.14% 0.20%
Cost of risk
Expected credit loss expense divided by average gross loans.
Half year to Half year to Half year to Full year to
30 Jun 2023 31 Dec 2022 30 Jun 2022 31 Dec 2022
£’million £’million £’million £’million
Expected credit loss expense* 11.3 22.0 17.9 39.9
Average gross lending 12,934 12,871 12,346 12,611
Cost of risk (annualised) 0.18% 0.33% 0.29% 0.32%
Coverage ratio
Expected credit losses as a percentage of gross loans.
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Expected credit losses 197 187 171
Gross loans and advances to customers 12,769 13,289 12,535
Coverage ratio 1.54% 1.41% 1.36%
Loan-to-deposit ratio
Net loans and advances to customers expressed as a percentage of total deposits as at the period end.
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Net loans and advances to customers 12,572 13,102 12,364
Deposits from customer 15,529 16,014 16,514
Loan–to–deposit ratio 81% 82% 75%
Net-interest margin
Net interest income as a percentage of average interest–earning assets.
Half year to Half year to Half year to Full year to
30 Jun 2023 31 Dec 2022 30 Jun 2022 31 Dec 2022
£’million £’million £’million £’million
Net interest income* 221.5 223.3 180.8 404.1
Average interest-earning assets 20,900 20,973 21,085 21,029
Net interest margin (annualised) 2.14% 2.11% 1.73% 1.92%
Non-performing loan ratio
Gross balance of loans in stage 3 (non–performing loans) as a percentage of gross loans as at period end.
30 Jun 2023 31 Dec 2022 30 Jun 2022
£’million £’million £’million
Stage 3 loans 365 352 345
Loans and advances to customers 12,769 13,289 12,535
Non–performing loan ratio 2.86% 2.65% 2.75%
Statutory cost:income ratio
Statutory total operating expenses as a percentage of statutory total income.
Half year to Half year to Half year to Full year to
30 Jun 2023 31 Dec 2022 30 Jun 2022 31 Dec 2022
£’million £’million £’million £’million
Operating expenses 259.7 275.5 278.8 554.3
Total income 286.4 287.0 236.5 523.5
Statutory cost:income ratio 91% 96% 118% 106%
Underlying cost:income ratio
Underlying total operating expenses as a percentage of underlying total income.
Half year to Half year to Half year to Full year to
30 Jun 2023 31 Dec 2022 30 Jun 2022 31 Dec 2022
£’million £’million £’million £’million
Underlying operating expenses 258.2 266.5 266.3 532.8
Total underlying income 285.6 285.9 236.2 522.1
Underlying cost:income ratio 90% 93% 113% 102%
Underlying profit/(loss)
Underlying profit/(loss) represents an adjusted measure, excluding the effect of certain items that are considered to distort
period-on-period comparisons, in order to provide readers with a better and more relevant understanding of the underlying
trends in the business.
Non-underlying item Description Reason for exclusion
The impairments and write-offs relating to
The costs associated with non-current assets property, plant, equipment and intangible assets
Impairment and write-offs of that are either no longer being used by or are removed as they distort comparison between
property, plant, equipment are no longer generating future economic periods. This is on the basis that the
and intangible assets benefit for the business. write-offs and impairments relate to specific
events and triggers which are not consistent
between periods.
The commitments under the Capability and
Innovation Fund continue through to 2025. The
These costs and income relate to the costs associated with fulfilling the commitments
Net C&I costs delivering the commitments associated with and associated income are felt to distort
the Capability and Innovation Fund (awarded period-on-period comparison. Given the
by BCR). offsetting nature of the income and expenditure,
there is no net impact on our profitability from
this adjustment.
The remediation costs are felt to be time
limited and will disappear once the
Remediation costs consists of money spent in investigations have concluded. As such are
relation to the RWA adjustment including the removed to allow greater comparability between
Remediation costs associated investigations by the PRA and FCA periods. Following the conclusion of the
as well as work undertaken in relation to investigations by the PRA, FCA and OFAC in 2022,
financial crime. remediation costs primarily relate to the
ongoing regulatory matters regarding financial
crime.
The transformation costs are seen as a
Transformation costs primarily consist of nonrecurring cost stream aimed at addressing the
the costs associated with redundancy challenges the business faces. These are
Transformation costs programmes during the year as part of our therefore removed in order to prevent
approach to right-sizing teams as well as period-on-period distortion. Following the
the costs of work undertaken to establish conclusion of our transformation plan in 2022 no
our cost reduction programme. transformation costs have been recognised in
2023.
Costs associated with the establishment and In 2022 we started work on implementing our new
insertion of a holding company (Metro Bank holding company which was successfully
Holding company insertion costs Holdings PLC) above the current operating implemented in May 2023. As such they have been
company (Metro Bank PLC) to meet regulatory excluded from our underlying results to avoid
requirements. distortion between periods.
Impairment and Holding
Statutory write offs of Net C&I Transformation company Underlying
basis PPE and costs costs Remediation insertion basis
Half year to 30 Jun 2023 intangible costs £’million costs
£’million assets £’million £’million £’million
£’million
£’million
Net interest income 221.5 - - - - - 221.5
Net fee and commission income 42.2 - - - - - 42.2
Net gains on sale of assets 0.8 - - - - - 0.8
Other income 21.9 - (0.8) - - - 21.1
Total income 286.4 - (0.8) - - - 285.6
General operating expenses (221.4) - 0.8 - (0.8) 1.5 (219.9)
Depreciation and amortisation (38.3) - - - - - (38.3)
Impairment and write offs of property, - - - - - - -
plant, equipment and intangible assets
Total operating expenses (259.7) - 0.8 - (0.8) 1.5 (258.2)
Expected credit loss expense (11.3) - - - - - (11.3)
Profit before tax 15.4 - - - (0.8) 1.5 16.1
Half year to 31 Dec 2022
Net interest income 223.3 - - - - - 223.3
Net fee and commission income 42.3 - - - - - 42.3
Net gains on sale of assets - - - - - - -
Other income 21.4 - (1.1) - - - 20.3
Total income 287.0 - (1.1) - - - 285.9
General operating expenses (234.4) - 1.1 2.3 2.3 1.8 (226.9)
Depreciation and amortisation (39.6) - - - - - (39.6)
Impairment and write offs of property, (1.5) 1.5 - - - - -
plant, equipment and intangible assets
Total operating expenses (275.5) 1.5 1.1 2.3 2.3 1.8 (266.5)
Expected credit loss expense (22.0) - - - - - (22.0)
Loss before tax (10.5) 1.5 - 2.3 2.3 1.8 (2.6)
Half year to 30 Jun 2022
Net interest income 180.8 - 0.1 - - - 180.9
Net fee and commission income 39.5 - - - - - 39.5
Net gains on sale of assets - - - - - - -
Other income 16.2 - (0.4) - - - 15.8
Total income 236.5 - (0.3) - - - 236.2
General operating expenses (233.2) - 0.3 1.0 3.0 - (228.9)
Depreciation and amortisation (37.4) - - - - - (37.4)
Impairment and write offs of property, (8.2) 8.2 - - - - -
plant, equipment and intangible assets
Total operating expenses (278.8) 8.2 0.3 1.0 3.0 - (266.3)
Expected credit loss expense (17.9) - - - - - (17.9)
Loss before tax (60.2) 8.2 - 1.0 3.0 - (48.0)
Metro Bank Holdings PLC
Registered number
14387040 (England and Wales)
Registered office
One Southampton Row
London
WC1B 5HA
metrobankonline.co.uk
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The issuer is solely responsible for the content of this announcement.
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ISIN: GB00BMX3W479
Category Code: IR
TIDM: MTRO
LEI Code: 984500CDDEAD6C2EDQ64
OAM Categories: 1.2. Half yearly financial reports and audit
reports/limited reviews
Sequence No.: 261360
EQS News ID: 1692473
End of Announcement EQS News Service
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