REG-Metro Bank plc Metro Bank plc: Results for Year ended 31 December 2022
02/03/2023 07:15
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Metro Bank plc (MTRO)
Metro Bank plc: Results for Year ended 31 December 2022
02-March-2023 / 07:00 GMT/BST
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Metro Bank PLC
Full year results
Trading Update 2022
2 March 2023
Metro Bank PLC (LSE: MTRO LN)
Results for Year ended 31 December 2022
Highlights
• Profitable in Q4 2022 on an underlying basis
• Financials significantly improved year-on-year:
◦ Underlying revenue increased 31%
◦ NIM improved by 52bps
◦ Underlying costs reduced 3%
• Completed turnaround; 2023 is a transitional year
• Targeting mid-single digit RoTE by 2024
• Resuming store expansion in the North of England
Key Financials
31 30
31 December Change from Change from
£ in millions December June
2021 FY 2021 H1 2022
2022 2022
Assets £22,119 £22,588 (2%) £22,566 (2%)
Loans £13,102 £12,290 7% £12,364 6%
Deposits £16,014 £16,448 (3%) £16,514 (3%)
Loan to deposit ratio 82% 75% 7pps 75% 7pps
CET1 capital ratio 10.3% 12.6% (230bps) 10.6% (30bps)
Total capital ratio (TCR) 13.4% 15.9% (250bps) 13.8% (40bps)
MREL ratio 17.7% 20.5% (280bps) 18.3% (60bps)
Liquidity coverage ratio 213% 281% (68pps) 257% (44pps)
FY FY Change from H2 H1 Change from
£ in millions
2022 2021 FY 2021 2022 2022 H1 2022
Total underlying revenue1 £522.1 £397.9 31% £285.9 £236.2 21%
Underlying loss before tax2 (£50.6) (£171.3) (70%) (£2.6) (£48.0) (95%)
Statutory loss before tax (£70.7) (£245.1) (71%) (£10.5) (£60.2) (83%)
Net interest margin 1.92% 1.40% 52bps 2.11% 1.73% 38bps
Lending yield 3.67% 3.07% 60bps 3.93% 3.40% 53bps
Cost of deposits 0.20% 0.24% (4bps) 0.25% 0.14% 11bps
Cost of risk 0.32% 0.18% 14bps 0.33% 0.29% 4bps
Underlying EPS (30.5p) (101.1p) (70%) (2.0p) (28.5p) (93%)
Tangible book value per share £4.29 £4.59 (7%) £4.29 £4.30 (0%)
1. Underlying revenue excludes income recognised relating to the Capability and Innovation Fund and the mortgage portfolio
sale.
2. Underlying loss before tax excludes the impairment and write-off of property, net BCR costs, plant & equipment (PPE)
and intangible assets, transformation costs, remediation costs, business acquisition and integration costs, mortgage
portfolio sale and costs related to holding company insertion.
Summary
• Underlying profit in Q4 achieved as a result of the bank’s commitment to strong cost control and the successful
balance sheet optimisation strategy.
• Underlying revenue increased by 31% to £522.1 million reflecting the shift in deposit and asset mix, the impact of
the higher Bank of England base rate, and a recovery in customer activity.
• Underlying costs reduced 3% to £532.8 million despite inflationary pressures, reflecting management actions to
control cost and leverage the fixed cost base for profitable growth.
• Operating jaws3 for 2022 were 34%.
• Underlying loss before tax for the year improved by 70% to £50.6 million as a result of the strong income growth,
cost discipline and prudent risk management.
• Statutory loss before tax of £70.7 million, improved 71%, as legacy issues, and their associated remediation costs,
concluded.
• Legacy PRA and FCA issues addressed regarding investigations into historical RWA reporting, and the OFAC
investigation was closed during the year.
• Targeting mid-single digit ROTE by 2024.
• Resuming store expansion in the important economic areas and communities that make up the North of England, supported
by funding from the Capability and Innovation Fund.
Continued commitment to customers, communities and colleagues, voted 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 customers4
for the 10th time in a row. Unique culture provides local communities with the support they need and builds
long-lasting and personal relationships with customers.
• Pillar 2A capital requirement reduced to 0.50% in June 2022, further reduced to 0.36% effective January 2023.
• The Resolution Directorate of the Bank of England adjusted the bank's existing £250 million 5.5% Tier 2 Notes to
remain eligible for MREL until 26 June 2025, following implementation of the holding company.
• 2023 is a transitional year and the bank will focus on serving customers and maintaining cost discipline whilst
continuing to invest in infrastructure and build sustainably.
3. Operating jaws calculated as percentage change in underlying revenue growth less percentage change in underlying cost
growth.
4. Competition and Market Authority’s Service Quality Survey February 2023.
Daniel Frumkin, Chief Executive Officer at Metro Bank, said:
“I’m pleased with Metro Bank’s performance over the past year and the successful completion of our transformation plan. We
returned to profitability, resolved our legacy issues and further strengthened the foundations for future sustainable
growth. While I remain confident in the underlying business, material headwinds do exist, including the macro-economic
environment and increasing competition for liabilities. We have established the basis to transition back to being a
profitable growth engine, committed to serving our communities through our network of stores, digital offerings and
stand-out customer service, as seen in the latest CMA results.”
A presentation for investors and analysts will be held at 9:00AM (UK time) on Thursday 2 March 2023. The presentation will
be webcast on:
1 https://webcast.openbriefing.com/metrobank-mar23/
For those wishing to dial-in:
From the UK dial: +44 800 640 6441
From the US dial: +1 855 9796 654
Access code: 172474
Financial performance for the year ended 31 December 2022
Deposits
31 30
31 December Change from Change from
£ in millions December June
2021 FY 2021 H1 2022
2022 2022
Demand: current accounts £7,888 £7,318 8% £7,770 2%
Demand: savings accounts £7,501 £7,684 (2%) £7,817 (4%)
Fixed term: savings accounts £625 £1,446 (57%) £927 (33%)
Deposits from customers £16,014 £16,448 (3%) £16,514 (3%)
Retail customers (excl. retail £5,797 £6,713 (14%) £6,267 (7%)
partnerships)
SMEs5 £5,080 £4,764 7% £4,892 4%
£10,877 £11,477 (5%) £11,159 (3%)
Retail partnerships £1,949 £1,814 7% £1,871 4%
Commercial customers (excluding SMEs5) £3,188 £3,157 1% £3,484 (8%)
£5,137 £4,971 3% £5,355 (4%)
5. 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.
Current accounts increased by 8% in the year to £7,888 million, the underlying service-led core deposit franchise
continued to grow. The focus remained on increasing share of relationship deposits whilst allowing the fixed term
deposits to roll off. As a result, total deposits fell 3% to £16,014 million as at 31 December 2022 (31 December
• 2021: £16,448 million). Current account and demand deposits now make up 96% of the total deposit base (31 December
2021: 91%).
Cost of deposits decreased to 20bps for the year (2021: 24bps) reflecting improvements in deposit mix and the value
of the service-led business model, partially offset by the recent trend of increased competition and pricing in the
• market.
Customer account growth of 0.2 million in the year to 2.7 million (2021: 2.5 million) reflects continued organic
growth in the underlying franchise, with 188,000 personal current accounts and 42,000 business current accounts
• opened in the year.
Stores remain at the heart of the bank’s service offering and the network will continue to expand as opportunity
exists for further market penetration in significant locations where there are currently no stores present. The bank
• remains committed to opening stores in the North of England, the operational costs post-launch of which will be
funded in part by the Capability and Innovation Fund. These stores are expected to be opened in 2024 and 2025.
Future stores have been redesigned and will be built for significantly less cost than previous stores, but will not
lose the distinctive Metro Bank style. Our refreshed approach will incorporate appropriate break clauses and will
• have less surplus floor space and more cost-effective fixtures and fittings.
Loans
31 30
31 December Change from Change from
£ in millions December June
2021 FY 2021 H1 2022
2022 2022
Gross Loans and advances to customers £13,289 £12,459 7% £12,535 6%
Less: allowance for impairment (£187) (£169) 11% (£171) 9%
Net Loans and advances to customers £13,102 £12,290 7% £12,364 6%
Gross loans and advances to customers consists of:
Retail mortgages £7,649 £6,723 14% £6,785 13%
Commercial lending6 £2,847 £3,220 (12%) £2,993 (5%)
Consumer lending £1,480 £890 66% £1,269 17%
Government-backed lending7 £1,313 £1,626 (19%) £1,488 (12%)
6. Includes CLBILS.
7. BBLS, CBILS and RLS.
Total net loans as at 31 December 2022 were £13,102 million, up 7% from £12,290 million as at 31 December 2021
reflecting growth in residential mortgages and consumer lending, offset by the targeted reduction of commercial term
• loans including commercial real estate and portfolio buy-to-let exposures. Focus remains on optimising the mix for
risk-adjusted return on capital.
Retail mortgages increased by 14% during the year to £7,649 million as at 31 December 2022 (31 December 2021: £6,723
million) and remained the largest component of the lending book at 58% (31 December 2021: 54%). The DTV of the
• portfolio as at 31 December 2022 was 56% (31 December 2021: 55%) and 82% of originations in 2022 were <80% LTV,
compared to 59% in 2021.
Commercial loans (excluding BBLS, CBILS and RLS) decreased by 12% during the year to £2,847 million as at 31 December
2022 (31 December 2021: £3,220 million) reflecting active portfolio management reducing commercial real estate to
• £681 million (31 December 2021: £837 million) and portfolio buy-to-let to £731 million (31 December 2021: £950
million), as part of the balance sheet optimisation strategy to target higher risk-adjusted return on capital.
Consumer lending increased by £590 million to £1,480 million in the year and now makes up 11% of the of the total
loan book (31 December 2021: 7%). The increase is driven by high quality new organic lending, for originations in Q4
• 2022 the average customer income was £52,000. Non-performing loans for consumer unsecured were 3.38% at 31 December
2022 (31 December 2021: 2.36%). The portfolio has a conservative ECL coverage of 5.07% (31 December 2021: 4.72%).
Government-backed lending reduced by more than £300 million in the year to £1,313 million as at 31 December 2022 (31
December 2021: £1,626 million) as balances continued to roll off, following effective collections
• management supported by the British Business Bank.
Capital constraints currently limit loan growth, asset originations were in line with replacement levels in Q4 2022.
•
Cost of risk increased to 32bps for the year (2021: 18bps). Whilst the credit quality of new lending remains strong,
the movement reflects the bank’s prudent approach to provisioning in response to the uncertain macro-economic
• environment and the growth in the consumer unsecured portfolio.
Non-performing loans decreased to 2.65% (31 December 2021: 3.71%) driven by effective management of BBLS collections
and reduced commercial exposures. Overall arrears levels have remained broadly stable and there have been no signs of
• increased stress. Excluding government-backed lending, non-performing loans were 2.02% as at 31 December 2022 (31
December 2021: 2.65%).
The loan portfolio remains highly collateralised and conservatively provisioned. Average DTV for retail mortgages was
• 56% (2021: 55%) and for commercial lending 55% (2021: 57%). The ECL provision as at 31 December 2022 is £187 million
with a coverage ratio of 1.41%, compared to £169 million with a coverage ratio of 1.36% as at the end of 2021.
Profit and Loss Account
Net interest margin (NIM) of 1.92% is up 52bps in the year (2021: 1.40%) reflecting the successful balance sheet
optimisation strategy of shifting towards higher yielding assets and rolling off more expensive fixed term deposits,
• also supported by the higher Bank of England base rate. Exit-NIM for December 2022 was 2.22%.
Underlying net interest income increased 37% to £404.2 million for the year (2021: £295.7 million) driven by
controlled asset growth and significant reshaping of lending and deposits supported by the rising interest rate
• environment.
Underlying net fee and other income increased 16% to £117.9 million for the year (2021: £101.5 million) driven
largely by higher customer transactions, increased safe deposit box usage and foreign currency activity, as volumes
• normalised following Covid-related restrictions in 2021.
Underlying costs reduced 3% to £532.8 million for the year (2021: £546.8 million) despite inflationary pressures,
• reflecting management actions to control cost.
Positive operating jaws of 34% for 2022 (2021: 4%) underpinned a reduction in the underlying cost:income ratio from
• 137% in 2021 to 102% in 2022.
Underlying loss before tax improved by 70% to £50.6 million for the year (2021: £171.3 million) as a result of the
• strong income growth and continued cost discipline. Underlying profit before tax achieved in Q4 2022.
• Statutory loss before tax of £70.7 million, improved 71% as legacy issues, and their associated remediation costs,
concluded.
Capital, Funding and Liquidity
31
31 December Change from
£ in millions December Minimum capital requirement8
2021 FY 2021
2022
CET1 capital ratio 10.3% 12.6% (230bps) 4.8%
Total capital ratio (TCR) 13.4% 15.9% (250bps) 8.5%
MREL ratio 17.7% 20.5% (280bps) 17.0%
While the bank continues to operate within capital buffers, the capital position has been managed above all
• regulatory minimum requirements8 and the balance sheet continues to be actively managed within capital constraints.
During the year, the Prudential Regulation Authority reduced the bank’s Pillar 2A capital requirement from 1.11% to
0.50%, effective as of 27 June 2022. The Resolution Directorate of the Bank of England also agreed that the bank’s
binding MREL applicable from 27 June 2022 shall be equal to the lower of:
i. 18% of the bank’s RWAs; or
ii. Two times the sum of the bank’s Pillar 1 and Pillar 2A
•
Therefore the bank’s minimum MREL requirement8 was reduced to 17.0%.
Effective 1 January 2023, the Prudential Regulation Authority has further reduced the bank's Pillar 2A capital
requirement from 0.50% to 0.36%, the reduction implies that the bank's MREL requirement8 would therefore reduce from
17.0% to 16.7%.
The Bank of England's Resolution Directorate has agreed to provide a temporary, time-limited, adjustment for the
• bank's existing £250 million 5.5% Tier 2 Notes with respect to MREL eligibility until 26 June 2025.
Common Equity Tier 1 (CET1) ratio of 10.3% as at 31 December 2022 (31 December 2021: 12.6%) compares to a minimum
CET1 requirement of 4.8%8 (or 8.3% including buffers9) and minimum Tier 1 requirement of 6.4%8 (or 9.9% including
• buffers9).
Total Capital ratio of 13.4% as at 31 December 2022 (31 December 2021: 15.9%) compares to a minimum requirement of
• 8.5%8 (or 12.0% including buffers9).
Total Capital plus MREL ratio of 17.7% as at 31 December 2022 (31 December 2021: 20.5%) compares to a minimum
• requirement of 17.0%8 (or 20.5% including buffers9).
Strong liquidity and funding position maintained. All customer loans are fully funded by customer deposits with a
loan-to-deposit ratio of 82% as at 31 December 2022 (31 December 2021: 75%). Strong Liquidity Coverage Ratio (LCR) of
• 213% as at 31 December 2022 (31 December 2021: 281%) and a Net Stable Funding Ratio (NSFR) of 134%, both far in
excess of requirements.
Total RWAs as at 31 December 2022 were £7,990 million (31 December 2021: £7,454 million). The increase reflects
• actions taken to improve the loan mix whilst managing loan growth within current capital constraints.
UK leverage ratio10 was 4.2% as at 31 December 2022 (31 December 2021: 5.2%).
•
The bank’s AIRB application continues to progress, and the requirement to implement a holding company for ‘bail in’
• purposes is on track to be completed by the deadline in June 2023.
8. Based on capital requirements at 31 December 2022, excluding all buffers.
9. Based on capital requirements at 31 December 2022 plus buffers, excluding any confidential PRA buffer, if applicable.
10. The PRA Policy Statement 21/21 took affect from 1 January 2022 which required the exclusion of certain central bank
claims from the total exposure measure.
Guidance
2022 2023
NIM 1.92% NIM accretion limited by fewer anticipated base rate moves.
Lending yield 3.67% Continue optimising mix for maximum risk-adjusted return 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 signs of stress.
RWA £8.0b Managed for optimal risk-adjusted return on regulatory capital as lending growth constrained by
capital.
MREL 17.7% Continue to operate within buffers with increasing headroom to regulatory minima.
Targeting mid-single digit RoTE by 2024.
Metro Bank PLC
Summary Balance Sheet and Profit & Loss Account
(Unaudited)
YoY 31-Dec 30-Jun 31-Dec
Balance Sheet
change 2022 2022 2021
£'million £'million £'million
Assets
Loans and advances to customers 7% £13,102 £12,364 £12,290
Treasury assets11 £7,870 £9,036 £9,142
Other assets12 £1,147 £1,166 £1,156
Total assets (2%) £22,119 £22,566 £22,588
Liabilities
Deposits from customers (3%) £16,014 £16,514 £16,448
Deposits from central banks £3,800 £3,800 £3,800
Debt securities £571 £577 £588
Other liabilities £778 £706 £717
Total liabilities (2%) £21,163 £21,597 £21,553
Total shareholder's equity £956 £969 £1,035
Total equity and liabilities £22,119 £22,566 £22,588
11. Comprises investment securities and cash & balances with the Bank of England.
12. Comprises property, plant & equipment, intangible assets and other assets.
Year ended
YoY 31-Dec 31-Dec
Profit & Loss Account
change 2022 2021
£'million £'million
Underlying net interest income 37% £404.2 £295.7
Underlying net fee and other income 16% £117.9 £101.5
Underlying net gains/(losses) on sale of assets - £0.7
Total underlying revenue 31% £522.1 £397.9
Total underlying costs (3%) (£532.8) (£546.8)
Expected credit loss expense 78% (£39.9) (£22.4)
Underlying loss before tax (70%) (£50.6) (£171.3)
Impairment and write-off of property plant & equipment and intangible assets (£9.7) (£24.9)
Transformation costs (£3.3) (£8.9)
Remediation costs (£5.3) (£45.9)
Business acquisition and integration costs - (£2.4)
Gain on mortgage portfolio sale (net of costs) - £8.3
Holding company insertion (£1.8) -
Statutory loss before tax (71%) (£70.7) (£245.1)
Statutory taxation (£2.0) (£3.1)
Statutory loss after tax (71%) (£72.7) (£248.2)
Year ended
31-Dec 31-Dec
Key metrics
2022 2021
Underlying earnings per share – basic and diluted (30.5p) (101.1p)
Number of shares 172.5m 172.4m
Net interest margin (NIM) 1.92% 1.40%
Lending yield 3.67% 3.07%
Cost of deposits 0.20% 0.24%
Cost of risk 0.32% 0.18%
Arrears rate 3.2% 4.1%
Underlying cost:income ratio 102% 137%
Tangible book value per share £4.29 £4.59
Half year ended
HoH change 31-Dec 30-Jun 31-Dec
Profit & Loss Account
2022 2022 2021
£'million £'million £'million
Underlying net interest income 23% £223.3 £180.9 £162.1
Underlying net fee and other income £62.6 £55.3 £54.8
Underlying net gains/(losses) on sale of assets - - £1.2
Total underlying revenue 21% £285.9 £236.2 £218.1
Total underlying costs - (£266.5) (£266.3) (£271.6)
Expected credit loss expense (£22.0) (£17.9) (£7.8)
Underlying loss before tax (95%) (£2.6) (£48.0) (£61.3)
Impairment and write-off of property plant & equipment and intangible assets (£1.5) (£8.2) (£17.4)
Net BCR costs - - £0.3
Transformation costs (£2.3) (£1.0) (£7.1)
Remediation costs (£2.3) (£3.0) (£20.5)
Business acquisition and integration costs - - (£0.1)
Gain on mortgage portfolio sale (net of costs) - - (£0.1)
Holding company insertion (£1.8) - -
Statutory loss before tax (83%) (£10.5) (£60.2) (£106.2)
Statutory taxation (£0.5) (£1.5) (£0.9)
Statutory loss after tax (82%) (£11.0) (£61.7) (£107.1)
Half year ended
31-Dec 30-Jun 31-Dec
Key metrics
2022 2022 2021
Underlying earnings per share – basic and diluted (2.0p) (28.5p) (36.0p)
Number of shares 172.5m 172.4m 172.4m
Net interest margin (NIM) 2.11% 1.73% 1.51%
Lending yield 3.93% 3.40% 3.14%
Cost of deposits 0.25% 0.14% 0.17%
Cost of risk 0.33% 0.29% 0.20%
Arrears rate 3.2% 3.1% 4.1%
Underlying cost:income ratio 93% 113% 125%
Tangible book value per share £4.29 £4.30 £4.59
Enquiries
For more information, please contact:
Metro Bank PLC Investor Relations
Jo Roberts
+44 (0) 20 3402 8900
2 IR@metrobank.plc.uk
Metro Bank PLC Media Relations
Tina Coates / Mona Patel
+44 (0) 7811 246016 / +44 (0) 7815 506845
3 pressoffice@metrobank.plc.uk
Teneo
Charles Armitstead / Haya Herbert Burns
+44 (0)7703 330269 / +44 (0) 7342 031051
4 metrobank@teneo.com
ENDS
About Metro Bank
Metro Bank services 2.7 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 PLC. Registered in England and Wales. Company number: 6419578. Registered office: One Southampton Row, London,
WC1B 5HA. ‘Metrobank’ is the registered trademark of Metro Bank PLC.
It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential
Regulation Authority. Most relevant 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 PLC 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 PLC
Preliminary Announcement
(Unaudited)
For the year ended 31 December 2022
Chief executive officer’s statement
I am very pleased that the Bank ended 2022 in its strongest position for several years. We completed our transformation
plan, despite facing into a series of challenging economic and external headwinds, and have built the foundations to drive
sustainable profitable growth. Perhaps the most significant proof point of our progress is recording in Q4 2022 our first
full quarter of underlying profit since Q2 2019 and ahead of our announced intention to break even in Q1 2023.
We’ve achieved this as a result of ongoing cost control, building a wider suite of asset products and the rising interest
rate environment, in parallel to maintaining our unwavering commitment to local communities and our focus on excellent
customer service. We are proud to have kept our position for the tenth time in a row as the top rated high street bank for
overall service quality to personal customers, plus ranking as the best high street bank for in-store personal and business
service in the CMA service quality survey.
We have a solid platform on which to build in 2023, having established strong momentum in 2022, although we recognise the
economic challenges which are expected. This is a testament to tireless work by all my colleagues right across the Bank,
and I would like to take this opportunity to thank them for their ongoing skill, effort, dedication and laser-like focus on
creating FANS. I am proud to lead such an inspiring and hardworking team, and look forward to serving our customers and
creating more FANS in 2023.
Strong momentum towards a sustainably profitable community bank
By delivering our transformation plan, we have proved what we have always known – that our model works and can deliver
sustainable growth and profitability. Our delivery of market-leading service helps us attract core deposits allowing us to
grow lending, which we flex and balance across a range of asset classes, to generate high-quality earnings.
Community banking via our store network is integral to this and will remain a core component of our model and service
offering. Our newest store opened in Leicester at the start of 2022 and is performing well. Our transformation plan has
enabled newer stores to open at much reduced cost and in 2023 we will undertake planning work with a view to resuming store
openings in 2024, focused on locations in the North of England with large local populations and strong SME presence. We
remain committed to the elements that have always made our 76 stores stand out, including being open seven days a week, 362
days a year, from early until late.
We know we cannot succeed without investing in excellent digital services to complement our store network. As customers’
digital expectations evolve, we will continue to invest in and refine our digital customer services while remaining true to
our guiding customer promises.
Successful completion of our transformation plan
Our strategic priorities were launched three years ago with the objective of setting the Bank on a path back to sustainable
profitability and growth, while staying true to our community banking model. Execution against the strategic priorities has
been excellent throughout the transformation period and has been instrumental in returning us to profitability.
Revenue
In a more normalised interest rate environment our model has really come into its own with the combination of core deposits
attracted by our excellent customer service proposition and a strategically rebalanced asset mix towards higher yield
lending leading to improved net interest margin.
We have continued to expand the range of products we offer to meet our customers’ needs. For example, our new enhanced
business overdraft product was launched in March and has quickly become popular with our business customers, due to the
fully digital journey. In December we launched our motor finance lending product, which operates under our RateSetter brand
using the latest technology to ensure a market-leading, fast and efficient customer journey. We’ve also supported customers
by growing our mortgage and invoice finance propositions, including developing new products, such as asset based lending.
Costs
We have retained tight control of our costs by further ingraining discipline across all business functions. Examples of
this in practice include simplifying our IT processes; improvements to our online and mobile app which have reduced calls
to our AMAZE Direct contact centres; freeing up time to focus on more complex calls. We’ve also continued to embed Agile
working practices to deliver better products and services more efficiently and safely. We recognise the need to continue
to target low marginal costs and efficient operations to support our future profitability.
Like any responsible retailer we regularly review our store estate, and during 2022 we completed the closure of three
stores. This was a difficult decision, but we ensured the impacts were minimal with customers supported and there were no
redundancies. We don’t have any plans for further closures and are pleased with how our stores are performing.
Infrastructure
Our objective is to make the Bank safer, more resilient and fit for the future. We have continued to invest in core
infrastructure, enhance risk management and integrate channels to further improve our service offering.
We have implemented a programme to identify and respond to the needs of our vulnerable customers with our customary
AMAZEING service. We have also invested in regulatory reporting, sanctions compliance, anti-money laundering controls and
in systems scalability and resilience.
To prepare for the introduction of the Consumer Duty, we are enhancing our products, services, communications and customer
journeys, along with monitoring customer outcomes to align with the requirements.
Balance sheet optimisation
We continued to shift the balance towards assets with better risk-adjusted returns on regulatory capital, growing our
unsecured consumer finance under the RateSetter brand along with higher-yielding residential mortgage lines and asset
finance.
Communication
Our commitment to supporting our colleagues and communities is deep and enduring. Inclusion is at the heart of our culture
and we demonstrate this through the local colleagues we employ, the market-leading service we deliver to all our customers
and the local causes we support. Our new D&I strategy celebrates our achievements and further raises our ambitions for the
future. Being named as one of the UK’s Most Loved Workplaces is a great testament to how special our culture is.
I’m delighted to say that we promoted more than 600 colleagues in 2022 across all teams and levels, including the Executive
Committee (ExCo). In response to the rising cost of living pressures, in the second half of the year we delivered a 2.75%
salary increase to colleagues. This was made up of passing on to colleagues our saving as an employer from the Government’s
1.25% National Insurance reduction and contributing a further 1.5% ourselves. This was on top of the average 5% salary
increase delivered at the start of the year – meaning that 98% of colleagues have received on average a 7.75% salary
increase during 2022. We decided to take this approach, as opposed to a one-off payment, to provide lasting support to help
our colleagues with cost of living challenges.
We remain customer-focused
As a people-people relationship-based bank, creating FANS has always been and always will be our motivation for delivering
superb customer service, and our commitment to delighting our customers is reflected in our recurring position on top of
the high street customer service rankings. In 2022, initiatives such as local marketing around our stores and improved
digital communications helped deliver strong growth in our personal and business accounts. In addition, our hands-on
support for communities is unwavering, from our financial literacy programme, Money Zone, which we have expanded to include
young adult care leavers, to our colleagues directly volunteering to help local causes.
We’ve drawn a line under the Bank’s legacy issues
2022 has also seen us substantially close out the Bank’s main legacy issues. This included the conclusion of the OFAC
investigation into sanctions breaches, with no financial penalty.
Following the finalisation of the PRA’s regulatory reporting investigation at the end of 2021, the FCA concluded its RWA
investigation in December 2022. The outcome was within the range of outcomes we expected and we can now put this legacy
issue firmly behind us, having greatly improved our reporting processes and controls.
Navigating through the economic cycle
2022 was a year of political turbulence and economic challenges which we expect to continue into 2023, with the economy
slowing and inflation remaining elevated.
We now have engines to generate risk-adjusted returns through the economic cycle. Our lending continues to be conservative
and our approach to provisioning for loan performance stands us in good stead to navigate economic fluctuations.
We will continue to manage our capital position carefully. We know our model can deliver more growth, but we are
constrained by our capital and MREL requirements.
We will look to optimise our capital stack
Capital is a core focus for us, as while we meet all of our minimum requirements, we continue to operate within our capital
buffers.
Our return to sustainable capital generation, and therefore our path to exiting capital buffers, will consist of our return
to profitability combined with a continued focus on balance sheet optimisation, including actively managing lending.
Alongside this we are progressing our application to adopt an Internal Ratings Based (IRB) approach to calculating credit
risk with the regulator. We will also seek to access the capital markets to raise additional regulatory debt, as and when
conditions allow.
Evolving our strategic priorities
As we come to the end of our transformation journey and are positioned for profitable growth, now is the time to increase
focus on our strategic priorities so we can deliver on the things that are important for our stakeholders.
In achieving this, our headline priorities will remain unchanged during this transitional year. Our focus will, however,
shift from fixing the problems of the past to leveraging the strengths of our business model for future growth.
While 2023 is going to be a transitional year, the following few years will see us place a renewed focus on growth,
ensuring this is done in both a responsible and sustainable way. We will continue to operate above our minimum requirements
although will remain within our capital buffers in the short term. If our capital constraints were to ease we know that we
could grow more quickly and generate greater shareholder returns.
Momentum towards meeting our goals
We have built strong momentum over the last three years by successfully implementing our transformation plan: driving
higher revenue, keeping costs firmly under control and optimising our balance sheet, while maintaining our service
standards, protecting our culture and supporting communities. Maintaining this disciplined approach for future years
instils confidence that our goals of achieving sustainable profitability and realising our ambition to be the number one
community bank is within our sights.
Finance review
Summary of the year
2022 was a significant year for Metro Bank with continued momentum in financial performance, marked by a return to
underlying profitability in the final quarter of the year, and the continued execution of our ambition to be the number one
community bank. We now have a clear opportunity to deliver for our customers, colleagues and shareholders and build
sustainable profitability in 2023 and beyond.
Underlying loss before tax for the year reduced to £50.6 million down from £171.3 million in 2021 as a result of strong
income growth combined with continued tight cost discipline. On a statutory basis losses before tax reduced to £70.7
million (2021: £245.1 million) as we continued to put legacy issues, and their associated remediation costs, behind us.
The economic backdrop remains uncertain and during the year we recognised an ECL expense of £39.9 million (2021: £22.4
million). We continue to take a prudent approach to origination and our ECL reflect the quality of our lending.
Alongside this we remain deposit funded with a loan-to-deposit ratio as at 31 December 2022 of 82% (31 December 2021: 75%)
and retain a strong liquidity position.
While we continue to operate in capital buffers we have remained above regulatory minima throughout 2022. We have taken
active measures to protect our capital ratios by constraining asset origination to around replacement levels. This,
combined with a return to profitability has seen our capital ratios start to stabilise in the fourth quarter. At 31
December 2022 our CET1, Tier 1 and total capital plus MREL ratios were 10.3%, 10.3% and 17.7% respectively (31 December
2021: 12.6%, 12.6% and 20.5%).
Income statement
2022 2021 Change
£m £m %
Underlying net interest income 404.2 295.7 37%
Underlying non-net interest income 117.9 102.2 15%
Total underlying revenue 522.1 397.9 31%
Underlying operating expenses (532.8) (546.8) (3%)
ECL expense (39.9) (22.4) 78%
Underlying loss before tax (50.6) (171.3) (70%)
Non-underlying items (20.1) (73.8) (73%)
Statutory loss before tax (70.7) (245.1) (71%)
Income
Underlying net interest income rose by 37% to £404.2 million (2021: £295.7 million), driven by an increase in net interest
margin which rose 52 basis points (bps) to 1.92% (2021: 1.40%). This was a result of active management of the deposit base
to maintain our low cost of deposits, continued balance sheet management including growing our mortgage and consumer
finance books together with the benefits of the higher Bank of England base rates.
During the year our current account balances increased 8% or £570 million while we continued the managed reduction in
higher rate fixed-term accounts. The result of these actions saw our cost of deposits remain significantly below base rate
at 0.20% (2021: 0.24%). Our business model is service-led and is supported by a compelling store proposition and this has
resulted in a cost of deposits significantly below the majority of sector peers.
Non-interest income
Non-interest income growth has reflected the normalisation of volumes following 2021 COVID-19 related restrictions.
Underlying non-interest income increased to £117.9 million (2021: £102.2 million), driven largely by continued fee growth,
in part by higher customer transaction fees. This included a 23% increase in income from customer foreign currency
transactions which rose to £34.1 million from £27.7 million in 2021.
Service charges and other fee income also increased, rising to £30.9 million from £25.5 million in 2021, as we continued to
grow our customer base and service their financial needs. This is particularly the case for SMEs, where we believe our
service approach fills a need which is largely underserved by the wider market.
Safe deposit boxes income increased to £16.5 million (2021: £15.1 million), with new net box openings in existing stores
offsetting the loss from the net stores reduction. Visits to safe deposit boxes are now above pre-pandemic levels.
Operating expenses
2022 2021
Underlying cost:income ratio 102% 137%
Statutory cost:income ratio 106% 153%
Despite the rising inflation environment through the year, underlying operating expenses fell by 3% year-on-year to £532.8
million (2021: £546.8 million). This reduction in costs, combined with rising income, saw our underlying cost:income ratio
improve from 137% in 2021 to 102% in 2022.
People costs remain the largest component of our cost base and during the year these fell by 1% to £236.6 million (2021:
£239.0 million). This is despite an average 5% salary rise given to colleagues in March followed by a further cost of
living increase for all but our most senior colleagues in December. In addition to this our active management of our
underlying non-people related expenses has resulted in a 4% year-on-year reduction from £307.8 million to £296.2 million in
these costs.
Inflation is still being felt across the UK. Despite achieving lower costs in 2022 than 2021, we expect the broad
inflationary pressures in the economy will likely mean our costs will increase in 2023 across colleague and supplier costs.
Depreciation and amortisation charges fell during in the year, reducing from £80.2 million to £77.0 million as the pace of
our investment slowed from the peak spending set out as part of our transformation plan.
Non-underlying items
2022 2021 Change
£m £m %
Impairment and write-off of property, plant, equipment and intangible assets (9.7) (24.9) (61%)
Remediation costs (5.3) (45.9) (88%)
Transformation costs (3.3) (8.9) (63%)
Business acquisition and integration costs – (2.4) n/a
Mortgage portfolio sale – 8.3 n/a
Holding company insertion costs (1.8) – n/a
Non-underlying items (20.1) (245.1) (92%)
Non-underlying costs continued to fall as we closed out legacy issues and also delivered functionality prioritised under
our transformation plan. This normalisation in non-underlying costs aided in total statutory operating expense falling from
£641.2 million in 2021 to £554.3 million in 2022.
In 2022 we saw the conclusion of the OFAC investigation into sanctions breaches, with no financial penalty. In December, we
also settled with the FCA in respect of the 2019 RWA matters for £10 million, within the range outlined last year and
drawing this matter to a close. We had recognised a provision of £5 million in respect of this matter during 2021, with the
remainder recognised within remediation costs during the year.
We have started to prepare for the implementation of our holding company which we are required to have in place by June
2023. The related costs are being treated as non-underlying due to their one-off nature. This was the only new
non-underlying item during 2022.
Expected credit loss expense
ECL Allowance Coverage ratio Non-performing loan ratio
31 December 2022
£m % %
Retail mortgages 20 0.26% 1.45%
Consumer lending 75 5.07% 3.38%
Commercial 92 2.21% 4.59%
Total lending 187 1.41% 2.65%
31 December 2021
Retail mortgages 19 0.28% 1.70%
Consumer lending 42 4.72% 2.36%
Commercial 108 2.23% 6.75%
Total lending 169 1.36% 3.71%
Our ECL expense increased 78% during 2022 to £39.9 million (2021: £22.4 million). This reflects both the uncertain economic
outlook and high inflationary environment that has emerged during the year, as well as increased consumer lending within
our asset mix.
The majority of the ECL charge was due to a £33 million increase in consumer impairments. The consumer coverage ratio ended
the year at 5.07% (31 December 2021: 4.72%) in line with our expectations as these balances start to mature.
As we potentially enter a more challenging phase of the credit cycle, we continue to monitor our portfolio for early signs
of deterioration and where necessary take proactive action to both support our customers and ensure losses are minimised.
We continue to see very few early signs of deterioration in our lending book with non-performing loans (NPLs) representing
2.65% of gross lending (31 December 2021: 3.71%), reflecting the resilient nature of our balance sheet. Our mortgage
portfolio is well collateralised with average debt-to-value (DTV) of 56% (31 December 2021: 55%) and our consumer portfolio
is geared towards prime customers with an average borrower income for RateSetter loans in 2022 of £48,000.
Our new origination quality has remained strong and mortgage applicant quality, as measured through credit scorecards, has
remained stable over the course of 2022. The proportion of new business with a loan-to-value (LTV) over 80% has reduced
from 41% in 2021 to 18% in 2022. In the RateSetter loan portfolio the proportion of higher rated credit scoring applicants
has increased during the year as has the average income of customers for new loans. This prudent lending approach should
mean that these customers are less exposed to inflationary risks as the cost of living increases.
The impact of high inflation, exacerbated by the Russian invasion of Ukraine has led to deterioration in the economic
outlook during the year. Within the retail mortgage portfolio, this deterioration and the increase in balances has
contributed to a £1 million increase in impairments held. Despite the increases in provisions, the portfolio is well placed
to provide resilience in the face of the economic outlook.
In the commercial portfolio we are actively rolling off older balances, in particular in the commercial real estate
portfolio where balances fell to £681 million as at 31 December 2022 from £837 million in 2021. Across the commercial book
our average DTV is 55% (31 December 2021: 57%) and we maintain appropriate coverage ratios. The reduction in commercial ECL
stock from £108 million as at 31 December 2021 to £92 million as at year-end reflects the continued repayment of balances
combined with the write-off of a number of individually assessed impairments on larger loans.
We continue to evolve our ECL models and where necessary apply expert judgements in the form of PMOs and PMAs to captured
emerging factors not captured by the models. In the unsecured space this is aided by the 12 years of credit data that came
with the acquisition of RateSetter. This has seen the proportion of our expected credit losses made up of PMOs and PMAs
fall to 16% of as at 31 December 2022 down from 26% as at 31 December 2021.
Balance sheet
Lending
31 December
2022 2021 Change
£m £m %
Retail mortgages 7,649 6,723 14%
Consumer lending 1,480 890 66%
Commercial 4,160 4,846 (14%)
Gross lending 13,289 12,459 7%
ECL allowance (187) (169) 11%
Net lending 13,102 12,290 7%
Net lending increased by 7% year-on-year ending the year at £13,102 million (31 December 2021: £12,290 million) with retail
mortgages continuing to form the majority of lending at 58% of the portfolio (31 December 2021: 54%). During the year we
received over £4 billion in mortgage applications, up 182% on 2021. We completed over £2.1 billion of mortgage lending (up
178% year-on-year), making us a top 20 mortgage lender.
Our retail mortgage portfolio continues to be primarily focused on owner occupied loans. These make up 72% of balances as
at 31 December 2022 (31 December 2021: 75%) with the remainder consisting of retail buy-to-lets.
As at 31 December 2022 10% of our retail mortgages were variable rate (31 December 2021: 13%) with the remainder having an
weighted average life of 2.45 years before they reprice (31 December 2021: 1.95 years).
We have continued to build our consumer lending proposition so that, as at 31 December 2022, consumer lending formed 11% of
gross lending, up from 7% as at 31 December 2021. As well as providing greater risk-adjusted returns than some of our
historic lending, our unsecured personal loans have relatively short lives, allowing us to replace this lending more
regularly as interest rates rise.
Commercial balances fell 14% to £4,160 million (31 December 2021: £4,846 million) reflecting active portfolio management
combined with the roll-off of COVID-19 related government-backed lending balances. As at 31 December 2022 government-backed
lending made up 36% of our commercial term lending portfolio (31 December 2021: 37%), the majority consisting of amounts
lent under the Bounce Back Loan Scheme (BBLS). During the year we claimed back £349 million (2021: n/a) in respect of
defaulted BBLS loans. We continue to maximise recoveries on these loans to minimise taxpayer losses, and we received a
green audit from the British Business Bank during the year for our collections and recovery activity.
Investment securities
In 2022 we took the opportunity presented by rising gilt yields to redeploy surplus cash balances into capital-efficient
treasury assets.
As a result of this combined with our lending growth and the active reduction of high-cost fixed deposits, cash and
balances at the Bank of England fell from £3,568 million at the end of 2021 to £1,956 million as at 31 December 2022, with
investment securities rising to £5,914 million (31 December 2021: £5,574 million).
Interest income earned on investment securities during the year rose from £23.2 million to £67.6 million.
Our investment securities remain high quality with 68% having a AAA credit rating (31 December 2021: 73%). The remaining
investment securities are all AA- or higher, the majority of which consists of UK gilts.
Other assets
Intangible assets reduced 11% as the pace of investment slowed, in line with our transformation plan.
Property, plant and equipment balances continued to fall as we retained our pause on future store growth. This led to
depreciation charges for the year offsetting the small level of additions in respect of the Leicester store which opened at
the start of 2022 and the purchase of two freeholds during the year. Over the course of our transformation plan we have
added 10 freehold and long-lease stores, with these now making up 38% of our store estate; providing us with greater
flexibility over these sites and reducing our long-term liabilities.
Deposits
31 December
2022 2021 Change
£m £m %
Retail customer (excluding retail partnerships) 5,797 6,713 (14%)
Retail partnership 1,949 1,814 7%
Commercial customers (excluding SMEs) 3,188 3,157 1%
SMEs 5,080 4,764 7%
Total customer deposits 16,014 16,448 (3%)
Of which:
Demand: current accounts 7,888 7,318 8%
Demand: savings accounts 7,501 7,684 (2%)
Fixed term: savings accounts 625 1,446 (57%)
Deposit balances fell 3% year-on-year to £16,014 million (31 December 2021: £16,448 million) as we continued to allow fixed
rate balances to roll-off while continuing to acquire more business and personal current accounts during the year.
As at 31 December 2022 current accounts made up 49% of deposits (31 December 2021: 44%). This aided in our cost of deposits
falling from 0.24% to 0.20%. The base rates rises during the year have seen our interest expense on savings accounts
increase, albeit at a lower rate than the base rate increases, reflecting the quality of our deposits and the value of our
model.
Wholesale funding and liquidity
We remain largely deposit funded with a loan-to-deposit ratio as at 31 December 2022 of 82% (31 December 2021: 75%).
Alongside our deposit base we continue to utilise wholesale funding in the form of the Bank of England’s Term Funding
Scheme with additional incentives for SMEs (TFSME). The cost of this funding is linked directly to the base rate and
therefore has risen from £4.0 million in 2021 to £55.5 million in 2022. Despite this increase, it remains an additional
stable cost of funding and is accretive to net interest income. Our TFSME drawdowns will start to mature in 2024 and
continue through until 2027.
Lease liabilities
Minimum lease payments as at
31 December 2022
£m
Within one year 24
One to five years 88
Five to 10 years 92
Over 10 years 80
Lease liabilities fell by 8% during the year to £248 million as at 31 December 2022 (31 December 2021: £269 million)
reflecting the continued pay down of our leases, combined with the freehold purchases in the year as well as the
surrendering of the lease on one of the sites we closed.
Our leases have an average remaining minimum term of 11 years, with the majority of our minimum lease payments falling
within the next 10 years, meaning as our estate matures our lease liabilities will continue to decrease.
Taxation
We recognised a statutory tax charge of £2.0 million (2021: charge of £3.1 million). The small tax charge results primarily
from current year losses for which no deferred tax asset is being recognised as well as statutory loss being adjusted for
non-deductible expenses.
We have a total of £859 million of brought forward tax losses on which we are not recognising a deferred tax asset of £215
million. We expect to re-recognise these assets on the balance sheet in the coming years as we establish a track record of
sustainable profitability. The fact we are not currently recognising these tax losses does not limit our ability to utilise
them and there is no time limit beyond which they expire.
In 2022 we made a total tax contribution of £143.7 million (2021: £152.5 million) made up of £76.0 million (2021: £91.6
million) taxes we paid and a further £67.7 million (2021: £60.9 million) of taxes we collected.
Liquidity
Our liquidity position continues to be strong and we continue to hold large amounts of high-quality liquid assets which
totalled £4,976 million as at 31 December 2022 (31 December 2021: £6,900 million).
We ended the year with a liquidity coverage ratio of 213% (31 December 2021: 281%) and a net stable funding ratio of 134%
(31 December 2021: n/a), both significantly ahead of requirements.
Capital
Overview
We ended the year with CET1, Tier 1 and total capital plus MREL ratios of 10.3%, 10.3% and 17.7% respectively (31 December
2021: 12.6%, 12.6% and 20.5%).
2022 2021 Change
£m £m %
CET1 capital 819 936 (13%)
RWAs 7,990 7,454 7%
CET1 ratio 10.3% 12.6% (230bps)
Total regulatory capital ratio 13.4% 15.9% (250bps)
Total regulatory capital + MREL ratio 17.7% 20.5% (280bps)
UK regulatory leverage ratio 4.2% 5.2% (100bps)
In October 2021 the Bank of England’s Financial Policy Committee and the PRA published their changes to the UK leverage
ratio framework. The changes, which came into effect from 1 January 2022, mean we are now only subject to the UK leverage
ratio. The comparative figure of 5.2% differs to the regulatory ratio of 4.4% disclosed last year as it reflects the
revised basis of calculation, which excludes claims on central banks.
We continue to operate in capital buffers although we remained above regulatory minima throughout 2022 and our return to
profitability combined with constraining lending growth should see us return to steady capital generation.
We remain engaged with the PRA in respect of our capital position as well as in relation to our IRB application, starting
with our residential mortgage portfolio, which we continue to progress.
Capital requirements
Minimum requirement including buffers
31 December 2022
CET1 8.3%
Tier 1 9.9%
Total Capital + MREL 20.5%
Excludes any confidential buffer, where applicable.
Our capital requirement reduced during the year following the decision in June by the PRA to reduce our Pillar 2A capital
requirement from 1.11% to 0.50% and the Bank of England agreeing that our binding MREL requirement applicable from 27 June
2022 would be equal to the lower of:
• 18% of RWAs.
• Two times the sum of our Pillar 1 and Pillar 2A.
In December the PRA confirmed a further reduction to our Pillar 2A capital requirement from 0.50% to 0.36% effective from 1
January 2023, meaning that our MREL requirement (excluding buffers) reduced further to 16.7%.
Capital movements
Total regulatory capital + MREL ratio
1 January 2022 20.5%
Lending volume & mix (1.5%)
Software add-back reversal (0.8%)
Profit & loss account ex-ECL (0.4%)
Profit & loss account ECL (0.5%)
Intangibles investment and other 0.4%
31 December 2022 17.7%
On 1 January 2022 software assets reverted to being deducted from capital, reducing our CET1 and MREL ratios by 0.8% and
0.7% respectively.
At the same time the original IFRS 9 ‘Financial Instruments’ transitional relief was reduced from 50% to 25% along with the
COVID-19 transitionary relief which moved from 100% to 75%, reducing CET1 and MREL by 0.3%. A further 25% reduction in the
transitional reliefs occurred on 1 January 2023, leading a further reduction in our CET1 and MREL ratios of 0.4% and 0.3%
respectively.
Risk-weighted assets ended the period at £7,990 million up 7% from £7,454 million at 31 December 2021, reflecting our
lending growth and change in asset mix during the year.
Holding company
We are working to implement our holding company (Metro Bank Holdings PLC) as part of our end-state MREL requirements. This
will be in place by June 2023.
Upon implementation of the holding company the Bank of England’s Resolution Directorate has agreed to provide a temporary,
time-limited, adjustment for our Tier 2 Notes. This will see them continue to contribute to our MREL requirements up until
26 June 2025, although they will continue to be held by Metro Bank PLC.
Our Tier 2 Notes have a one-time call date in June 2023 and, given the adjustment we do not expect to exercise the call
provision, unless it would be economically rational to do so. By not calling these notes their Tier 2 eligibility amortises
at a rate of 20% per year.
In line with its conditions of issue, our existing MREL Notes will ‘flip up’ to Metro Bank Holdings PLC and be
‘back-to-backed’ by internal MREL issued down to Metro Bank PLC, which will remain our main operating company.
Other than owning Metro Bank PLC, being the new listed entity and holding our external capital, Metro Bank Holdings PLC
will undertake limited activities.
Looking ahead
2022 has been a year of clear progress as our turnaround plan completed. I am delighted to have joined the Metro Bank team
as we build on the hard work of the past three years.
From my first few months in the role I can see clearly that the Metro Bank model works. Our customer service focused model
is ideally suited to a normalised rate environment, and with the acquisition of RateSetter we now have the asset
flexibility to generate yield if interest rates fall again.
As we focus on our next set of strategic priorities our attention will be serving the needs of our customers, while
continuing to optimise our balance sheet to both build and maximise our return on regulatory capital, and maintain our
prudent approach to liquidity management.
Alongside this will be a renewed emphasis on achieving responsible and sustainable profitable growth through building
front-book yields, carefully controlling deposit pricing and adopting a disciplined approach to managing the inflationary
pressures in our cost base.
Although we will continue to operate within our capital buffers in the short-term, our return to profitability and our
disciplined approach to asset origination will see us protect our capital ratios and position us for future growth, both of
which will be important factors in allowing us to ultimately restore our capital levels back above buffers.
Aiding our delivery of this will be our continued investments in infrastructure. This includes preparing for the proposed
enhancements to internal control requirements under the revised UK Corporate Governance Code which will see us continue to
invest in our controls both within finance and across the Bank, building on the work that has already been undertaken over
the past few years.
We remain cautious in our outlook, given the political and economic uncertainty, however, we believe the Bank is in a good
place to be able to respond to any further headwinds in the form of market volatility or economic downturn.
Risk review
In line with the UK Corporate Governance Code requirements, we have performed a robust assessment of the principal and
emerging risks we face, including those that could result in events or circumstances that might threaten our business
model, future performance, solvency or liquidity, and reputation. In deciding on the classification of principal risks, we
considered the potential impact and probability of the related events and circumstances and the timescale over which they
may occur.
An overview of the principal risks and how they have changed over the year are set out below.
Principal risk Definition Change in 2022
We continue to take a prudent approach to
origination and our arrears profile and ECL
reflect the quality of our lending. Arrears
rates remain stable across both unsecured
consumer lending and residential mortgages,
which are both areas in which we have seen
strong growth in 2022. Our new asset quality is
strong with a lower LTV profile for mortgages
The risk of financial loss should our than 2021. Our consumer portfolio is geared
Credit risk borrowers or counterparties fail to Risk increased towards prime customers with strong borrower
fulfil their contractual obligations income.
in full and on time.
We continue to focus on monitoring emerging
trends including the impact of cost of living
pressures on our customers. These trends have
increased the level of credit risk across the
industry and are reflected in our ECL. Given the
ongoing macroeconomic volatility, we have
ensured we have processes in place to support
customers in financial difficulty.
We continue to ensure that we have enough
capital to meet the minimum regulatory
requirements at all times, although continue to
operate within our capital buffers.
The risk that we fail to meet minimum
Capital risk regulatory capital (and MREL) Risk stable We remain focused on returning to sustainable
requirements. profitability, which combined with RWA
optimisation will see us start to generate
additional capital. Alongside this we are
working to deliver our new holding company,
which will allow any future debt issuances to be
undertaken in line with regulatory expectations.
The risk of financial loss or Overall, financial crime risk has remained
reputational damage due to regulatory stable during the year, however, our inherent
fines, restriction or suspension of sanctions risk exposure increased following
business, or cost of mandatory Russia’s invasion of Ukraine and the subsequent
Financial crime risk corrective action as a result of Risk stable sanctions which were imposed. While financial
failing to comply with prevailing crime continues to present a heightened risk,
legal and regulatory requirements ongoing enhancements made to our anti-money
relating to financial crime. laundering and sanctions controls enable us to
continue to improve our management of this risk.
Operational risk has remained broadly consistent
The risk that events arising from through 2022, although we continue to observe
inadequate or failed internal elevated risks in certain areas. These include
processes, people and systems, or cyber attacks and evolving modes of external
Operational risk from external events cause regulatory Risk stable fraud. During the year we focused on the
censure, reputational damage, technology and third party risks that could
financial loss, service disruption impact our operational resilience as well as
and/or detriment to our FANS. people risk which has increased owing to higher
attrition rates in roles across the banking
industry.
Regulatory risk remains unchanged and continues
to be a key area of focus as a result of the
ongoing volume and complexity of regulatory
change. We continue to place significant focus
on overseeing and ensuring compliance with
regulatory requirements and continue to have
The risk of regulatory sanction, open and constructive dialogue with our
financial loss and reputational regulators.
Regulatory risk damage as a result of failing to Risk stable
comply with relevant regulatory 2022 has also seen us substantially close out
requirements. our main legacy issues. In December 2022 the FCA
concluded its investigation into announcements
made in respect of RWA. The outcome was within
the range of outcomes we expected and we can now
put this legacy issue firmly behind us, having
greatly improved our reporting processes and
controls.
Our culture is focused on supporting our
customer. This sees us offer a relatively simple
range of products, which are easy for customers
to understand. Conduct risk increased in 2022 as
customers became increasingly vulnerable to the
challenges of the economic and social impacts of
The risk that our behaviours or the external environment, driven by the
Conduct risk actions result in unfair outcomes or Risk increased macroeconomic headwinds
detriment to customers and/or
undermines market integrity. The regulatory focus on the treatment of
customers in the retail banking sector remains
heightened, especially in relation to lending
decisions, those at risk of financial difficulty
and potential vulnerability. We are preparing to
implement Consumer Duty requirements in 2023 in
order to further strengthen our capabilities.
Strategic risk remained unchanged in the year.
We have considered the uncertainties and
potential challenges to our strategic risk in
The risk of having an insufficiently 2022 and beyond as part of the annual strategic
defined, flawed or poorly implemented and financial planning process.
strategy, a strategy that does not
adapt to political, environmental, We have also continued our work to understand
Strategic risk business and other developments Risk stable how to define, monitor, manage and report the
and/or a strategy that does not meet impact of climate change on our strategy,
the requirements and expectations of business and sustainability aspirations.
our stakeholders.
We consider our strategic risks on an ongoing
basis via our risk governance structure,
including a second line review of the risks
related to our annual Long Term Plan.
We use models to support a broad range of
business and risk management activities,
including informing business decisions and
The risk of potential loss and strategies, measuring, and mitigating risk,
regulatory non-compliance due to valuing exposures (including the calculation of
decisions that could be principally impairment), conducting stress testing, and
based on the output of models, due to measuring capital adequacy. Model risk remained
Model risk errors in the development, Risk stable stable during the year as we continued to
implementation, or use of such enhance our model governance and oversight to
models. mitigate against the risk from model changes,
including those arising from the impacts and
uncertainties related to the cost of living
crisis.
Liquidity risk is the risk that we Liquidity and funding risk remained stable
fail to meet our obligations as they throughout 2022, with liquidity management and
fall due. Funding Risk is the risk funding levels remaining strong. We ended the
Liquidity and funding that we cannot fund assets that are year with our liquidity coverage ratio at 213%
risk difficult to monetise at short notice Risk stable (31 December 2021: 281%) and our net stable
(i.e. illiquid assets) with funding funding ratio at 134% (31 December 2021: n/a).
that is behaviourally or
contractually long-term (i.e. stable
funding).
The risk of loss arising from Market risk remained stable throughout the year.
movements in market prices. Market In 2022 we continued to effectively manage the
risk is the risk posed to earnings, risk of mismatches between our fixed rate assets
Market risk economic value or capital that arises Risk stable and liabilities with this risk remaining low.
from changes in interest rates,
market prices or foreign exchange
rates.
Legal risk remained stable throughout 2022. We
The risk of loss, including to remain exposed to a range of legal risks in
reputation that can result from lack relation to our normal business activities. We
of awareness or misunderstanding of, minimise legal risk via a range of mitigants,
ambiguity in or reckless indifference including the use of in house and external legal
Legal risk to, the way law applies to the Risk stable expertise, appropriate policy documentation and
Directors, the business, its training related to specific legal requirements
relationships, processes, products and monthly reporting of metrics to measure
and services. compliance with our Legal Risk Appetite.
Consolidated statement of comprehensive income
For the year ended 31 December 2022
Years ended 31 December
2022 2021
Notes
£’million £’million
Interest income 2 563.7 405.7
Interest expense 2 (159.6) (110.4)
Net interest income 404.1 295.3
Fee and commission income 3 84.4 71.2
Fee and commission expense 3 (2.6) (1.6)
Net fee and commission income 81.8 69.6
Net gains on sale of assets – 9.4
Other income 37.6 44.2
Total income 523.5 418.5
General operating expenses 4 (467.6) (536.1)
Depreciation and amortisation 9, 10 (77.0) (80.2)
Impairment and write-offs of property, plant, equipment and intangible assets 9, 10 (9.7) (24.9)
Total operating expenses (554.3) (641.2)
Expected credit loss expense 12 (39.9) (22.4)
Loss before tax (70.7) (245.1)
Taxation 5 (2.0) (3.1)
Loss for the year (72.7) (248.2)
Other comprehensive expense for the year
Items which will be reclassified subsequently to profit or loss:
Movement in respect of investment securities held at FVOCI (net of tax):
• changes in fair value (7.6) (8.1)
• fair value changes transferred to the income statement on disposal – (0.3)
Total other comprehensive expense (7.6) (8.4)
Total comprehensive loss for the year (80.3) (256.6)
Loss per share
Basic (pence) 16 (42.2) (144.0)
Diluted (pence) 16 (42.2) (144.0)
Consolidated balance sheet
As at 31 December 2022
Years ended 31 December
2022 2021
Notes
£’million £’million
Cash and balances with the Bank of England 1,956 3,568
Loans and advances to customers 7 13,102 12,290
Investment securities held at fair value through other comprehensive income 8 571 798
Investment securities held at amortised cost 8 5,343 4,776
Financial assets held at fair value through profit and loss 1 3
Derivative financial assets 23 1
Property, plant and equipment 9 748 765
Intangible assets 10 216 243
Prepayments and accrued income 85 68
Assets classified as held for sale 1 –
Other assets 73 76
Total assets 22,119 22,588
Deposits from customers 16,014 16,448
Deposits from central banks 3,800 3,800
Debt securities 571 588
Repurchase agreements 238 169
Derivative financial liabilities 26 11
Lease liabilities 11 248 269
Deferred grants 17 19
Provisions 7 15
Deferred tax liability 5 12 12
Other liabilities 230 222
Total liabilities 21,163 21,553
Called-up share capital – –
Share premium 1,964 1,964
Retained losses (1,015) (942)
Other reserves 7 13
Total equity 956 1,035
Total equity and liabilities 22,119 22,588
Consolidated statements of changes in equity
For the year ended 31 December 2022
Called-up Share
Share Retained FVOCI Total
share option
premium losses reserve equity
capital reserve
£’million £’million £’million £’million
£’million £’million
Balance as at 1 January 2022 – 1,964 (942) (5) 18 1,035
Loss for the year – – (73) – – (73)
Other comprehensive expense (net of tax) relating to investment – – – (8) – (8)
securities held at FVOCI
Total comprehensive loss – – (73) (8) – (81)
Net share option movements – – – – 2 2
Balance as at 31 December 2022 – 1,964 (1,015) (13) 20 956
Balance as at 1 January 2021 – 1,964 (694) 3 16 1,289
Loss for the year – – (248) – – (248)
Other comprehensive expense (net of tax) relating to investment – – – (8) – (8)
securities held at FVOCI
Total comprehensive loss – – (248) (8) – (256)
Net share option movements – – – – 2 2
Balance as at 31 December 2021 – 1,964 (942) (5) 18 1,035
Consolidated cash flow statement
For the year ended 31 December 2022
Years ended 31 December
2022 2021
Notes
£’million £’million
Reconciliation of loss before tax to net cash flows from operating activities:
Loss before tax (71) (245)
Adjustments for non-cash items 17 (273) (182)
Interest received 553 409
Interest paid (124) (126)
Changes in other operating assets (852) 2,649
Changes in other operating liabilities (418) 349
Net cash (outflows)/inflows from operating activities (1,185) 2,854
Cash flows from investing activities
Sales, redemptions and paydowns of investment securities 857 1,269
Purchase of investment securities (1,206) (3,438)
Purchase of property, plant and equipment 9 (29) (42)
Purchase and development of intangible assets 10 (24) (39)
Net cash outflows from investing activities (402) (2,250)
Cash flows from financing activities
Repayment of capital element of leases 11 (25) (29)
Net cash outflows from financing activities (25) (29)
Net (decrease)/increase in cash and cash equivalents (1,612) 575
Cash and cash equivalents at start of year 3,568 2,993
Cash and cash equivalents at end of year 1,956 3,568
1. Basis of preparation and significant accounting policies
Basis of preparation
The Group’s consolidated financial statements have been prepared in accordance with UK adopted International Accounting
Standards (IAS), International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (IASB) and the Companies Act 2006 applicable to companies reporting under IFRS. They were authorised by the Board for
issue on 2 March 2023.
Changes in accounting policy and disclosures
During the period there have not been any changes in accounting policy or disclosures that have had a material impact on
our financial statements.
2. Net interest income
Interest income
2022 2021
£’million £’million
Cash and balances held with the Bank of England 33.0 4.4
Loans and advances to customers 462.2 382.3
Investment securities held at amortised cost 62.9 20.6
Investment securities held at FVOCI 4.7 2.6
Interest income calculated using the effective interest rate method 562.8 409.9
Derivatives in hedge relationships 0.9 (4.2)
Total interest income 563.7 405.7
Interest expense
2022 2021
£’million £’million
Deposits from customers 32.9 40.1
Deposits from central banks 55.5 4.0
Debt securities 48.7 48.7
Lease liabilities 14.4 16.7
Repurchase agreements 3.4 2.2
Interest expense calculated using the effective interest rate method 154.9 111.7
Derivatives in hedge relationships 4.7 (1.3)
Total interest expense 159.6 110.4
3. Net fee and commission income
2022 2021
£’million £’million
Service charges and other fee income 30.9 25.5
Safe deposit box income 16.5 15.1
ATM and interchange fees 37.0 30.6
Fee and commission income 84.4 71.2
Fee and commission expense (2.6) (1.6)
Total net fee and commission income 81.8 69.6
4. General operating expenses
2022 2021
£’million £’million
People costs 236.6 239.0
Information technology costs 62.2 57.2
Occupancy costs 30.8 32.9
Money transmission and other banking-related costs 48.7 50.6
Transformation costs 3.3 8.9
Remediation costs 5.3 45.9
Capability and Innovation Fund costs 1.3 8.1
Legal and regulatory fees 7.0 6.6
Professional fees 38.4 52.2
Printing, postage and stationery costs 6.2 5.6
Travel costs 1.6 1.1
Marketing costs 5.0 4.7
Business acquisition and integration costs – 2.4
Holding company insertion costs 1.8 –
Other 19.4 20.9
Total general operating expenses 467.6 536.1
5. Taxation
Tax expense
2022 2021
£’million £’million
Current tax
Current tax – (0.5)
Adjustment in respect of prior years – 0.6
Total current tax credit – 0.1
Deferred tax
Origination and reversal of temporary differences (1.5) 3.4
Effect of changes in tax rates (0.7) (5.4)
Adjustment in respect of prior years 0.2 (1.2)
Total deferred tax expense (2.0) (3.2)
Total tax expense (2.0) (3.1)
Reconciliation of the total tax expense
Effective Effective
2022 2021
tax rate tax rate
£’million £’million
% %
Accounting loss before tax (70.7) (245.1)
Tax expense at statutory tax rate of 19% (2021: 19%) 13.4 19.0% 46.6 19.0%
Tax effects of:
Non-deductible expenses – depreciation on non-qualifying fixed assets (2.5) (3.5%) (2.7) (1.1%)
Non-deductible expenses – investment property impairment (0.1) (0.1%) (1.8) (0.8%)
Non-deductible expenses – remediation (0.6) (0.8%) (7.1) (2.9%)
Non-deductible expenses – other (0.4) (0.6%) (0.1) –
Impact of intangible asset write-off on research and development deferred tax 0.3 0.4% 3.0 1.2%
liability
Share-based payments 0.1 0.1% (0.3) (0.1%)
Adjustment in respect of prior years 0.2 0.2% (0.6) (0.3%)
Current year losses for which no deferred tax asset has been recognised (11.7) (16.5%) (34.7) (14.1%)
Effect of changes in tax rates (0.7) (1.0%) (5.4) (2.2%)
Tax expense reported in the consolidated income statement (2.0) (2.8%) (3.1) (1.3%)
Deferred tax assets
31 December 2022
Investment
Share- Property,
Unused securities Intangible
based plant and Total
tax losses and assets
payments equipment £’million
£’million impairments £’million
£’million £’million
£’million
Deferred tax assets 12 3 1 – – 16
Deferred tax liabilities – 4 – (26) (6) (28)
Deferred tax liabilities (net) 12 7 1 (26) (6) (12)
1 January 13 5 – (23) (7) (12)
Income statement (1) – 1 (3) 1 (2)
Other comprehensive income – 2 – – – 2
31 December 12 7 1 (26) (6) (12)
31 December 2021
Investment
Share- Property,
Unused securities Intangible
based plant and Total
tax losses and assets
payments equipment £’million
£’million impairments £’million
£’million £’million
£’million
Deferred tax assets 13 3 – – – 16
Deferred tax liabilities – 2 – (23) (7) (28)
Deferred tax liabilities (net) 13 5 – (23) (7) (12)
1 January 12 2 – (16) (10) (12)
Income statement 1 – – (7) 3 (3)
Other comprehensive income – 3 – – – 3
31 December 13 5 – (23) (7) (12)
Unrecognised deferred tax assets
We have total unused tax losses of £859 million for which a deferred tax asset of £215 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 our
forecasts and prevailing market conditions. There is no time limit beyond which these losses expire.
6. Financial instruments
Our financial instruments primarily comprise customer deposits, loans and advances to customers and investment securities,
all of which arise as a result of our normal operations.
The main financial risks arising from our financial instruments are credit risk, liquidity risk and market risks (price and
interest rate risk).
The financial instruments we hold are simple in nature and we do not consider that we have made any significant or material
judgements relating to the classification and measurement of financial instruments under IFRS 9.
Cash and balances with the Bank of England, trade and other receivables, trade and other payables and other assets and
liabilities which meet the definition of financial instruments are not included in the following tables.
Classification of financial instruments
31 December 2022
Fair value
through Amortised
FVOCI Total
profit and cost
£’million £’million
loss £’million
£’million
Assets
Loans and advances to customers – – 13,102 13,102
Investment securities – 571 5,343 5,914
Financial assets held as fair value through profit and loss 1 – – 1
Derivative financial assets 23 – – 23
Liabilities
Deposits from customers – – 16,014 16,014
Deposits from central bank – – 3,800 3,800
Debt securities – – 571 571
Derivative financial liabilities 26 – – 26
Repurchase agreements – – 238 238
31 December 2021
Fair value
through Amortised
FVOCI Total
profit cost
£’million £’million
and loss £’million
£’million
Assets
Loans and advances to customers – – 12,290 12,290
Investment securities – 798 4,776 5,574
Financial assets held as fair value through profit and loss 3 – – 3
Derivative financial assets 1 – – 1
Liabilities
Deposits from customers – – 16,448 16,448
Deposits from central bank – – 3,800 3,800
Debt securities – – 588 588
Derivative financial liabilities 11 – – 11
Repurchase agreements – – 169 169
7. Loans and advances to customers
31 December 2022 31 December 2021
Gross Net Gross Net
ECL ECL
carrying carrying carrying carrying
allowance allowance
amount amount amount amount
£’million £’million
£’million £’million £’million £’million
Consumer lending 1,480 (75) 1,405 890 (42) 848
Retail mortgages 7,649 (20) 7,629 6,723 (19) 6,704
Commercial lending (excluding asset and invoice finance) 3,748 (84) 3,664 4,526 (102) 4,424
Asset and invoice finance 412 (8) 404 320 (6) 314
Total loans and advances to customers 13,289 (187) 13,102 12,459 (169) 12,290
An analysis of the gross loans and advances by product category is set out below:
31 December 31 December
2022 2021
£’million £’million
Overdrafts 60 66
Credit cards 19 13
Term loans 1,401 811
Total consumer lending 1,480 890
Residential owner occupied 5,507 5,022
Retail buy-to-let 2,142 1,701
Total retail mortgages 7,649 6,723
Total retail lending 9,129 7,613
Professional buy-to-let 731 950
Bounce back loans 801 1,304
Coronavirus business interruption loans 127 165
Recovery loan scheme 385 157
Other term loans 1,578 1,791
Commercial term loans 3,622 4,367
Overdrafts and revolving credit facilities 122 156
Credit cards 4 3
Asset and invoice finance 412 320
Total commercial lending 4,160 4,846
Gross loans and advances to customers 13,289 12,459
Amounts include:
Repayable at short notice 156 181
Recovery loan scheme includes £97 million acquired from third parties under forward flow arrangements (31 December 2021:
£66 million). The loans are held in a trust arrangement in which we hold 99% of the beneficial interest, with the issuer
retaining the remaining 1% (the trust retains the legal title loans).
8. Investment securities
31 December
31 December
2021
2022
£’million
£’million
Investment securities held at FVOCI 571 798
Investment securities held at amortised cost 5,343 4,776
Total investment securities 5,914 5,574
Investment securities held at FVOCI
31 December 31 December
2022 2021
£’million £’million
Sovereign bonds 215 566
Residential mortgage-backed securities 38 38
Covered bonds 152 156
Multi-lateral development bank bonds 166 38
Total investment securities held at FVOCI 571 798
Investment securities held at amortised cost
31 December
31 December
2022
2021
£’million
£’million
Sovereign bonds 1,717 1,198
Residential mortgage-backed securities 1,095 1,687
Covered bonds 542 442
Multi-lateral development bank bonds 1,821 1,289
Asset backed securities 168 160
Total investment securities held at amortised cost 5,343 4,776
9. Property, plant and equipment
Freehold Fixtures,
Investment Leasehold Right-of-use
land and fittings and IT Hardware Total
property improvements assets
buildings equipment £’million £’million
£’million £’million £’million
£’million £’million
Cost
1 January 2022 18 280 341 24 1 295 959
Additions – – 22 – 7 1 30
Disposals – – – – – (13) (13)
Write-offs – (10) – (2) – – (12)
Moved to held for sale (6) – – – – – (6)
Transfers – (9) 9 – – – –
31 December 2022 12 261 372 22 8 283 958
Accumulated depreciation
1 January 2022 12 68 28 19 – 67 194
Depreciation charge – 12 5 3 2 13 35
Impairments 1 – – – – – 1
Disposals – – – – – (3) (3)
Write-offs – (10) – (2) – – (12)
Moved to held for sale (5) – – – – – (5)
Transfers – (1) 1 – – – –
31 December 2022 8 69 34 20 2 77 210
Net book value 4 192 338 2 6 206 748
Freehold Fixtures,
Investment Leasehold Right-of-use
land and fittings and IT Hardware Total
property improvements assets
buildings equipment £’million £’million
£’million £’million £’million
£’million £’million
Cost
1 January 2021 18 292 298 25 11 330 974
Additions – 12 29 – 1 (4) 38
Disposals – – – – – (29) (29)
Write-offs – (10) – (1) (11) (2) (24)
Transfers – (14) 14 – – – –
31 December 2021 18 280 341 24 1 295 959
Accumulated depreciation
1 January 2021 12 66 21 15 7 47 168
Depreciation charge – 14 4 4 2 18 42
Impairments – – – – – 6 6
Disposals – – – – – (4) (4)
Write-offs – (9) – – (9) – (18)
Transfers – (3) 3 – – – –
31 December 2021 12 68 28 19 – 67 194
Net book value 6 212 313 5 1 228 765
10. Intangible assets
Goodwill Brands Software Total
£’million £’million £’million £’million
Cost
1 January 2022 10 2 336 348
Additions – – 24 24
Write-offs – – (22) (22)
31 December 2022 10 2 338 350
Accumulated amortisation
1 January 2022 – – 105 105
Amortisation charge – – 42 42
Write-offs – – (13) (13)
31 December 2022 – – 134 134
Net book value 10 2 204 216
Goodwill Brands Software Total
£’million £’million £’million £’million
Cost
1 January 2021 10 2 328 340
Additions – – 39 39
Write-offs – – (32) (32)
Deferred grant – – 1 1
31 December 2021 10 2 336 348
Accumulated amortisation
1 January 2021 – – 86 86
Amortisation charge – – 38 38
Impairments – – 7 7
Write-offs – – (26) (26)
31 December 2021 – – 105 105
Net book value 10 2 231 243
11. Leases
Lease liabilities
2022 2021
£’million £’million
1 January 269 327
Additions and modifications 1 (6)
Disposals (11) (40)
Lease payments made (25) (29)
Interest on lease liabilities 14 17
31 December 248 269
Minimum lease payments
31 December 31 December
2022 2021
£’million £’million
Within one year 24 25
Due in one to five years 88 92
Due in more than five years 172 219
Total 284 336
12. Expected credit losses and credit risk
Expected credit loss expense
2022 2021
£’million £’million
Retail mortgages1 1 (7)
Consumer lending1 33 17
Commercial lending (excluding asset and invoice finance) 1 (18) 4
Asset and invoice finance1 2 1
Investment securities 1 –
Write-offs and other movements 21 7
Total expected credit loss expense 40 22
1. Represents the movement in ECL stock during the year and therefore excludes write-offs which are shown separately.
The write-offs and other movements during 2022 primarily related to the write-off of a small number of large commercial
single name exposures. These amounts had previously been fully provided for.
Loss allowance
Total loans and advances to customers
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage Stage POCI Total Stage Stage Stage POCI Total Stage 1 Stage Stage POCI Total
2 3 1 2 3 2 3
1 January 2022 10,071 1,925 462 1 12,459 (47) (49) (73) – (169) 10,024 1,876 389 1 12,290
Transfers
to/(from) Stage 517 (504) (13) – – (13) 13 – – – 504 (491) (13) – –
11
Transfers
to/(from) Stage (451) 458 (7) – – 2 (2) – – – (449) 456 (7) – –
2
Transfers
to/(from) Stage (124) (73) 197 – – 1 7 (8) – – (123) (66) 189 – –
3
Net
remeasurement – – – – – 10 (10) (15) – (15) 10 (10) (15) – (15)
due to
transfers2
New lending3 3,157 742 31 – 3,930 (30) (15) (11) – (56) 3,127 727 20 – 3,874
Repayments,
additional
drawdowns (604) (107) (26) (1) (738) – – – – – (604) (107) (26) (1) (738)
and interest
accrued
Derecognitions4 (1,717) (353) (292) – (2,362) 7 10 34 – 51 (1,710) (343) (258) – (2,311)
Changes to
model – – – – – 4 (5) 3 – 2 4 (5) 3 – 2
assumptions5
31 December 10,849 2,088 352 – 13,289 (66) (51) (70) – (187) 10,783 2,037 282 – 13,102
2022
Off-balance
sheet items
Commitments and 1,115 – 1,115
guarantees
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage Stage POCI Total Stage Stage Stage POCI Total Stage 1 Stage Stage POCI Total
2 3 1 2 3 2 3
1 January 2021 10,175 1,812 257 – 12,244 (30) (69) (55) – (154) 10,145 1,743 202 – 12,090
Transfers to/(from) 559 (537) (22) – – (16) 16 – – – 543 (521) (22) – –
Stage 1
Transfers to/(from) (772) 787 (15) – – 2 (3) 1 – – (770) 784 (14) – –
Stage 2
Transfers to/(from) (202) (110) 312 – – – 6 (6) – – (202) (104) 306 – –
Stage 3
Net remeasurement due to – – – – – 11 (11) (19) – (19) 11 (11) (19) – (19)
transfers
New lending 2,157 357 18 1 2,533 (23) (13) (10) – (46) 2,134 344 8 1 2,487
Repayments, additional
drawdowns (318) (57) (16) – (391) – – – – – (318) (57) (16) – (391)
and interest accrued
Derecognitions (1,528) (327) (72) – (1,927) 5 11 20 – 36 (1,523) (316) (52) – (1,891)
Changes to model – – – – – 4 14 (4) – 14 4 14 (4) – 14
assumptions
31 December 2021 10,071 1,925 462 1 12,459 (47) (49) (73) – (169) 10,024 1,876 389 1 12,290
Off-balance sheet items
Commitments and 1,245 – 1,245
guarantees
1. Represents stage transfers prior to any ECL remeasurements.
2. Represents the remeasurement between the 12 month and lifetime ECL due to stage transfer. In addition it includes any
ECL change resulting from model assumptions and forward-looking information on these loans.
3. Represents the increase in balances resulting from loans and advances that have been newly originated, purchased or
renewed as well as any ECL that has been recognised in relation to these loans during the year.
4. Represents the decrease in balances resulting from loans and advances that have been fully repaid, sold or written off.
5. Represents the change in ECL to those loans that remain within the same stage through the year.
Retail mortgages
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage POCI Total Stage Stage Stage POCI Total Stage 1 Stage Stage POCI Total
3 1 2 3 2 3
1 January 2022 5,546 1,063 114 – 6,723 (2) (12) (5) – (19) 5,544 1,051 109 – 6,704
1 January 2022 293 (281) (12) – – (4) 4 – – – 289 (277) (12) – –
Transfers to/(from) (199) 205 (6) – – – – – – – (199) 205 (6) – –
Stage 1
Transfers to/(from) (16) (22) 38 – – – 1 (1) – – (16) (21) 37 – –
Stage 2
Transfers to/(from) – – – – – 4 (1) – – 3 4 (1) – – 3
Stage 3
Net remeasurement 1,666 549 1 – 2,216 (3) (7) – – (10) 1,663 542 1 – 2,206
due to transfers
New lending (130) (22) (5) – (157) – – – – – (130) (22) (5) – (157)
Repayments,
additional
drawdowns (965) (149) (19) – (1,133) (1) 2 3 – 4 (966) (147) (16) – (1,129)
and interest
accrued
Derecognitions – – – – – – 2 – – 2 – 2 – – 2
31 December 2022 6,195 1,343 111 – 7,649 (6) (11) (3) – (20) 6,189 1,332 108 – 7,629
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage Stage POCI Total Stage Stage Stage POCI Total Stage 1 Stage Stage POCI Total
2 3 1 2 3 2 3
1 January 2021 5,911 863 118 – 6,892 (5) (17) (4) – (26) 5,906 846 114 – 6,866
Transfers to/(from) 362 (345) (17) – – (8) 8 – – – 354 (337) (17) – –
Stage 1
Transfers to/(from) (469) 477 (8) – – 1 (1) – – – (468) 476 (8) – –
Stage 2
Transfers to/(from) (19) (26) 45 – – – 1 (1) – – (19) (25) 44 – –
Stage 3
Net remeasurement due to – – – – – 7 (1) – – 6 7 (1) – – 6
transfers
New lending 894 233 – – 1,127 (1) (4) – – (5) 893 229 – – 1,122
Repayments, additional
drawdowns (131) (17) (2) – (150) – – – – – (131) (17) (2) – (150)
and interest accrued
Derecognitions (1,002) (122) (22) – (1,146) 1 1 1 – 3 (1,001) (121) (21) – (1,143)
Changes to model – – – – – 3 1 (1) – 3 3 1 (1) – 3
assumptions
31 December 2021 5,546 1,063 114 – 6,723 (2) (12) (5) – (19) 5,544 1,051 109 – 6,704
Consumer lending
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage Stage Stage POCI Total Stage 1 Stage Stage POCI Total
1 2 3 2 3
1 January 2022 786 82 21 1 890 (18) (8) (16) – (42) 768 74 5 1 848
Transfers to/(from) 19 (19) – – – (2) 2 – – – 17 (17) – – –
Stage 1
Transfers to/(from) (96) 96 – – – 1 (1) – – – (95) 95 – – –
Stage 2
Transfers to/(from) (21) (6) 27 – – 1 2 (3) – – (20) (4) 24 – –
Stage 3
Net remeasurement due – – – – – 2 (3) (15) – (16) 2 (3) (15) – (16)
to transfers
New lending 806 156 12 – 974 (15) (7) (9) – (31) 791 149 3 – 943
Repayments, additional
drawdowns (144) (41) (6) (1) (192) – – – – – (144) (41) (6) (1) (192)
and interest accrued
Derecognitions (170) (18) (4) – (192) 5 1 1 – 7 (165) (17) (3) – (185)
Changes to model – – – – – 5 2 – – 7 5 2 – – 7
assumptions
31 December 2022 1,180 250 50 – 1,480 (21) (12) (42) – (75) 1,159 238 8 – 1,405
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage POCI Total Stage Stage Stage POCI Total
3 1 2 3
1 January 2021 149 43 12 – 204 (6) (9) (10) – (25) 143 34 2 – 179
Transfers to/(from) 8 (8) – – – (1) 1 – – – 7 (7) – – –
Stage 1
Transfers to/(from) (6) 6 – – – – – – – – (6) 6 – – –
Stage 2
Transfers to/(from) (2) (3) 5 – – – 2 (2) – – (2) (1) 3 – –
Stage 3
Net remeasurement due – – – – – 1 – (2) – (1) 1 – (2) – (1)
to transfers
New lending 697 66 12 1 776 (16) (7) (9) – (32) 681 59 3 1 744
Repayments, additional
drawdowns (20) (9) (1) – (30) – – – – – (20) (9) (1) – (30)
and interest accrued
Derecognitions (40) (13) (7) – (60) 1 2 7 – 10 (39) (11) – – (50)
Changes to model – – – – – 3 3 – – 6 3 3 – – 6
assumptions
31 December 2021 786 82 21 1 890 (18) (8) (16) – (42) 768 74 5 1 848
Commercial lending (excluding asset and invoice finance)
Our top 10 commercial exposures total £310 million (2021: £326 million), representing 8% (2021: 7%) of our total commercial
lending.
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage Stage Stage POCI Total Stage 1 Stage 2 Stage POCI Total
1 2 3 3
1 January 2022 3,425 775 326 – 4,526 (23) (28) (51) – (102) 3,402 747 275 – 4,424
Transfers 202 (201) (1) – – (7) 7 – – – 195 (194) (1) – –
to/(from) Stage 1
Transfers (148) 149 (1) – – 1 (1) – – – (147) 148 (1) – –
to/(from) Stage 2
Transfers (85) (45) 130 – – – 4 (4) – – (85) (41) 126 – –
to/(from) Stage 3
Net remeasurement – – – – – 4 (5) – – (1) 4 (5) – – (1)
due to transfers
New lending 485 36 17 – 538 (9) (1) (1) – (11) 476 35 16 – 527
Repayments,
additional
drawdowns (275) (42) (14) – (331) – – – – – (275) (42) (14) – (331)
and interest
accrued
Derecognitions (532) (184) (269) – (985) 2 6 29 – 37 (530) (178) (240) – (948)
Changes to model – – – – – (1) (9) 3 – (7) (1) (9) 3 – (7)
assumptions
31 December 2022 3,072 488 188 – 3,748 (33) (27) (24) – (84) 3,039 461 164 – 3,664
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage POCI Total Stage Stage Stage POCI Total
3 1 2 3
1 January 2021 3,843 906 125 – 4,874 (15) (43) (40) – (98) 3,828 863 85 – 4,776
Transfers to/(from) 189 (184) (5) – – (7) 7 – – – 182 (177) (5) – –
Stage 1
Transfers to/(from) (292) 299 (7) – – 1 (2) 1 – – (291) 297 (6) – –
Stage 2
Transfers to/(from) (179) (81) 260 – – – 3 (3) – – (179) (78) 257 – –
Stage 3
Net remeasurement due – – – – – 3 (9) (16) – (22) 3 (9) (16) – (22)
to transfers
New lending 427 58 6 – 491 (4) (2) (1) – (7) 423 56 5 – 484
Repayments, additional
drawdowns (120) (31) (12) – (163) – – – – – (120) (31) (12) – (163)
and interest accrued
Derecognitions (443) (192) (41) – (676) 2 8 11 – 21 (441) (184) (30) – (655)
Changes to model – – – – – (3) 10 (3) – 4 (3) 10 (3) – 4
assumptions
31 December 2021 3,425 775 326 – 4,526 (23) (28) (51) – (102) 3,402 747 275 – 4,424
Asset and invoice finance
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage POCI Total Stage Stage Stage POCI Total
3 1 2 3
1 January 2022 314 5 1 – 320 (4) (1) (1) – (6) 310 4 – – 314
Transfers to/(from) 3 (3) – – – – – – – – 3 (3) – – –
Stage 1
Transfers to/(from) (8) 8 – – – – – – – – (8) 8 – – –
Stage 2
Transfers to/(from) (2) – 2 – – – – – – – (2) – 2 – –
Stage 3
Net remeasurement due – – – – – – (1) – – (1) – (1) – – (1)
to transfers
New lending 200 1 1 – 202 (3) – (1) – (4) 197 1 – – 198
Repayments, additional
drawdowns (55) (2) (1) – (58) – – – – – (55) (2) (1) – (58)
and interest accrued
Derecognitions (50) (2) – – (52) 1 1 1 – 3 (49) (1) 1 – (49)
Changes to model – – – – – – – – – – – – – – –
assumptions
31 December 2022 402 7 3 – 412 (6) (1) (1) – (8) 396 6 2 – 404
Gross carrying amount Loss allowance Net carrying amount
£’million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage POCI Total Stage Stage Stage POCI Total
3 1 2 3
1 January 2021 272 – 2 – 274 (4) – (1) – (5) 268 – 1 – 269
Transfers to/(from) – – – – – – – – – – – – – – –
Stage 1
Transfers to/(from) (5) 5 – – – – – – – – (5) 5 – – –
Stage 2
Transfers to/(from) (2) – 2 – – – – – – – (2) – 2 – –
Stage 3
Net remeasurement due – – – – – – (1) (1) – (2) – (1) (1) – (2)
to transfers
New lending 139 – – – 139 (2) – – – (2) 137 – – – 137
Repayments, additional
drawdowns (47) – (1) – (48) – – – – – (47) – (1) – (48)
and interest accrued
Derecognitions (43) – (2) – (45) 1 – 1 – 2 (42) – (1) – (43)
Changes to model – – – – – 1 – – – 1 1 – – – 1
assumptions
31 December 2021 314 5 1 – 320 (4) (1) (1) – (6) 310 4 – – 314
Credit risk exposures
Retail mortgages
31 December 2022 31 December 2021
Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI
£’million 12-month Lifetime Lifetime Lifetime Total 12-month Lifetime Lifetime Lifetime Total
ECL ECL ECL ECL ECL ECL ECL ECL
Up to date 6,194 1,289 33 – 7,516 5,544 1,010 38 – 6,592
1 to 29 days past due 1 21 7 – 29 2 27 9 – 38
30 to 89 days past due – 33 15 – 48 – 26 16 – 42
90+ days past due – – 56 – 56 – – 51 – 51
Gross carrying amount 6,195 1,343 111 – 7,649 5,546 1,063 114 – 6,723
Consumer lending
31 December 2022 31 December 2021
Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI
£’million 12-month Lifetime Lifetime Lifetime Total 12-month Lifetime Lifetime Lifetime Total
ECL ECL ECL ECL ECL ECL ECL ECL
Up to date 1,172 235 3 – 1,410 786 71 2 – 859
1 to 29 days past due 8 2 – – 10 – 2 – – 2
30 to 89 days past due – 13 5 – 18 – 9 3 – 12
90+ days past due – – 42 – 42 – – 16 1 17
Gross carrying amount 1,180 250 50 – 1,480 786 82 21 1 890
Commercial lending (excluding asset and invoice finance)
31 December 2022 31 December 2021
Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI
£’million 12-month Lifetime Lifetime Lifetime Total 12-month Lifetime Lifetime Lifetime Total
ECL ECL ECL ECL ECL ECL ECL ECL
Up to date 3,052 412 64 – 3,528 3,414 654 117 – 4,185
1 to 29 days past due 20 36 5 – 61 11 43 2 – 56
30 to 89 days past due – 40 20 – 60 – 78 23 – 101
90+ days past due – – 99 – 99 – – 184 – 184
Gross carrying amount 3,072 488 188 – 3,748 3,425 775 326 – 4,526
Asset and invoice finance
31 December 2022 31 December 2021
Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI
£’million 12-month Lifetime Lifetime Lifetime Total 12-month Lifetime Lifetime Lifetime Total
ECL ECL ECL ECL ECL ECL ECL ECL
Up to date 401 7 3 – 411 313 2 1 – 316
1 to 29 days past due 1 – – – 1 1 3 – – 4
30 to 89 days past due – – – – – – – – – –
90+ days past due – – – – – – – – – –
Gross carrying amount 402 7 3 – 412 314 5 1 – 320
Credit risk concentration
Retail mortgage lending by repayment type
31 December 2022 31 December 2021
£’million £’million
Retail owner Retail Total Retail owner Retail Total
occupied buy-to-let retail mortgages occupied buy-to-let retail mortgages
Interest only 2,005 2,047 4,052 2,113 1,620 3,733
Capital and repayment 3,502 95 3,597 2,909 81 2,990
Total retail mortgage 5,507 2,142 7,649 5,022 1,701 6,723
lending
Retail mortgage lending by geographic exposure
31 December 2022 31 December 2021
£’million £’million
Retail owner Retail Total Retail owner Retail Total
occupied buy-to-let retail mortgages occupied buy-to-let retail mortgages
Greater London 1,937 1,201 3,138 2,130 1,048 3,178
South east 1,435 408 1,843 1,157 283 1,440
South west 476 99 575 434 82 516
East of England 531 163 694 309 69 378
North west 263 68 331 264 62 326
West Midlands 226 76 302 190 61 251
Yorkshire and the Humber 184 34 218 139 34 173
East Midlands 168 54 222 140 25 165
Wales 109 18 127 110 20 130
North east 63 10 73 62 10 72
Scotland 115 11 126 87 7 94
Total retail mortgage 5,507 2,142 7,649 5,022 1,701 6,723
lending
Retail mortgage lending by DTV
31 December 2022 31 December 2021
£’million £’million
Retail owner Retail Total Retail owner Retail Total
occupied buy-to-let retail mortgages occupied buy-to-let retail mortgages
Less than 50% 2,007 568 2,575 1,907 524 2,431
51–60% 961 463 1,424 767 415 1,182
61–70% 1,088 660 1,748 1,092 564 1,656
71–80% 990 434 1,424 805 188 993
81–90% 374 13 387 400 3 403
91–100% 87 – 87 51 3 54
More than 100% – 4 4 – 4 4
Total retail mortgage 5,507 2,142 7,649 5,022 1,701 6,723
lending
Commercial lending – excluding BBLS by repayment type
31 December 2022 31 December 2021
£’million £’million
Professional Other Total commercial term Professional Other Total commercial term
loans loans
buy-to-let term loans buy-to-let term loans
Interest only 691 253 944 897 230 1,127
Capital and repayment 40 1,837 1,877 53 1,883 1,936
Total commercial term 731 2,090 2,821 950 2,113 3,063
loans
Commercial term lending – excluding BBLS by geographic exposure
31 December 2022 31 December 2021
£’million £’million
Professional Other Total commercial term Professional Other Total commercial term
loans loans
buy-to-let term loans buy-to-let term loans
Greater London 472 1,052 1,524 676 1,186 1,862
South east 149 377 526 160 390 550
South west 22 143 165 28 151 179
East of England 45 147 192 39 71 110
North west 13 153 166 18 150 168
West Midlands 8 112 120 9 84 93
Yorkshire and the Humber 3 23 26 3 17 20
East Midlands 12 43 55 9 27 36
Wales 3 11 14 4 12 16
North east 3 19 22 3 17 20
Scotland - 7 7 – 6 6
Northern Ireland 1 3 4 1 2 3
Total commercial term 731 2,090 2,821 950 2,113 3,063
loans
Commercial term lending – excluding BBLS by sector exposure
31 December 2022 31 December 2021
£’million £’million
Professional Other Total commercial term Professional Other Total commercial term
loans loans
buy-to-let term loans buy-to-let term loans
Real estate (rent, buy and 731 681 1,412 950 837 1,787
sell)
Hospitality – 372 372 – 361 361
Health and social work – 334 334 – 225 225
Legal, accountancy and – 196 196 – 206 206
consultancy
Retail – 161 161 – 136 136
Real estate (develop) – 6 6 – 46 46
Recreation, cultural and – 87 87 – 88 88
sport
Construction – 62 62 – 85 85
Education – 17 17 – 17 17
Real estate (management of) – 9 9 – 9 9
Investment and unit trusts – 11 11 – 6 6
Other – 154 154 – 97 97
Total commercial term loans 731 2,090 2,821 950 2,113 3,063
Commercial term lending – excluding BBLS by DTV
31 December 2022 31 December 2021
£’million £’million
Retail owner Retail Total Retail owner Retail Total
occupied buy-to-let retail mortgages occupied buy-to-let retail mortgages
Less than 50% 278 817 1,095 306 770 1,076
51–60% 158 433 591 232 483 715
61–70% 219 112 331 282 158 440
71–80% 62 76 138 112 63 175
81–90% 3 53 56 8 30 38
91–100% 5 12 17 6 27 33
More than 100% 6 587 593 4 582 586
Total commercial term 731 2,090 2,821 950 2,113 3,063
loans
13. Legal 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.
14. Fair value of financial instruments
31 December 2022
With
Quoted Using
significant
Carrying market observable Total fair
unobservable
value price inputs value
inputs
£’million Level 1 Level 2 £’million
Level 3
£’million £’million
£’million
Assets
Loans and advances to customers 13,102 – – 12,321 12,321
Investment securities held at fair value through other comprehensive 571 533 38 – 571
income
Investment securities held at amortised cost 5,343 3,834 1,135 40 5,009
Financial assets held at fair value through profit and loss 1 – – 1 1
Derivative financial assets 23 – 23 – 23
Liabilities
Deposits from customers 16,014 – – 16,004 16,004
Deposits from central bank 3,800 – – 3,800 3,800
Debt securities 571 423 – – 423
Derivative financial liabilities 26 – 26 – 26
Repurchase agreements 238 – – 238 238
31 December 2021
With
Quoted Using
significant
Carrying market observable Total fair
unobservable
value price inputs value
inputs
£’million Level 1 Level 2 £’million
Level 3
£’million £’million
£’million
Assets
Loans and advances to customers 12,290 – – 12,356 12,356
Investment securities held at fair value through other comprehensive 798 760 38 – 798
income
Investment securities held at amortised cost 4,776 2,977 1,710 60 4,747
Financial assets held at fair value through profit and loss 3 – – 3 3
Derivative financial assets 1 – – 1 1
Liabilities
Deposits from customers 16,448 – – 16,452 16,452
Deposits from central bank 3,800 – – 3,800 3,800
Debt securities 588 495 – – 495
Derivative financial liabilities 11 – 11 – 11
Repurchase agreements 169 – – 169 169
Information on how fair values are calculated are 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 (fair value Level 1 assets), or using observable inputs (in the case of fair value 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. They are measured at the fair value of the amounts that we expect to recover on these loans.
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.
Deposits from central banks/repurchase agreements
Fair values are estimated using discounted cash flows, applying current rates. Fair values approximate carrying amounts as
their balances are either short-dated or are on a variable rate which aligns to the current market rate.
Derivative financial liabilities
The fair values of derivatives are obtained from discounted cash flow models as appropriate.
15. Related party transactions
Key management personnel
Our key management personnel, and persons connected with them, are considered to be related parties. Key management
personnel are defined as those persons having authority and responsibility for planning, directing and controlling the
activities of the Group. The Directors and members of the Executive Committee are considered to be the key management
personnel for disclosure purposes.
Key management compensation
Total compensation cost for key management personnel for the year by category of benefit was as follows:
2022 2021
£’million £’million
Short-term benefits 6.2 5.4
Post-employment benefits 0.1 0.1
Termination benefits 0.3 –
Share-based payment costs 1.8 1.3
Total compensation for key management personnel 8.4 6.8
Short-term employee benefits include salary, medical insurance, bonuses and cash allowances paid to key management
personnel. The share-based payment cost represents the IFRS 2 charge for the year which includes awards granted in prior
years that have not yet vested.
Banking transactions with key management personnel
We provide banking services to Directors and other key management personnel and persons connected to them.
Deposit transactions during the year and the balances outstanding as at 31 December 2022 and 31 December 2021 were as
follows:
2022 2021
£’million £’million
Deposits held at 1 January 1.5 2.1
Deposits relating to persons and companies newly considered related parties 0.2 0.1
Deposits relating to persons and companies no longer considered related parties (0.3) (0.1)
Net amounts deposited/(withdrawn) 0.1 (0.6)
Deposits held as at 31 December 1.5 1.5
Loan transactions during the year and the balances outstanding as at 31 December 2022 and 31 December 2021 were as follows:
2022 2021
£’million £’million
Loans outstanding at 1 January 3.2 1.9
Loans relating to persons and companies no longer considered related parties – (0.5)
Loans issued during the year 0.2 1.8
Net repayments during the year (1.3) –
Loans outstanding as at 31 December 2.1 3.2
Interest received on loans (£’000) 60 30
There were two (31 December 2021: three) loans outstanding at 31 December 2022 totalling £2.1 million (31 December 2021:
£3.2 million). Both are residential mortgages secured on property; all loans were provided on our standard commercial
terms.
In addition to the loans detailed above, we have issued credit cards and granted overdraft facilities on current accounts
to Directors and key management personnel.
Credit card balances outstanding as at 31 December 2022 and 31 December 2021 were as follows:
2022 2021
£’000 £’000
Credit cards outstanding as at 31 December 7 5
As with all of our lending we recognise an ECL on loans and credit card balances outstanding with key management personnel.
As at 31 December 2022 the only ECL recognised on the balances above was our standard modelled ECL with no individual
impairments recognised (31 December 2021: £nil). We have not written-off any balances to key management personnel in either
2021 or 2022.
16. Loss per share
Basic loss per share is calculated by dividing the loss attributable to our ordinary equity holders by the weighted average
number of ordinary shares in issue during the year.
2022 2021
Loss attributable to our ordinary equity holders (£’million) (72.7) (248.2)
Weighted average number of ordinary shares in issue – basic (‘000) 172,464 172,421
Basic loss per share (pence) (42.2) (144.0)
Diluted loss per share has been calculated by dividing the 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 made a loss during both the years to 31
December 2022 and 31 December 2021, 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 loss per share.
2022 2021
Loss attributable to our ordinary equity holders (£’million) (72.7) (248.2)
Weighted average number of ordinary shares in issue – diluted (‘000) 172,464 172,421
Diluted loss per share (pence) (42.2) (144.0)
There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the
date of the completion of these financial statements which would require the restatement of loss per share.
17. Non-cash items
2022 2021
£’million £’million
Interest income (564) (406)
Interest expense 160 110
Depreciation and amortisation 77 80
Impairment and write-offs of property, plant, equipment and intangible assets 10 25
Expected credit loss expense 40 22
Share option charge 2 2
Grant income recognised in the income statement (2) (11)
Amounts provided for (net of amounts released) 4 5
Gain on sale of assets – (9)
Total adjustments for non-cash items (273) (182)
18. Post balance sheet events
There have been no material post balance sheet events.
Reconciliation from statutory to underlying results
Business Impairment and
acquisition write-off of Holding
Statutory and property, Net C&I Transformation Mortgage Remediation company Underlying
Year ended 31 basis integration plant, costs portfolio costs insertion basis
December 2022 £’million costs equipment and costs £’million sale costs
intangible £’million £’million £’million £’million £’million
£’million assets
£’million
Net interest 404.1 – – 0.1 – – – – 404.2
income
Net fee and
commission 81.8 – – – – – – – 81.8
income
Net gains on
sale of - – – – – – – – -
assets
Other income 37.6 – – (1.5) – – – – 36.1
Total income 523.5 – – (1.4) – – – – 522.1
General
operating (467.6) – – 1.4 3.3 – 5.3 1.8 (455.8)
expenses
Depreciation
and (77.0) – – – – – – (77.0)
amortisation
Impairment
and
write-offs of (9.7) – 9.7 – – – – – -
PPE and
intangible
assets
Total
operating (554.3) – 9.7 1.4 3.3 – 5.3 1.8 (532.8)
expenses
Expected
credit loss (39.9) – – – – – – – (39.9)
expense
Loss before (70.7) – 9.7 – 3.3 – 5.3 1.8 (50.6)
tax
Business Impairment and
acquisition write-off of Holding
Statutory and property, Net C&I Transformation Mortgage Remediation company Underlying
Year ended 31 basis integration plant, costs portfolio costs insertion basis
December 2022 £’million costs equipment and costs £’million sale costs
intangible £’million £’million £’million £’million £’million
£’million assets
£’million
Net interest 295.3 – – 0.4 – – – – 295.7
income
Net fee and
commission 69.6 – – – – – – – 69.6
income
Net gains on
sale of 9.4 – – – – (8.7) – – 0.7
assets
Other income 44.2 – – (9.4) – (2.9) – – 31.9
Total income 418.5 – – (9.0) – (11.6) – – 397.9
General
operating (536.1) 2.4 – 9.0 8.9 3.3 45.9 – (466.6)
expenses
Depreciation
and (80.2) – – – – – – – (80.2)
amortisation
Impairment
and
write-offs of (24.9) – 24.9 – – – – – –
PPE and
intangible
assets
Total
operating (641.2) 2.4 24.9 9.0 8.9 3.3 45.9 – (546.8)
expenses
Expected
credit loss (22.4) – – – – – – – (22.4)
expense
Loss before (245.1) 2.4 24.9 – 8.9 (8.3) 45.9 – (171.3)
tax
Capital information
The information set out within this section does not form part of the statutory accounts for the years ended 31 December
2022 or 31 December 2021.
Key metrics
The table below summarises our key regulatory metrics as at 31 December 2022 and 31 December 2021.
31 December 31 December
2022 2021
£’million £’million
Available capital
CET1 capital 819 936
Tier 1 capital 819 936
Total capital 1,069 1,184
TCR + MREL 1,416 1,527
Risk weighted assets (RWAs)
Total risk weighted assets 7,990 7,454
Risk-based capital ratios as % of RWAs
CET1 ratio 10.3% 12.6%
Tier 1 ratio 10.3% 12.6%
Total capital ratio 13.4% 15.9%
MREL ratio 17.7% 20.5%
Additional CET1 buffer requirements as % of RWAs
Capital conservation buffer requirement 2.5% 2.5%
Countercyclical buffer requirement 1.0% –
Total of bank CET1 specific buffer requirements 3.5% 2.5%
Leverage ratio
UK leverage ratio 4.2% 5.2%
Liquidity coverage ratio
Liquidity coverage ratio (LCR) 213% 281%
In October 2021 the Bank of England’s Financial Policy Committee and the PRA published their changes to the UK leverage
ratio framework. The changes, which came into effect from 1 January 2022, mean we are now only subject to the UK leverage
ratio. The comparative figure of 5.2% differs to the regulatory ratio of 4.4% disclosed last year as it reflects the
revised basis of calculation, which excludes claims on central banks.
Leverage ratio
The table below shows our Tier 1 Capital and Total Leverage Exposure that are used to derive the UK leverage ratio. The UK
leverage ratio is the ratio of Tier 1 Capital to Total Leverage exposure.
31 December 31 December
2022 2021
£’million £’million
Common equity tier 1 capital 819 936
Additional tier 1 capital – –
Tier 1 capital 819 936
CRD IV leverage exposure 19,348 17,869
UK leverage ratio 4.2% 5.2%
In October 2021 the Bank of England’s Financial Policy Committee and the PRA published their changes to the UK leverage
ratio framework. The changes, which came into effect from 1 January 2022, mean we are now only subject to the UK leverage
ratio. The comparative figure of 5.2% differs to the regulatory ratio of 4.4% disclosed last year as it reflects the
revised basis of calculation, which excludes claims on central banks.
Our UK leverage ratio is 4.2% which is in excess of the minimum requirement of 3.0% and our strategic target of maintaining
a UK leverage ratio of greater than 4.0%.
Liquidity coverage ratio
The table below shows the bank's Total HQLA and total net cash outflow that are used to derive the liquidity coverage
ratio.
31 December 31 December
2022 2021
£’million £’million
Total HQLA 4,976 6,754
Total net cash outflow 2,342 2,406
Liquidity coverage ratio 213% 281%
Overview of RWAs and capital requirements
The table below sets out the risk weighted assets and Pillar 1 capital requirements for Metro Bank. The bank has applied
the standardised approach to measure credit risk and the basic indicator approach to measure operational risk. Under the
approach the bank calculates its Pillar 1 capital requirement based on 8% of total RWAs. This covers credit risk,
operational risk, market risk and counterparty credit risk.
Pillar 1 capital required
31 December 31 December
31 December
2022 2021
2022
£’million £’million
£’million
Credit risk (excluding counterparty credit risk (CCR)) 7,237 6,704 579
Of which the standardised approach 7,237 6,704 579
CCR 9 6 0.7
Of which mark to market 7 3 0.6
Of which CVA 2 3 0.1
Market risk – 9 0.0
Operational risk 739 729 59
Of which basic indicator approach 739 729 59
Amounts below the thresholds for deduction (subject to 250% risk 5 5 –
weight)
Total 7,990 7,454 639
Credit risk exposures by exposure class
Our Pillar 1 capital requirement for credit risk is set out in the table below.
31 December 2022 31 December 2021
£’million £’million
Exposure value Capital required Exposure value Capital required
Central governments or central banks 5,326 – 6,847 –-
Exposures to multilateral development banks 1,663 – 1,327 –
Institutions 10 – 167 3
Corporates 703 50 507 35
Retail 1,870 107 1,320 74
Secured by mortgages on immovable property 9,424 308 8,898 305
Covered bonds 693 6 597 5
Claims on institutions and corporates with a short-term 97 3 – –
credit assessment
Securitisation position 1,223 13 1,804 21
Exposure at default 179 15 209 17
Items associated with particularly high risk 18 2 8 1
Collective investment undertakings 59 – – –
Other exposures 1,021 75 1,032 76
Total 22,286 579 22,716 537
Capital resources
The table below summarises the composition of regulatory capital.
31 December 31 December
2022 2021
£’million £’million
Share capital and premium 1,964 1,964
Retained earnings (942) (694)
Loss for the year (73) (248)
Available for sale reserve (13) (5)
Other reserves 20 18
Intangible assets (216) (243)
Other regulatory adjustments 79 144
CET 1 capital 819 936
Tier 1 capital 819 936
Tier 2 capital 250 249
Total capital resources 1,069 1,184
MREL eligible debt 347 342
TCR + MREL 1,416 1,527
Our capital adequacy was in excess of the minimum required by the regulators at all times.
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Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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ISIN: GB00BZ6STL67
Category Code: FR
TIDM: MTRO
LEI Code: 213800X5WU57YL9GPK89
Sequence No.: 226824
EQS News ID: 1572577
End of Announcement EQS News Service
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