REG - Metro Bank PLC - Results for Year ended 31 December 2021
23/02/2022 07:00
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RNS Number : 5407C Metro Bank PLC 23 February 2022
Metro Bank PLC
Full year results
Trading Update 2021
23 February 2022
Metro Bank PLC (LSE: MTRO LN)
Results for Year ended 31 December 2021
Highlights
· Turnaround plan successfully delivering momentum and sustainable growth,
underpinning the path to profitability
- Improving lending mix and maximising risk-adjusted returns on
capital
- Margin expansion, NII growth and fee recovery driving revenue growth
- Enabling sustainable growth through strong cost control and improving
operating jaws
- Targeted infrastructure development to improve resilience and
protect the Bank
- Management remains focused on execution with clear steps to
breakeven
· Continued focus on customers, communities and colleagues, voted #1 high street
bank for overall service, supported local communities with government-backed
loans and successfully transitioned colleagues to a hybrid working model
whilst maintaining the Bank's strong culture
· Underlying revenue increased by 17% to £397.9 million reflecting the shift
towards higher yielding assets, lower cost of deposits and a recovery in
customer activity.
· Underlying costs of £546.8 million reflect management actions to control
cost, deliver positive operating jaws and leverage the fixed cost base,
underlying operating costs reduced 1% in the second half
· Underlying loss before tax reduced by 37% to £171.3 million, a second half
underlying loss of £61.3 million is down 44% on the first half, highlighting
the momentum towards profitability
· Statutory loss before tax of £245.1 million following settlement of the PRA
investigation, provisioning for the FCA investigation, sanctions related
remediation and non-recurring expense items that underpin the path to
profitability such as restructuring and legacy fixed asset impairment
Daniel Frumkin, Chief Executive Officer at Metro Bank, said:
"Two years into the turnaround, our strategy is delivering meaningful results
as we move towards profitability. In a changing macro-economic environment, we
have accelerated the shift of our balance sheet, with improved yields and
lower cost of deposits. This has had a material impact on underlying revenue,
which improved 42%(1) when adjusting for the mortgage portfolio disposal.
Encouragingly, the second half of the year delivered even stronger revenue and
exit-NIM performances, providing ongoing momentum into 2022. There is still
more to do, but our focus on delivering higher margins through unsecured and
specialist mortgage lending, as well as tight cost control, is enabling
transformational change. We remain committed to delivering on the strategy we
set out, including supporting the communities in which we operate."
1. Adjusts total underlying revenue by excluding loan income
from the mortgage portfolio disposal announced in December 2020.
Outlook and Guidance
· The return to profitability gathered momentum in the year despite continued
volatility in the macro-economic environment, with 4Q21 rates reflecting the
Bank's improved lending and deposit mix:
2021 Average 4Q21 Average
Cost of Deposits 0.24% 0.15%
Lending Yield 3.07% 3.19%
Net Interest Margin 1.40% 1.56%
· Given the economic uncertainty resulting from the pandemic it is too early to
provide medium term guidance. However, the Bank remains focused on execution
and guides directionally for the next 12 months as follows.
Balance sheet: Higher growth than 2021 with continued focus on mix
improvement.
Margin: A strong exit-NIM holds us in good stead for 2022 with continued focus
on lending mix and improved yields as a result of the base rate rises,
potentially tempered by higher cost of deposits.
Fees: Transaction-driven revenue streams influenced by the pace of recovery.
Costs: Low single digit % reduction in total underlying operating expenses.
Non-underlying items are expected to be less than 20% of 2021 as remediation
costs fall away.
Capital: Will operate in buffers but remain above regulatory minima. The
Bank's AIRB application is progressing.
A presentation for investors and analysts will be held at 8.30AM (UK time) on
23 February 2022.
The presentation will be webcast on:
https://onlinexperiences.com/Launch/QReg/ShowUUID=B1193A94-7E98-424E-B793-627EE9765A05
(https://onlinexperiences.com/Launch/QReg/ShowUUID=B1193A94-7E98-424E-B793-627EE9765A05)
For those wishing to dial-in:
From the UK dial: 0800 358 9473
From the US dial: +1 855 85 70686
Participant Pin: 89517228#
URL for other international dial in numbers:
https://events-ftp.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
Key Financials:
31 31 December Change from 30 Change from
£ in millions December 2020 FY 2020 June H1 2021
2021 2021
Assets £22,587 £22,579 0% £23,013 (2%)
Loans £12,290 £12,090 2% £12,325 0%
Deposits £16,448 £16,072 2% £16,620 (1%)
Loan to deposit ratio 75% 75% 0 pps 74% 1 pps
CET1 capital ratio 12.6% 15.0% (2.4 pps) 13.9% (1.3 pps)
Total capital ratio (TCR) 15.9% 18.1% (2.2 pps) 17.2% (1.3 pps)
MREL ratio 20.5% 22.4% (1.9 pps) 21.7% (1.2 pps)
Liquidity coverage ratio 281% 187% 94 pps 309% (28 pps)
FY FY Change from H2 H1 Change from
£ in millions 2021 2020 FY 2020 2021 2021 H1 2021
Total underlying revenue(2) £397.9 £340.9 17% £218.1 £179.8 21%
Underlying loss before tax(3) (£171.3) (£271.8) (37%) (£61.3) (£110.0) (44%)
Statutory loss before tax (£245.1) (£311.4) (21%) (£106.2) (£138.9) (24%)
Net interest margin 1.40% 1.22% 18bps 1.51% 1.28% 23bps
Underlying EPS (144.0p) (151.7p) (5%) (78.9p) (65.1p) (21%)
2. Underlying revenue excludes income recognised relating to
the Capability & Innovation fund and the mortgage portfolio sale.
3. Underlying loss before tax excludes the Listing Share
Awards, impairment and write-off of property, plant & equipment (PPE) and
intangible assets, net BCR costs, transformation costs, remediation costs,
business acquisition and integration costs and mortgage portfolio sale.
Statutory loss after tax is included in the Profit and Loss Account.
Progress on strategic plan
Metro Bank continues to successfully deliver transformational change against
all five pillars of the strategic plan set out in February 2020.
· Balance sheet optimisation: Improving mix, maximising risk-adjusted returns on
capital. Decisive action taken in response to the changing environment. The
mortgage disposal and RateSetter back book acquisition accelerated the shift
to higher yielding assets followed by strong organic growth in consumer
unsecured and specialist mortgages.
· Revenue: Margin expansion, NII growth and fee recovery. More products launched
in store including RateSetter loans and insurance offerings. Government-backed
lending through the Bounce Back Loan Scheme (BBLS) top-up and the Recovery
Loan Scheme (RLS) to support communities. Investment in digital capability
improves the multi-channel presence.
· Cost: Enabling sustainable growth. Investment in automation, IT platforms and
the customer service proposition supports cost efficient growth. Agreed the
acquisition of three further store freeholds at attractive yields and
selectively closing three stores. Reduced central London office space and the
hybrid working model utilises office space around stores.
· Infrastructure: Protecting the Bank. The enhancements to IT, regulatory
reporting, financial crime, cyber security and digital channels all improve
the Bank's resilience and customer journeys.
· Internal and external communications: Delivering clear messages. Continued
support for customers, colleagues and communities through the pandemic with a
range of bank wide and hyper local brand and PR campaigns, as well as
launching an SME marketing campaign showcasing the Bank's FANS.
Financial performance for the year ended 31 December 2021
Deposits
£ in millions 31 31 December Change from 30 Change from
December 2020 FY 2020 June H1 2021
2021 2021
Demand: current accounts £7,318 £6,218 18% £6,749 8%
Demand: savings accounts £7,684 £6,430 20% £7,402 4%
Fixed term: savings accounts £1,446 £3,424 (58%) £2,469 (41%)
Deposits from customers £16,448 £16,072 2% £16,620 (1%)
Retail customers (excl. retail partnerships) £6,713 £7,364 (9%) £6,964 (4%)
SMEs £4,764 £4,420 8% £4,605 3%
£11,477 £11,784 (3%) £11,569 (1%)
Retail partnerships £1,814 £1,596 14% £1,697 7%
Commercial customers (excluding SMEs(4)) £3,157 £2,692 17% £3,354 (6%)
£4,971 £4,288 16% £5,051 (2%)
4. SME defined as enterprises which employ fewer than 250 persons
and which have an annual turnover not exceeding €50 million, and/or an
annual balance sheet total not exceeding €43 million, and have aggregate
deposits less than €1 million.
· Total deposits grew by over £370 million in the year to £16,448 million as
at 31 December 2021 (31 December 2020: £16,072 million). Continued growth in
current and savings accounts was offset by a £2.0 billion reduction in fixed
term deposit (FTD) accounts following action taken to reduce prices. FTD
accounts now make up 9% of total deposits (2020: 21%). Growth largely resulted
from an increase in commercial deposits, reflecting customers' continued
preference for increased liquidity.
· Cost of deposits was 24bps for the year, a decrease of 41bps compared to 65bps
in 2020, reflecting the managed roll-off of higher cost FTD accounts with a
corresponding mix improvement in favour of non-interest-bearing current
accounts and demand savings accounts, the Q4 2021 cost of deposits was 0.15%.
· Customer account growth of 0.3 million in the year to 2.5 million (2020: 2.2
million) reflects continued organic growth, with account growth from the
RateSetter back book acquisition offsetting the managed reduction in fixed
term deposits.
Loans
£ in millions 31 31 December Change from 30 Change from
December 2020 FY 2020 June H1 2021
2021 2021
Gross Loans and advances to customers £12,459 £12,244 2% £12,491 0%
Less: allowance for impairment (£169) (£154) 10% (£166) 2%
Net Loans and advances to customers £12,290 £12,090 2% £12,325 0%
Gross loans and advances to customers consists of:
Commercial lending(5) £3,220 £3,681 (13%) £3,416 (6%)
Government-backed lending(6) £1,626 £1,467 11% £1,556 4%
Retail mortgages £6,723 £6,892 (2%) £6,815 (1%)
Consumer lending £890 £204 336% £704 26%
5. Includes CLBILS.
6. BBLS, CBILS and RLS.
· Total net loans as at 31 December 2021 were £12,290 million, up 2% from
£12,090 million as at 31 December 2020 reflecting growth in government-backed
lending and the strong organic growth in consumer lending supported by the
integration of the RateSetter platform, which offset the attrition of
lower-yielding residential mortgages and commercial term loans.
· Commercial loans (excluding BBLS and CBILS) decreased by 13% during the year
to £3,220 million as at 31 December 2021 (31 December 2020: £3,681 million),
as large transactional lending rolled off.
· Government-backed lending increased by more than £150 million in the year to
£1,626 million as at 31 December 2021 (31 December 2020: £1,467 million).
Growth was primarily driven by BBLS top-up applications and Recovery Loan
Scheme (RLS) lending.
· Retail mortgages remained the largest component of the lending book at 54% (31
December 2020: 56%), with mortgage applicants benefitting from enhancements to
the existing mortgage offering and the launch of further specialist mortgage
products during the year.
· Consumer lending increased to 7% of the of the total loan book from 2% as at
31 December 2020, resulting from the RateSetter back book acquisition and
strong increase in organic lending as the RateSetter platform was rolled-out
across all of Metro Bank's channels. Consumer originations continue to average
more than £50 million per month compared to less than £2 million per month a
year earlier.
· Loan to deposit ratio held at 75% (31 December 2020: 75%) reflecting the
impact of the mortgage portfolio disposal in December 2020 and capital
constraints on lending.
· Cost of risk was 18bps for the year, a decrease of 68bps compared to 86bps in
2020, reflecting the more favourable macro-economic outlook. Non-performing
loans increased to 3.71% (31 December 2020: 2.10%) driven by BBLS and a
limited number of single name commercial exposures. The loan portfolio remains
highly collateralised with average debt to value (DTV) of the residential
mortgage book at 55% (31 December 2020: 56%), while DTV in the commercial book
was 57% (31 December 2020: 56%).
Profit and Loss Account
· Net interest margin (NIM) of 1.40% is an increase of 18bps in the year (2020:
1.28%) and reflects an improved lending mix and lower cost of deposits, the Q4
2021 NIM was 1.56%.
· Underlying net interest income increased by 18% to £295.7 million (2020:
£250.3 million), despite the mortgage portfolio disposal in H2 2020.
· Underlying net fee and other income increased 18% to £101.5 million (2020:
£86.3 million). The lifting of COVID-19 lockdowns and other social
restrictions in H2 led to growth in transaction-driven revenue streams.
· Total underlying operating costs increased 13% to £546.8 million (2020:
£486.0 million) despite reducing 1% in the second half, reflecting a full
year of RateSetter costs. 'Change the Bank' spend has now passed its peak,
reducing 15% in the second half. The closure of three selected stores in
Windsor, Milton Keynes and Earl's Court also reduce cost run-rate into 2022,
offset by the opening of a new store in Leicester in Q1 2022.
· Underlying loss before tax was £171.3 million, a 37% reduction from the
£271.8 million loss in 2020.
· Statutory loss before tax of £245.1 million in 2021 (2020: loss of £311.4
million) includes remediation costs of (£45.9 million), and impairment of
RateSetter peer-to-peer technology and the exit of three stores (£24.7
million), partially offset by the residual gain on sale in respect of the
mortgage portfolio (£8.1 million). The remediation costs include (£5.4
million) relating to settlement of the PRA investigation and a (£5.3 million)
provision for the FCA investigation.
· Statutory loss after tax of £248.2 million in 2021 (2020: loss of £301.7
million) after a £3.1 million corporation tax charge.
Capital, Funding and Liquidity
· Strong liquidity and funding position maintained, supported by the settlement
of the mortgage portfolio disposal in February. As a result, the Bank's
Liquidity Coverage Ratio (LCR) remained elevated at 281% as of 31 December
2021 (31 December 2020: 187%). Whilst NIM dilutive, this excess liquidity is
earnings neutral and in a rising rate environment has the potential to be
earnings accretive.
In 2021, £3,250 million of Term Funding Scheme (TFS) drawings were refinanced
into Term Funding Scheme with additional incentives for SMEs (TFSME), equating
to total TFSME drawings of £3.8bn, maturing in 2024/2025.
· Common Equity Tier 1 (CET1) ratio of 12.6% (31 December 2020: 15.0%) compares
to a minimum CET1 requirement of 7.6%(7) and minimum Tier 1 requirement of
9.3%(7).
· Total Capital ratio of 15.9% (31 December 2020: 18.1%) compares to a minimum
requirement of 11.6%(7).
· Total Capital plus MREL ratio of 20.5% (31 December 2020: 22.4%) compares to a
minimum interim requirement of 20.5%(7).
· As expected, the PRA have announced that from 1 January 2022 the following
capital benefits will be reversed, as such the Bank's capital ratios will
reduce on 1 January 2022 to reflect these adjustments:
- Reversal of £64 million of relief provided through the EBA's
treatment of software assets, equivalent to 0.8% of CET1 and 0.7% of MREL.
- Amortisation of the IFRS9 Transitional Relief, equivalent to 0.3% of
CET1 and MREL.
· Total RWA as at 31 December 2021 was £7,454 million (31 December 2020:
£7,957 million). The reduction reflects changes to the lending mix and
settlement of a receivable related to the mortgage portfolio sale(9). The
result is a loan risk weight density of 48% as at 31 December 2021 (31
December 2020: 47%).
· Regulatory leverage ratio was 4.4%.
· Extension of HoldCo implementation deadline to June 2023 agreed with BoE.
7. Based on current capital requirements plus buffers,
including P2A requirement of 1.11% (of which 0.8% must be met with Tier 1),
excluding any confidential PRA buffer, if applicable.
Metro Bank PLC
Summary Balance Sheet and Profit & Loss Account
(Unaudited)
Balance Sheet YoY 31-Dec 30-Jun 31-Dec
change 2021 2021 2020
£'million £'million £'million
Assets
Loans and advances to customers 2% £12,290 £12,325 £12,090
Treasury assets(8) £9,142 £9,474 £6,406
Assets classified as held for sale - - £295
Other assets(9) £1,155 £1,214 £3,788
Total assets 0% £22,587 £23,013 £22,579
Liabilities
Deposits from customers 2% £16,448 £16,620 £16,072
Deposits from central banks £3,800 £3,800 £3,808
Debt securities £588 £596 £600
Other liabilities £716 £850 £810
Total liabilities 1% £21,552 £21,866 £21,290
Total shareholder's equity £1,035 £1,147 £1,289
Total equity and liabilities £22,587 £23,013 £22,579
8. Comprises investment securities and cash & balances
with the Bank of England.
9. Comprises property, plant & equipment, intangible
assets and other assets. Other assets at 31 December 2020 include £2.6
billion receivable from NatWest. This was received post year-end upon the
completion of the transaction.
Year ended
Profit & Loss Account YoY 31-Dec 31-Dec
change 2021 2020
£'million £'million
Underlying net interest income 18% £295.7 £250.3
Underlying net fee and other income 18% £101.5 £86.3
Underlying net gains/(losses) on sale of assets £0.7 £4.3
Total underlying revenue 17% £397.9 £340.9
'Run the Bank' costs 12% (£435.5) (£390.4)
'Change the Bank' costs(10) (£111.3) (£95.6)
Total underlying costs 13% (£546.8) (£486.0)
Expected credit loss expense (£22.4) (£126.7)
Underlying loss before tax (37%) (£171.3) (£271.8)
Listing Share Awards - £0.2
Impairment and write-off of property plant & equipment and intangible (£24.9) (£40.6)
assets
Transformation costs (£8.9) (£16.7)
Remediation costs (£45.9) (£40.8)
Business acquisition and integration costs (£2.4) (£5.4)
Gain on mortgage portfolio sale (net of costs) £8.3 £63.7
Statutory loss before tax (21%) (£245.1) (£311.4)
Statutory taxation (£3.1) £9.7
Statutory loss after tax (18%) (£248.2) (£301.7)
Year ended
Key metrics 31-Dec 31-Dec
2021 2020
Underlying earnings per share - basic and diluted (144.0p) (151.7p)
Number of shares 172.4m 172.4m
Net interest margin (NIM) 1.40% 1.22%
Cost of deposits 0.24% 0.65%
Cost of risk 0.18% 0.86%
Underlying cost:income ratio 137% 143%
HoH change Half year ended
Profit & Loss Account 31-Dec 30-Jun 31-Dec
2021 2021 2020
£'million £'million £'million
Underlying net interest income 21% £162.1 £133.6 £134.1
Underlying net fee and other income £54.8 £46.7 £50.2
Underlying net gains/(losses) on sale of assets £1.2 (£0.5) £3.3
Total underlying revenue 21% £218.1 £179.8 £187.6
'Run the Bank' costs (£220.6) (£214.9) (£206.3)
'Change the Bank' costs(10) (£51.6) (£60.3) (£55.0)
Total underlying costs (1%) (£271.6) (£275.2) (£261.3)
Expected credit loss expense (£7.8) (£14.6) (£14.7)
Underlying loss before tax (44%) (£61.3) (£110.0) (£88.4)
Listing Share Awards - - £0.4
Impairment and write-off of property plant & equipment and intangible (£17.4) (£7.5) (£14.0)
assets
Net BCR costs £0.3 (£0.3) -
Transformation costs (£7.1) (£1.8) (£4.3)
Remediation costs (£20.5) (£25.4) (£23.0)
Business acquisition and integration costs (£0.1) (£2.3) (£5.4)
Gain on mortgage portfolio sale (net of costs) (£0.1) £8.4 £63.7
Statutory loss before tax (24%) (£106.2) (£138.9) (£71.0)
Statutory taxation (£0.9) (£2.2) £8.6
Statutory loss after tax (24%) (£107.1) (£141.1) (£62.4)
Half year ended
Key metrics 31-Dec 30-Jun 31-Dec
2021 2021 2020
Underlying earnings per share - basic and diluted (36.0p) (65.1p) (42.9p)
Number of shares 172.4m 172.4m 172.4m
Net interest margin (NIM) 1.51% 1.28% 1.28%
Cost of deposits 0.17% 0.31% 0.49%
Cost of risk 0.20% 0.24% 0.20%
Underlying cost:income ratio 125% 153% 139%
10. Change the Bank costs consists of investment spend, including
amortisation
Enquiries
For more information, please contact:
Metro Bank PLC Investor Relations
Jo Roberts
+44 (0) 20 3402 8900
IR@metrobank.plc.uk (mailto:IR@metrobank.plc.uk)
Metro Bank PLC Media Relations
Tina Coates / Mona Patel
+44 (0) 7811 246016 / +44 (0) 7815 506845
pressoffice@metrobank.plc.uk (mailto:pressoffice@metrobank.plc.uk)
Teneo
Charles Armitstead / Haya Herbert Burns
+44 (0)7703 330269 / +44 (0) 7342 031051
metrobank@teneo.com (mailto:metrobank@teneo.com)
ENDS
About Metro Bank
Metro Bank services more than two million customer accounts and is celebrated
for its exceptional customer experience. It is the highest rated high street
bank for overall service quality and best bank for service in-store for
personal and business customers, in the Competition and Market Authority's
Service Quality Survey in February 2022. It was recognised as 'Bank of the
Year' at the 2020 MoneyAge Awards and 'Banking Brand of The Year' at the
Moneynet Personal Finance Awards 2021, received Gold Award in the Armed Forces
Covenant's Employer Recognition Scheme 2021 and won Best Open Banking
Partnership - Commercial at the inaugural Open Banking Expo Awards 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 78 stores open
seven days a week, 362 days a year; on the phone through its UK-based 24/7
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.
Chief executive officer's statement
2021 saw the Bank complete the second year of its turnaround plan and despite
the external headwinds it was a year of significant progress. I'm pleased to
report the Bank ends the year in a significantly stronger position than when I
took over the reins as CEO in 2020.
Our commitment to being the UK's best community bank continues to set us apart
from our banking peers and our model continues to resonate with our FANS. Our
personal and business customers have depended on Metro Bank to help them
navigate what for many has been another difficult 12 months. They have also
relied on the Bank to be their partner in the local communities they live.
Whether that is through supporting local community activities, donating
colleagues' time and expertise, fundraising for good causes, providing space
in our stores, or helping young people learn about money, Metro Bank has been
there every step of the way, hand in hand.
We are proud to remain the UK's highest rated high street bank for customer
service for the eighth time running. When you combine this relentless focus on
exceptional customer service with our desire to continually surprise and
delight to create FANS, it's easy to see why we are the Bank of choice for 2.5
million customer accounts.
Our strategy
In early 2020, we identified the five strategic pillars that formed our
turnaround strategy, designed to deliver improved shareholder returns and
sustainable profitable growth. These comprise:
· Revenue
· Cost
· Infrastructure
· Balance sheet optimisation
· Communication
Our strategy is driven by an unwavering focus on customer service which we
believe enables us to build deeper, more meaningful relationships with our
customers. We achieve this with well-informed colleagues in our stores, our
market leading digital services, an easily accessible store footprint in the
major cities and towns of England and Wales and offering a wide range of
products to meet customers' banking needs.
Progress
Revenue
We've made great progress in filling our shelves by adding new products that
meet more of our customers' needs. Most notably, we strengthened our consumer
lending operation with customers now able to take a loan through the
RateSetter platform in-store, online and via our mobile app, as well as under
the RateSetter brand on the main aggregator sites, as well as its own website.
We have also reinvigorated our credit card offer via our stores.
Also, in the lending space, we supported small businesses by offering the UK
Government-funded BBLS top-ups and later in the year the Recovery Loan Scheme.
In Specialist Mortgages we have introduced new products. We also entered the
insurance market, providing SME business insurance and pet insurance.
Cost initiatives
While the Bank continues to operate with a high fixed cost base in the form of
its store footprint, we have worked hard to contain business as usual ('Run
the Bank') costs which grew 3% on a like for like basis in the year. Costs to
transform the Bank ('Change the Bank') have fallen by 15% in the second half
of the year as this transformation programme has now passed its peak. The bank
continues to optimise its property footprint and has adopted a hybrid way of
working for office-based colleagues, utilising space above and alongside our
existing store network. We have purchased the freehold of seven stores since
2020, lowering our occupancy costs and consolidated our call centre operations
into three main sites in Bristol, Slough and Ilford.
We have also made the difficult decision to close three of our stores - Earl's
Court, Milton Keynes Midsummer and Windsor. Our stores are fundamental to our
customer and community proposition, culture and brand, but like any good
retailer we regularly review how our stores are doing. While we are happy with
our store estate overall, these three stores have certain unique challenges:
Earl's Court was a fantastic billboard when Metro Bank first opened, but it's
in a low footfall area; Windsor has high footfall, but much of this is driven
by tourists rather than residents; and we have two stores in Milton Keynes -
one with a lease break coming up, and we're confident we can meet our
customers' needs with one store. While our colleagues have done a great job of
trying to make these three stores successful, this is the right decision for
the Bank and we're pleased to be able to make these closures without any
colleague redundancies.
Furthermore, we have worked hard to simplify complex processes and systems and
to work more efficiently. We have also transformed the way we deliver our
change agenda by introducing Agile methodology, which centres around value
streams, to help IT, Change, and Product teams design and deliver new products
and solutions more quickly.
Infrastructure
Throughout the year we invested in the Bank's IT resilience and delivered
upgrades and improvements that have reduced vulnerability. The bank has
focused on its regulatory requirements and introduced Secure Customer
Authentication and card migration to meet PSD2 requirements. There has also
been progress on our financial crime improvement, GDPR and cyber programmes,
which have all delivered a range of improvements further protecting the Bank.
During the year we recruited colleagues to ensure that customers in financial
difficulties received the support they needed; we launched a service to
support the new Debt Respite Scheme (Breathing Space) guidance to alleviate
pressure from customers with financial or mental health difficulties; and we
delivered Pay-as-You-Grow functionality in line with BBLS requirements to
support businesses beyond the pandemic.
All of these initiatives have helped make the Bank safer, more resilient and
fit for the future.
Balance Sheet Optimisation
During the year we have made meaningful strides in reshaping the Bank's
balance sheet. We acquired the RateSetter back book, significantly increased
the volume of consumer lending and ramped up specialist mortgages. In tandem
we actively managed down high-cost fixed term deposits and increased the
proportion of current accounts and low-cost instant access savings accounts.
These activities have resulted in increased yield and a lower cost of
deposits. At the end of the period, RateSetter has established itself as a
leading provider of consumer credit in the open market.
Culture and Communication
We've done lots of work to showcase what makes Metro Bank stand out from the
crowd, from our small business banking campaign to our refreshed RateSetter
website. Our colleagues in-store have embraced being Champions of our
Community through educating children with our Money Zone Programme, our
in-store events, and the work we have done with local charities. This year saw
us increase our spend on digital and performance marketing. We have also
invested in hyper-local marketing to drive footfall into stores across England
and Wales and highlight our community credentials.
Results
The bank has shown year on year, half on half and quarter on quarter
improvements throughout the year. The financial performance is in line with
our expectations and demonstrates promising momentum in the business.
The bank reported a loss before tax of £245.1 million, an improvement on last
year's loss (2020: loss of £311.4 million). Underlying loss before tax
reduced by 37% to £171.3 million, and second half underlying loss of £61.3
million is down 44% on the first half, highlighting the momentum towards
profitability. While good progress is being made to return to sustainable
profitability, I fully understand that these losses need to be minimised
swiftly and I am confident our strategy will achieve that.
The future
The bank's strategic pillars, transformation plan and relentless focus on the
provision of superior customer service will continue into 2022. We were once
again rated the top high street bank for overall service for personal and
business customers in the latest Competition and Markets Authority Service
Quality rankings and number one for store service for the eighth time running.
This is welcome external validation of the continued efforts of our colleagues
across the business.
2021 saw the Bank complete much of the heavy lifting required to transform the
Bank from loss-making towards sustainable profitability. Metro Bank is a
business to be proud of, with colleagues who are dedicated to meeting the
needs of their customers and communities.
As I come to the end of my second year in role, after another challenging
year, I am proud of the achievements of 2021, the progress we have made in the
Bank's turnaround and most of all the support we have provided to our local
communities. There is still much to do in the coming months, but we start 2022
with real momentum.
Finally
Metro Bank's success is directly attributable to my fantastic colleagues who I
am blessed to lead. Their brilliance, dedication, customer focus, caring
natures and focus on others inspires me every day. While it doesn't seem like
enough, all I can do is say a huge thank you.
Finance review
Our financial performance in 2021 reflects where we are in our strategic
turnaround, it shows strong momentum within the business and positive signs
that our approach is working. When adjusting for the sale of the £3.1 billion
mortgage portfolio disposal in December 2020, the underlying momentum in the
business is even clearer.
2021 2020 Change
£'million £'million
Net interest income 295.7 250.3 18%
Fee and other income 101.5 86.3 18%
Net gains on sale of assets 0.7 4.3 (84%)
Total underlying revenue 397.9 340.9 17%
Operating costs (546.8) (486.0) 13%
Expected credit loss expense (22.4) (126.7) (82%)
Underlying loss before tax (171.3) (271.8) (37%)
Non-underlying items (73.8) (39.6) 86%
Statutory loss before tax (245.1) (311.4) (21%)
We recognised a statutory loss before tax for the period of £245.1 million,
down from the £311.4 million loss recognised in 2020, with the decrease
primarily due to the £104.3 million lower charge for expected credit losses.
We entered 2021 well positioned for the prevailing economic climate, with the
recently signed £3.1 billion mortgage portfolio divestment providing both
regulatory capital headroom and liquidity at a time of uncertainty with the
country in lockdown. The disposal supported our strategic goal of maximising
risk adjusted returns on capital, as we reinvested £377 million of the
proceeds to acquire the RateSetter back book of consumer loans with an average
total gross yield of c.8%; that compared to the divested mortgage portfolio
which had a weighted average rate of 2.1%.
The bank has continued to make strong progress against the turnaround plan,
delivering considerable improvement in balance sheet mix at an accelerated
pace that can now clearly be seen in improved net interest income.
On an underlying basis, the loss for the period of £171.3 million was down
37% compared to the prior year (2020: £271.8 million), driven by lower
expected credit losses and positive operating jaws. Operating expenses
increased 13% year-on-year and income increased 17%, despite £63 million of
lost income as a result of the mortgage portfolio sale.
2021 has seen us continue to focus on shifting our deposit mix, which has led
to the cost of deposits falling from 0.65% in 2020 to 0.24% in the current
period. Alongside this we have delivered an increasing lending yield and our
approach of optimising the balance sheet is now seeing us generate a greater
level of interest income as a proportion of risk weighted assets.
We ended the year with a CET1 capital ratio of 12.6% and a Total Capital plus
MREL ratio of 20.5%. These compare to the regulatory minima of 5.1% and 18.0%
respectively, or 9.3% and 20.5% respectively including buffers (excluding any
confidential buffer, if applicable). We continue to take a proactive, measured
approach to capital management and are focused on building a greater risk
adjusted return on regulatory capital.
Our primary focus remains the transformation of the Bank and in doing so we
are taking a prudent approach in our assessment of the pace of economic
recovery. We recognised an expected credit loss expense of £22.4 million for
the period which is a significant improvement on the prior year (2020: £126.7
million).
2021
£million
Underlying loss before tax (171.3)
Impairment and write-off of PPE and intangible assets (24.9)
Remediation costs (45.9)
Transformation costs (8.9)
Business acquisition costs (2.4)
Portfolio sale 8.3
Statutory loss before tax (245.1)
Income
Underlying net interest income increased 18% year-on-year to £295.7 million
(2020: £250.3 million), reflecting increased front book yields, including our
meaningful entry into the personal lending market, combined with actions we
have taken to reduce cost of deposits.
NIM at 1.40% is 18 bps above 2020 (1.22%) reflecting the higher yielding asset
mix and lower cost of deposits. The average lending yield increased to 3.07%
from 2.68% a year earlier benefitting from high consumer lending yields and an
improvement in the blended mortgage lending yield reflecting our focus on
specialist mortgage products. Meanwhile our emphasis on current accounts and
instant access deposits combined with the roll-off of higher-rate fixed term
accounts reduced the cost of deposits meaningfully to 0.24% compared to 0.65%
a year earlier.
A strong Q4 2021 NIM at 1.56% holds us in good stead for 2022 with continued
focus on lending mix and improved yields as a result of the base rate rises,
potentially tempered by higher cost of deposits.
Fee, commission and other income
Fee, commission and other income remain below pre-pandemic levels as the
lockdowns at the start of the year continued to constrain activity. However,
as restrictions started to be lifted in the second half we saw an uptick in
activity particularly in areas such as foreign exchange, where volumes had
been significantly depressed throughout the pandemic.
Fees and commission income is an area where we believe that we can deliver
strong capital efficient returns by building on our expanding account base and
leading customer service, however the growth of these income streams will be
influenced by the pace of recovery from the pandemic.
Operating expenses
Underlying operating expenses grew to £546.8 million from £486.0 million in
2020. The year-on-year increase is impacted by several factors, including the
acquisition of RateSetter which occurred in September 2020.
As expected, expenditure on the 'Change the Bank' investment programme began
to reduce in the second half of the year. This trend is anticipated to
continue, contributing to an expected low single digit percentage reduction in
total underlying operating costs in 2022.
On a statutory basis total operating expenses increased by less than 4% to
£641.2 million compared to £617.3 million in 2020 as the underlying cost
increase, including the additional RateSetter running costs, was partially
offset by lower write downs and BCR costs together with reduced transformation
and integration expenditure.
Depreciation and amortisation remained largely unchanged at £80.2 million
(2020: £74.4 million).
2021 2020 Change
£'million £'million
Depreciation and amortisation 80.2 74.4 8%
Total operating expense 641.2 617.3 4%
Total non-underlying operating expense 94.4 131.3 (28%)
Total underlying operating expenses 546.8 486.0 13%
'Run the Bank' costs 435.5 390.4 12%
'Change the Bank' costs 111.3 95.6 16%
Statutory cost:income ratio 153% 143%
Underlying cost:income ratio 137% 143%
Remediation programmes continue to be a significant expense with associated
costs of £45.9 million recognised in the period (2020: £40.8 million). These
costs include the penalty resulting from the PRA investigation, which was
concluded in December, as well as a provision for the settlement of the
related FCA investigation. We are continuing to work closely with the
regulators on the outstanding regulatory matters.
Non-underlying costs also reflect the decision taken to close three stores in
2022. We regularly review how our existing stores are performing as well as
assess new markets where there is potential for growth in the longer term. The
three stores have consistently underperformed compared to other locations and
upcoming lease events provided us with an opportunity to close. We still
remain committed to stores and continue to invest in them. In 2021 we opened
our 78(th) store in Bradford, alongside preparing to launch our new store in
Leicester.
We also acquired four further freeholds during the year; which means a third
of our store estate is now freehold. By trading right of use assets for
freeholds at attractive prices we can both reduce costs and gain flexibility
for minimal additional risk weighted assets. Whilst we will continue to take
advantage of opportunities where these arise and there is a strong commercial
rationale for doing so, the stabilisation of commercial property prices will
likely limit these opportunities in the near term.
Non-underlying items in 2022 are expected to be less than 20% of the £73.9
million total in 2021 as remediation costs fall away.
Expected credit loss expense
Although the macroeconomic environment has improved in 2021, uncertainty
remains, particularly in respect of new COVID variants and the sustainability
of recently lifted public health restrictions. The expected credit loss charge
for the year of £22.4 million (2020: £126.7 million) is primarily driven by
growth in unsecured lending origination, the purchase of RateSetter back book
and a small number of large single name commercial cases.
A fourth severe downside macroeconomic scenario was introduced in 2021 across
all portfolios, with associated changes in the probability weightings. This
aligns our approach to market best practice and further captures the potential
risks associated with a more extreme downside scenario.
We continue to maintain a prudent level of post model overlays to capture
factors that are not fully reflected in the scenarios. These reflect our
cautious outlook driven by the impact of higher energy prices, increase in
national insurance contributions, and inflationary pressures on individual
customer affordability. During the year we have reduced the overall number of
post model overlays applied through the continued development of our models.
Unsecured lending has increased significantly in the year, in line with our
strategy. We manage this exposure within a defined risk appetite, with a focus
on prime lending, underpinned by strong credit scoring criteria to limit
losses, which to date remain low.
Deposits
Customer deposits 2021 2020 Change
£'million £'million
Retail customers (excluding retail partnerships) 6,713 7,364 (9%)
Retail partnerships 1,814 1,596 14%
Commercial customers (excluding SMEs) 3,157 2,692 17%
SMEs 4,764 4,420 8%
Total customer deposits 16,448 16,072 2%
Deposits grew by 2% from 31 December 2020 to £16,448 million at 31 December
2021 (31 December 2020: £16,072 million). The increase was primarily driven
by commercial and SME customers which were up 17% and 8% respectively from the
start of the year.
Customer deposits 2021 2020 Change
£'million £'million
Demand: current accounts 7,318 6,218 18%
Demand: savings accounts 7,684 6,430 20%
Fixed term: savings accounts 1,446 3,424 (58%)
Total customer deposits 16,448 16,072 2%
Current account balances grew by 18% during the year and make up 43% of total
customer deposits as at 31 December 2021 (31 December 2020: 39%). We continue
to see customer preference moving towards having instant access to funds,
leading to growth of current accounts and instant access savings accounts,
whilst at the same time we have proactively let higher cost fixed term
deposits roll off as we continue to manage cost of deposits down.
In 2022 we anticipate higher growth in deposits than in 2021 with continued
focus on mix improvement.
Assets
2021 2020 Change
£'billion £'billion
Loans and advances to customers 12.3 12.1 2%
Total assets 22.6 22.6 -
Loan to deposit ratio 75% 75%
Cost of risk 0.18% 0.86%
Net lending ended the period at £12,290 million, up 2% from £12,090 million
at 31 December 2020. The £200 million increase has been driven by a £686
million growth in consumer lending, offset by a moderate reduction in the
commercial loans and retail mortgage books. The growth in consumer lending is
a result of both organic origination through the RateSetter platform, and the
purchase of the £337 million back book from peer-to-peer investors. Our
investment in consumer lending, including integrating the RateSetter lending
capabilities in store, provides a strong base on which we can capitalise as
the economy continues to recover and we are ready to serve a consumer-led
recovery.
Retail mortgages remained the largest component of the lending book at 54% of
gross lending (31 December 2020: 56%), down £169 million to £6,723 million
at 31 December 2021 from £6,892 million at 31 December 2020. The decrease
reflects the attrition of older loans, offset by our continued penetration
through our specialist mortgage products into underserved areas of the
mortgage market, which has replaced some of these balances.
Commercial loans, which now comprise 39% of our lending, saw a £302 million
reduction from £5,148 million at 31 December 2020. The decrease is down to
older term loans repaying combined with a slowdown and the start of repayments
of BBLS loans in the second half, partially offset by government-backed
Recovery Loan Scheme lending.
We anticipated a higher rate of growth in overall lending in 2022 compared to
2021, with expansion in existing categories with higher risk adjusted returns
including consumer unsecured and specialist mortgages, complemented by the
expected launch of new products including automotive finance and digital
lending products for SMEs.
Non-current assets have decreased during the period, driven by a reduction in
our PPE balance, reflecting the scaling back of our store opening programme.
Intangibles remained flat during the year as continued investment, albeit at a
slower rate, was offset by amortisation and impairment charges.
Taxation
During 2021 we made a total tax contribution of £152.5 million (2020: £132.9
million), which comprised £91.6 million (2020: £86.5 million) of taxes we
paid and a further £60.9 million (2020: £46.4 million) of taxes we
collected.
Taxes paid 2021 2020
Business rates 15.0% 13.5%
Land transaction tax 1.6% 1.3%
Employer NICs 23.7% 20.4%
Irrecoverable VAT and customs duty 59.4% 64.5%
Other 0.3% 0.3%
Total taxes paid £91.6m £86.5m
Taxes collected on behalf of HMRC 2021 2020
Employer NICs 22.3% 25.1%
PAYE 64.0% 65.5%
Net VAT 13.7% 9.1%
Other 0.0% 0.4%
Total taxes paid £60.9m £46.4m
In 2021 our tax expense recognised in the income statement was £3.1 million
(2020: credit of £9.7 million).
Capital and liquidity
2021 2020 Change
£'million £'million
CET1 capital 936 1,192 (21%)
Risk-weighted assets (RWAs) 7,454 7,957 (6%)
CET1 ratio 12.6% 15.0% (240bps)
Total regulatory capital ratio 15.9% 18.1% (220bps)
Total regulatory capital plus MREL ratio 20.5% 22.4% (190bps)
Regulatory leverage ratio 4.4% 5.6%
Our CET1, Tier 1 and MREL ratios at 31 December 2021 were 12.6%, 12.6% and
20.5% respectively, compared to the minimum capital requirement including
buffers (excluding any confidential buffer, if applicable) of 7.6%, 9.3% and
20.5%, respectively. On 1 January 2022 software assets will revert to being
deducted from capital, reducing our CET1 by c0.8%. At the same time, IFRS9
transitionary relief will move from 100% to 75%, reducing CET1 by c0.3%. From
13 December 2022, the Bank of England has announced that that the
countercyclical buffer will increase from 0% back to its pre pandemic level of
1%.
Risk weighted assets ended the period down 6% to £7,454 million (31 December
2020: £7,957 million) reflecting our change in asset mix and our focus on
improving return on regulatory capital. The reduction was also supported by
the settlement of the final tranche of the mortgage portfolio in February
2021.
Reconciliation
Total capital plus MREL ratio at 1 January 2021 22.4%
Annual operational risk adjustment (0.1%)
Intangibles investment and other 0.1%
RateSetter back book acquisition (0.3%)
Profit and loss account (excluding ECL and mortgage sale) (3.1%)
Profit and loss account - ECL (0.3%)
Quick-fix ECL add back (0.1%)
Lending volume and mix (0.1%)
Mortgage book disposal completion 2.0%
Total capital plus MREL ratio at 31 December 2021 20.5%
Our liquidity position continues to be strong owing to the liquidity freed up
from the mortgage portfolio sale. We ended the year with a Liquidity Coverage
Ratio (LCR) of 281%. We will continue to prudently manage our investments and
to invest in high quality securities while maintaining a strong cash position.
We will operate in buffers but remain above regulatory minima. The Bank's AIRB
application is progressing.
Following discussion with the BOE, post the publication of the BOE's December
2021 MREL Policy Statement, the BOE has provided Metro Bank with a 6 month
adjustment to the point in time at which the BOE's revised policy on MREL
eligibility is implemented. As such, the requirement to establish a Holding
Company has moved to 26 June 2023, which is line with the call date of the
existing T2 debt instrument. For the avoidance of doubt, there has been no
change to Metro Bank's end-state MREL deadline of 1 January 2023.
Risk report
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.
During the year, we have continued to support our customers and minimise the
negative impact of COVID-19 for businesses and households across the UK,
maintaining our customer service operations and store distribution with
minimal interruption. However, COVID-19 continues to impact all of our
principal risks. The measures introduced to support the economy have created
operational, conduct and financial risks for the Bank. These risks are being
managed and monitored in line with our risk management framework.
Capital risk Risk stable The continued tightening of the regulatory capital framework and economic
uncertainty relating to COVID-19 have been the primary drivers of capital risk
during 2021. We continue to take a proactive, measured approach to capital
management and are focused on building a greater risk adjusted return on
regulatory capital. Capital risk is primarily managed through the ICAAP which
is based upon the Long Term Plan. The Long Term Plan remained on track during
the year.
Credit risk Risk increasing During 2021, the impact of COVID-19 and the potential for economic downturn
has remained the primary factor impacting credit risk performance and outlook.
The lending portfolio has remained resilient despite the disruption faced by
our customers. However, there continues to be a high level of uncertainty
within the external environment due to the potential longer-term impacts of
the pandemic which is reflected through our ECL position. We continue to
rebalance our lending mix in line with our strategy, increasing the proportion
of unsecured consumer lending and developing our specialist mortgage
portfolio.
Model risk Risk stable Model risk remains stable with enhancements to model risk governance, risk
appetite metrics and scope mitigating potential increases in model risk from
the impact of COVID-19 and the resulting uncertain economic environment.
We continue to monitor and assess model risk closely through the model
lifecycle.
Liquidity and funding risk Risk stable Liquidity and funding risk remained low through the year, with prudent
liquidity and funding levels.
Market risk Risk stable Market risk remained low throughout the year, following a temporary increase
resulting from the mortgage portfolio sale.
Strategic risk Risk stable There have continued to be significant macroeconomic headwinds in 2021,
notably the ongoing effects of COVID-19. We have considered this uncertainty
and potential challenges as part of the annual strategic and financial
planning process. We have also continued our work to understand how to define,
monitor, manage and report the impact of climate change on our strategy,
business and sustainability aspirations.
Financial crime risk Risk stable Financial crime risk has decreased residually during the year. Whilst
Financial Crime continues to present a heightened risk external to the Bank,
enhancements made to our AML and sanctions controls enable the Bank to better
manage this risk.
Operational risk Risk stable Operational risk has remained largely consistent this year. The impacts of
COVID-19 on our operations, colleagues and customers have stabilised as we
have effectively transitioned into new working patterns. Elevated risk has
been observed in certain areas including cyber-attacks and evolving modes of
external fraud. Targeted and strategic responses continue to be applied.
Regulatory risk Risk stable Regulatory risk remains unchanged and continues to be a key focus due to the
complexity, pace and volume of regulatory change to be managed. During 2021,
there was ongoing regulatory oversight by supervisory bodies as a result of
COVID-19 which focused on the key areas of business model and profitability
risk, credit risk, impairment provisioning, capital adequacy, business
continuity management and operational resilience. Existing programmes
continued and new programmes were established during the year to continue
preparations for the significant regulatory change agenda over the coming
years.
Conduct risk Risk stable Conduct risk remains unchanged but elevated, where customers are increasingly
vulnerable to the challenges of the economic and social impacts of the
external environment, driven by the COVID-19 pandemic. This is leading to
increased regulatory focus on the treatment of customers in the retail banking
sector, especially in relation to lending decisions, those at risk of
financial difficulty and potential vulnerability.
Legal risk Risk stable There continue to be uncertainties around the UK legal framework as Brexit is
implemented, however, we have not faced any significant additional legal risks
in 2021.
Consolidated statement of comprehensive income
For the year ended 31 December 2021
Notes Year ended Year ended
31 December 31 December 2020
2021 £'million
£'million
Interest income 2 405.7 426.3
Interest expense 2 (110.4) (176.6)
Net interest income 295.3 249.7
Fee and commission income 71.2 61.1
Fee and commission expense (1.6) (1.2)
Net fee and commission income 69.6 59.9
Net gains on sale of assets 9.4 73.3
Other income 44.2 49.7
Total income 418.5 432.6
General operating expenses (536.1) (502.3)
Depreciation and amortisation 7,8 (80.2) (74.4)
Impairment and write-offs of property, plant, equipment and intangible assets 7,8 (24.9) (40.6)
Total operating expenses (641.2) (617.3)
Expected credit loss expense (22.4) (126.7)
Loss before tax (245.1) (311.4)
Taxation 3 (3.1) 9.7
Loss for the year (248.2) (301.7)
Other comprehensive income for the year
Items which will be reclassified subsequently to profit or loss:
Movement in respect of investment securities held at fair value through other
comprehensive income (net of tax):
- changes in fair value (8.1) 5.6
- fair value changes transferred to the income statement on disposal (0.3) (0.1)
Total other comprehensive income (8.4) 5.5
Total comprehensive loss for the year (256.6) (296.2)
Loss per share
Basic (pence) 15 (144.0) (175.0)
Diluted (pence) 15 (144.0) (175.0)
Consolidated balance sheet
As at 31 December 2021
Notes 31 December 31 December
2021 2020
£'million £'million
Assets
Cash and balances with the Bank of England 3,568 2,993
Loans and advances to customers 5 12,290 12,090
Investment securities held at fair value through other comprehensive income 6 798 773
Investment securities held at amortised cost 6 4,776 2,640
Financial assets held at fair value through profit and loss 3 30
Property, plant and equipment 7 765 806
Intangible assets 8 243 254
Prepayments and accrued income 68 77
Assets classified as held for sale - 295
Other assets 76 2,621
Total assets 22,587 22,579
Liabilities
Deposits from customers 16,448 16,072
Deposits from central banks 3,800 3,808
Debt securities 588 600
Financial liabilities held at fair value through profit and loss - 30
Repurchase agreements 169 196
Derivative financial liabilities 10 8
Lease liabilities 9 269 327
Deferred grants 19 28
Provisions 10 15 11
Deferred tax liability 3 12 12
Other liabilities 222 198
Total liabilities 21,552 21,290
Equity
Called-up share capital 11 - -
Share premium 11 1,964 1,964
Retained losses (942) (694)
Other reserves 13 19
Total equity 1,035 1,289
Total equity and liabilities 22,587 22,579
Consolidated statement of changes in equity
For the year ended 31 December 2021
Called-up share capital Share premium Retained losses FVOCI reserve Share option reserve Total equity
£'million £'million £'million £'million £'million £'million
Balance as at 1 January 2021 - 1,964 (694) 3 16 1,289
Loss for the year - - (248) - - (248)
Other comprehensive income (net of tax) relating to investment securities - - - (8) - (8)
designated 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
Balance as at 1 January 2020 - 1,964 (392) (3) 14 1,583
Loss for the year - - (302) - - (302)
Other comprehensive income (net of tax) relating to investment securities - - - 6 - 6
designated at FVOCI
Total comprehensive loss - - (302) 6 - (296)
Net share option movements - - - - 2 2
Balance as at 31 December 2020 - 1,964 (694) 3 16 1,289
Notes 11 11
Consolidated cash flow statement
For the year ended 31 December 2021
Notes Year ended 31 December Year ended
2021 31 December 2020
£'million £'million
Reconciliation of loss before tax to net cash flows from operating activities:
Loss before tax (245) (311)
Adjustments for:
Impairment and write-offs of property, plant, equipment and intangible assets 7,8 25 41
Interest on lease liabilities 9 17 19
Depreciation and amortisation 7,8 80 74
Share option charge 2 2
Grant income recognised in the income statement (11) (24)
Amounts provided for (net of amounts released) 5 8
Gain on sale of assets and fair value gains on derivatives (9) (73)
Accrued interest on and amortisation of investment securities 5 3
Changes in operating assets and liabilities
Changes in loans and advances to customers (200) 2,591
Changes in deposits from customers 376 1,595
Changes in other operating assets 2,847 (2,820)
Changes in other operating liabilities (38) (64)
Net cash inflows from operating activities 2,854 1,041
Cash flows from investing activities
Sales of investment securities 1,269 615
Purchase of investment securities (3,438) (1,460)
Purchase of property, plant and equipment 7 (42) (29)
Purchase and development of intangible assets 8 (39) (81)
Acquisition of subsidiary, net of cash acquired - (1)
Net cash outflows from investing activities (2,250) (956)
Cash flows from financing activities
Grant repaid - (50)
Repayment of capital element of leases 9 (29) (31)
Net cash outflows from financing activities (29) (81)
Net increase in cash and cash equivalents 575 4
Cash and cash equivalents at start of year 2,993 2,989
Cash and cash equivalents at end of year 3,568 2,993
Loss before tax includes:
Interest received 409 407
Interest paid 126 176
Notes to the financial statements
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 23 February 2022.
The financial statements are prepared on a going concern basis, the Directors
are satisfied that the Group has the resources to continue in business for the
foreseeable future.
Changes in accounting policy and disclosures
The accounting policies and methods of computation are consistent with those
applied and disclosed in the Group's 2020 Annual Report and Accounts.
2. Net interest income
Interest income
2021 2020
£'million £'million
Cash and balances held with central banks 4.4 6.1
Loans and advances to customers 378.1 393.3
Investment securities held at amortised cost 20.6 24.8
Investment securities held at FVOCI 2.6 2.1
Total interest income 405.7 426.3
Interest expense
2021 2020
£'million £'million
Deposits from customers 40.1 99.1
Deposits from central banks 4.0 8.7
Debt securities 47.4 47.8
Lease liabilities 16.7 18.7
Repurchase agreements 2.2 2.3
Total interest expense 110.4 176.6
3. Taxation
Tax expense
The components of the tax (expense)/credit for the year are:
2021 2020
£'million £'million
Current tax
Current tax (0.5) (0.1)
Adjustment in respect of prior years 0.6 (0.5)
Total current tax credit/(expense) 0.1 (0.6)
Deferred tax
Origination and reversal of temporary differences 3.4 3.6
Effect of changes in tax rates (5.4) 2.1
Adjustment in respect of prior years (1.2) 4.6
Total deferred tax (expense)/credit (3.2) 10.3
Total tax (expense)/credit (3.1) 9.7
Reconciliation of the total tax expense
The tax expense shown in the income statement differs from the tax expense
that would apply if all accounting profits had been taxed at the UK
corporation tax rate.
A reconciliation between the tax expense and the accounting profit multiplied
by the UK corporation tax rate is as follows:
2021 Effective 2020 Effective
£'million tax rate £'million tax rate
% %
Accounting loss before tax (245.1) (311.4)
Tax expense at statutory tax rate of 19% 46.6 19.0% 59.2 19.0%
Tax effects of:
Non-deductible expenses - depreciation on non-qualifying fixed assets (2.7) (1.1%) (2.4) (0.8%)
Non-deductible expenses - investment property impairment (1.8) (0.8%) (3.2) (1.0%)
Non-deductible expenses - remediation (7.1) (2.9%) (6.6) (2.1%)
Non-deductible expenses - other (0.1) - (0.7) (0.2%)
Impact of intangible asset impairment on R&D deferred tax liability 3.0 1.2% 0.2 0.1%
Share based payments (0.3) (0.1%) (0.2) (0.1%)
Adjustment in respect of prior years (0.6) (0.3%) 4.1 1.3%
Current year losses for which no deferred tax asset has been recognised (34.7) (14.1%) (42.8) (13.7%)
Effect of changes in tax rates (5.4) (2.2%) 2.1 0.7%
Tax (expense)/credit reported in the consolidated income statement (3.1) (1.3%) 9.7 3.2%
The effective tax rate for this year is (1.3%) (2020: 3.2%). The main reasons
for this, in addition to the reported accounting loss before tax for the year,
are set out below:
Deferred tax
The following table shows deferred tax recorded in the statement of financial
position and changes recorded in the tax expense:
Unused Investment securities and impairments Share-based payments Property, plant and equipment Intangible Total
tax losses £'million £'million £'million assets £'million
£'million £'million
2021
Deferred tax assets 13 3 - - - 16
Deferred tax liabilities - 2 - (23) (7) (28)
Deferred tax liabilities (net) 13 5 - (23) (7) (12)
At 1 January 2021 12 2 - (16) (10) (12)
Income statement 1 - - (7) 3 (3)
Other comprehensive income - 3 - - - 3
At 31 December 2021 13 5 - (23) (7) (12)
Unused Investment securities and impairments Share-based payments Property, plant and equipment Intangible Total
tax losses £'million £'million £'million assets £'million
£'million £'million
2020
Deferred tax assets 12 3 - - - 15
Deferred tax liabilities - (1) - (16) (10) (27)
Deferred tax assets (net) 12 2 - (16) (10) (12)
At 1 January 2020 - 4 - (15) (4) (15)
Income statement 12 (1) - (1) - 10
Other comprehensive income - (1) - - - (1)
Acquisition - - - - (6) (6)
At 31 December 2020 12 2 - (16) (10) (12)
4. Financial instruments
Our financial instruments primarily comprise customer deposits, loans and
advances to customers, cash held at banks 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 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 table below as the carrying
value of those assets are a close approximation of their fair value.
Fair value Fair value Amortised Total
through through other comprehensive income cost fair value
profit and loss £'million £'million £'million
£'million
31 December 2021
Assets
Loans and advances to customers - - 12,290 12,290
Investment securities - 798 4,776 5,574
Financial assets held at FVTPL 3 - - 3
Liabilities
Deposits from customers - - 16,448 16,448
Deposits from central bank - - 3,800 3,800
Debt securities - - 588 588
Derivative financial liabilities 10 - - 10
Repurchase agreements - - 169 169
Fair value Fair value Amortised Total
through through other comprehensive income cost fair value
profit and loss £'million £'million £'million
£'million
31 December 2020
Assets
Loans and advances to customers - - 12,090 12,090
Investment securities - 773 2,640 3,413
Financial assets held at FVTPL 30 - - 30
Assets classified as held for sale - - 295 295
Liabilities
Deposits from customers - - 16,072 16,072
Deposits from central bank - - 3,808 3,808
Debt securities - - 600 600
Financial liabilities held at FVTPL 30 - - 30
Derivative financial liabilities 8 - - 8
Repurchase agreements - - 196 196
5. Loans and advances to customers
31 December 2021
Gross carrying amount ECL Net carrying
£'million allowance amount
£'million £'million
Consumer lending 890 (42) 848
Retail mortgages 6,723 (19) 6,704
Commercial lending 4,846 (108) 4,738
Total loans and advances to customers 12,459 (169) 12,290
31 December 2020
Gross carrying amount ECL Net carrying
£'million allowance amount
£'million £'million
Consumer lending 204 (25) 179
Retail mortgages 6,892 (26) 6,866
Commercial lending 5,148 (103) 5,045
Total loans and advances to customers 12,244 (154) 12,090
Further information on the movements in gross carrying amounts and ECL can be
found in note 11. An analysis of the gross loans and advances by product
category is set out below:
31 December 31 December
2021 2020
£'million £'million
Overdrafts 66 73
Credit cards 13 10
Term loans 811 121
Total consumer lending 890 204
Residential owner occupied 5,022 5,051
Retail buy-to-let 1,701 1,841
Total retail mortgages 6,723 6,892
Total retail lending 7,613 7,096
Professional buy-to-let 950 1,117
Bounce back loans 1,304 1,353
Coronavirus business interruption loans 165 114
Recovery loan scheme(1) 157 -
Other term loans 1,791 2,138
Total commercial term lending 4,367 4,722
Overdrafts and revolving credit facilities 156 149
Credit cards 3 3
Asset and invoice finance 320 274
Total commercial lending 4,846 5,148
Gross loans and advances to customers 12,459 12,244
1. Recovery loan scheme includes £66 million acquired from third
parties under forward flow arrangements (31 December 2020: £nil)
6. Investment securities
31 December 31 December
2021 2020
£'million £'million
Fair value through other comprehensive income 798 773
Amortised cost 4,776 2,640
Total investment securities 5,574 3,413
Fair value through other comprehensive income
31 December 31 December
2021 2020
£'million £'million
Sovereign bonds 566 386
Residential mortgage backed securities 38 50
Covered bonds 156 337
Multi-lateral development bank bonds 38 -
Total investment securities held at FVOCI 798 773
Amortised cost
31 December 31 December
2021 2020
£'million £'million
Sovereign bonds 1,198 495
Residential mortgage backed securities 1,687 1,624
Covered bonds 442 521
Multi-lateral development bank bonds 1,289 -
Asset backed securities 160 -
Total investment securities held at amortised cost 4,776 2,640
7. Property, plant and equipment
Investment property Leasehold improvements Freehold land Fixtures, IT hardware Right of use assets relating to leased stores and offices Total
fittings and equipment
£'million £'million and buildings
£'million £'million £'million
£'million
£'million
Cost
1 January 2021 18 292 298 25 11 330 974
Additions and modifications - 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
Charge for the year - 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
Investment property Leasehold improvements Freehold land Fixtures, IT hardware Right of use assets relating to leased stores and offices Total
fittings and equipment
£'million £'million and buildings
£'million £'million £'million
£'million
£'million
Cost
1 January 2020 18 314 262 26 10 332 962
Additions and modifications - 6 18 3 2 4 33
Recognised in business combinations - 1 - - 1 3 5
Disposals - - - - - (9) (9)
Write-offs - (11) - (4) (2) - (17)
Transfers - (18) 18 - - - -
31 December 2020 18 292 298 25 11 330 974
Accumulated depreciation
1 January 2020 10 49 14 12 5 16 106
Charge for the year - 11 5 5 4 16 41
Recognised in business combinations - 1 - - - - 1
Impairments 2 9 - 1 - 16 28
Disposals - - - - - (1) (1)
Write-offs - (2) - (3) (2) - (7)
Transfers - (2) 2 - - - -
31 December 2020 12 66 21 15 7 47 168
Net book value 6 226 277 10 4 283 806
Impairments
During the year impairments were recognised in relation to the right of use
assets on the three stores announced for closure. Prior to impairment, the
right of use assets and lease liabilities were remeasured through to the next
break clause. The leasehold improvements, fixtures and fittings associated
with these stores have been written off on the basis that they will not
provide the Group with any economic benefit post closure.
Write-offs
As well as the write-offs relating to the store closures outlined above during
the year we wrote-off a number of items of IT hardware that are no longer
being used or no longer providing the Group with any economic benefit.
Transfers
Transfers represent costs associated with the improvements made to previously
leased stores which have been purchased. These stores were purchased where
there was a strong commercial rationale for doing so.
8. Intangible assets
Goodwill Brand 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
Amortisation
1 January 2021 - - 86 86
Charge for the year - - 38 38
Impairment - - 7 7
Write-offs - - (26) (26)
31 December 2021 - - 105 105
Net book value 10 2 231 243
Goodwill Brand Software Total
£'million £'million £'million £'million
Cost
1 January 2020 4 - 224 228
Additions - - 81 81
Recognised in business combinations 6 2 32 40
Write-offs - - (10) (10)
Deferred grant - - 1 1
31 December 2020 10 2 328 340
Amortisation
1 January 2020 - - 60 60
Charge for the year - - 33 33
Write-offs - - (7) (7)
31 December 2020 - - 86 86
Net book value 10 2 242 254
Impairments
Following the purchase of the RateSetter back book in April 2021 an impairment
was recognised in relation to the peer-to-peer component of the RateSetter
lending platform.
Write-offs
The write-offs in the year consisted primarily of software and applications
that are no longer being used and are no longer providing any further economic
benefits.
9. Leases
Lease liabilities
2021 2020
£'million £'million
1 January 327 341
Additions and modifications (6) 4
Recognised in business combinations - 3
Disposals (40) (9)
Lease payments made (29) (31)
Interest on lease liabilities 17 19
31 December 269 327
Right of use assets
All disclosures relating to right of use assets, including accounting policy
can be found in note 7.
Additions and modifications
As part of our decision to close three stores the lease liabilities on these
stores were remeasured out to their first break clause (where available). This
led to a modification of the lease liabilities of £6 million, with a
corresponding adjustment made to the associated right of use assets.
Disposals
The disposals during year relate to the four stores where we purchased the
freehold or long-lease during the year (2020: three stores). Following the
purchase both the lease liabilities and right of use assets relating to these
stores were derecognised. Additionally we disposed of the majority of our
leases at Old Bailey office space, which we vacated during 2020. We had
already impaired the right of use assets related during 2020 following our
decision to no longer use this space.
Low value and short leases
During the year ended 31 December 2021 £0.7 million (year ended 31 December
2020: £0.2 million) was recognised in the income statement with respect to
assets of low value or a lease of less than12 months. The lease for the
Bishopsgate office was transferred over to Metro Bank in October 2021 from
RateSetter. This amounted to an immaterial amount (less than £0.1 million)
therefore has been excluded from the note.
Future income due under non-cancellable operating leases
The Group leases out surplus space in some of its properties. The table below
sets out the cash payments expected over the remaining non-cancellable term of
each lease, exclusive of any VAT.
31 December 31 December
2021 2020
£'million £'million
Within one year 1 1
Due in one to five years 4 4
Due in more than five years 4 5
Total 9 10
10. Provisions
Customer Dilapidations Onerous Legal and regulatory Other Total
remediation £'million contracts £'million £'million £'million
£'million £'million
1 January 2021 2 3 6 - - 11
Additions - 2 5 5 1 13
Released - (2) (4) - - (6)
Utilised (1) - (2) - - (3)
31 December 2021 1 3 5 5 1 15
Customer Dilapidations Onerous Legal and regulatory Other Total
remediation £'million contracts £'million £'million £'million
£'million £'million
1 January 2020 12 3 - - 2 17
Additions 1 - 9 - - 10
Recognised in business combinations - - 3 - - 3
Released - - - - (2) (2)
Utilised (11) - (6) - - (17)
31 December 2020 2 3 6 - - 11
All additions have been recognised in the income statement, with the exception
of £2 million provision for dilapidations. This has been recognised as an
addition to the right of use assets (see note 7).
Dilapidations
The amounts provided in respect of dilapidations are calculated based on
assessments by an independent qualified valuer. They represent the best
estimate of the present value to restore the site to the condition required
under the lease. As the date restoration is required may be up to 25 years in
the future, there is uncertainty in this estimation. Additionally, for sites
that are outside the Landlord and Tenant Act 1954, should we be successful in
renewing the lease at the end of its term, it is possible that the provision
recognised may not be utilised.
The additional provision for dilapidations during the year relate to the three
stores we will be closing in 2022 (where a provision had not already been
recognised). A provision for the restoration of the Old Bailey office space
was substantially released in the year following the disposal of the majority
of this site.
The provision made in relation to these sites is expected to be utilised
within the next two years.
Onerous contract
Onerous contracts primarily relate to the non-rental costs of fulfilling
property contracts from which we will no longer benefit. The additions in year
primarily relate to the three stores announced for closures and have been
determined with reference to the occupancy costs from the date of closure
through to the next lease event. Rental costs on these sites from which we
will receive no future economic benefits are represented by an impairment to
the right of use asset (see note 7 for further details). The utilisation and
releases in the year relate to both occupancy costs at Old Bailey, a previous
head office site, the majority of which has now been disposed of as well as a
provision in relation to negative margin peer-to-peer loans, which is no
longer required following the acquisition of the RateSetter back book in April
2021.
The majority of our current onerous contract provisions are anticipated to be
utilised within the next two years.
Legal and regulatory
Provision for regulatory matters consists of £5 million provided in respect
of the FCA investigation into potential rule breaches in the period prior to
the announcements made on 23 January 2019 and 26 February 2019 in relation to
risk-weighted assets and AIRB accreditation respectively.
As at 31 December 2021 we believe there to be sufficient certainty in the
outcome of this investigation to make a provision against the likely penalty.
The actual level of penalty remains uncertain. Management expects that the
outcome will sit within a range up to £13 million. The provision reflects
Management's best estimate of the outcome at this stage.
11. Called-up share capital
The Group has a single class of shares. As at 31 December 2021 172.4 million
ordinary shares of 0.0001p (31 December 2020: 172.4 million) were authorised
and in issue.
Called-up ordinary share capital, issued and fully paid
The called-up share capital reserve is used to record the nominal share
capital. At the 31 December 2020 the Group's called up share capital was
£172.42 (31 December 2019: £172.42).
2021 2020
£'million £'million
31 December - -
Share premium
The share premium reserve is used to record the excess consideration of any
shares issued over the nominal share value.
2021 2020
£'million £'million
31 December 1,964 1,964
12. Credit Risk
Credit risk concentration
Retail mortgage lending by DTV banding
31 December 2021 31 December 2020
£'million
£'million
Retail Retail Total retail mortgages Retail Retail Total retail mortgages
owner occupied buy-to-let owner occupied buy-to-let
DTV ratio
Less than 50% 1,907 524 2,431 1,855 502 2,357
51-60% 767 415 1,182 842 390 1,232
61-70% 1,092 564 1,656 836 533 1,369
71-80% 805 188 993 1,084 407 1,491
81-90% 400 3 403 359 4 363
91-100% 51 3 54 74 - 74
More than 100% - 4 4 1 5 6
Total retail mortgage lending 5,022 1,701 6,723 5,051 1,841 6,892
Retail mortgage lending by geographic exposure
31 December 2021 31 December 2020
£'million
£'million
Retail Retail Total retail mortgages Retail Retail Total retail mortgages
owner occupied buy-to-let owner occupied buy-to-let
Region
Greater London 2,130 1,048 3,178 2,213 1,147 3,360
South east 1,157 283 1,440 1,157 309 1,466
South west 434 82 516 433 91 524
East of England 309 69 378 298 73 371
North west 264 62 326 265 63 328
West Midlands 190 61 251 179 58 237
Yorkshire and the Humber 139 34 173 139 37 176
East Midlands 140 25 165 131 25 156
Wales 110 20 130 102 21 123
North east 62 10 72 62 10 72
Scotland 87 7 94 72 7 79
Total retail mortgage lending 5,022 1,701 6,723 5,051 1,841 6,892
Retail mortgage lending by repayment type
31 December 2021 31 December 2020
£'million
£'million
Retail Retail Total retail mortgages Retail Retail Total retail mortgages
owner occupied buy-to-let owner occupied buy-to-let
Repayment
Interest 2,113 1,620 3,733 2,337 1,751 4,088
Capital and interest 2,909 81 2,990 2,714 90 2,804
Total retail mortgage lending 5,022 1,701 6,723 5,051 1,841 6,892
Commercial term lending (exc. BBLS) by DTV banding
31 December 2021 31 December 2020
£'million
£'million
Professional Other term loans Total commercial term loans Professional Other term loans Total commercial term loans
buy-to-let buy-to-let
DTV ratio
Less than 50% 306 770 1,076 353 876 1,229
51-60% 232 483 715 261 546 807
61-70% 282 158 440 351 255 606
71-80% 112 63 175 133 100 233
81-90% 8 30 38 9 51 60
91-100% 6 27 33 6 13 19
More than 100% 4 582 586 4 411 415
Total commercial term loans 950 2,113 3,063 1,117 2,252 3,369
Commercial term lending (exc. BBLS) by geographic exposure
31 December 2021 31 December 2020
£'million
£'million
Professional Other term loans Total commercial term loans Professional Other term loans Total commercial term loans
buy-to-let buy-to-let
Region
Greater London 676 1,186 1,862 780 1,358 2,138
South east 160 390 550 205 399 604
South west 28 151 179 31 156 187
East of England 39 71 110 48 67 115
North west 18 150 168 20 146 166
West Midlands 9 84 93 10 66 76
Yorkshire and the Humber 3 17 20 3 13 16
East Midlands 9 27 36 11 18 29
Wales 4 12 16 5 10 15
North east 3 17 20 3 18 21
Scotland 1 2 3 1 - 1
Northern Ireland - 6 6 - 1 1
Total commercial term loans 950 2,113 3,063 1,117 2,252 3,369
Commercial term lending (exc. BBLS) by repayment type
31 December 2021 31 December 2020
£'million
£'million
Professional Other term loans Total commercial term loans Professional Other term loans Total commercial term loans
buy-to-let buy-to-let
Repayment
Interest 897 230 1,127 1,058 281 1,339
Capital and interest 53 1,883 1,936 59 1,971 2,030
Total commercial term loans 950 2,113 3,063 1,117 2,252 3,369
A Commercial term lending (exc. BBLS) by industry exposure
31 December 2021 31 December 2020
£'million
£'million
Professional Other term loans Total commercial term loans Professional Other term loans Total commercial term loans
buy-to-let buy-to-let
Industry sector
Real estate (rent, buy and sell) 950 837 1,787 1,117 1,032 2,149
Hospitality - 361 361 - 376 376
Health and social work - 225 225 - 248 248
Legal, accountancy and consultancy - 206 206 - 208 208
Retail - 136 136 - 107 107
Real estate (development) - 46 46 - 60 60
Recreation, cultural and sport - 88 88 - 53 53
Construction - 85 85 - 36 36
Education - 17 17 - 30 30
Real estate (management of) - 9 9 - 10 10
Investment and unit trusts - 6 6 - 9 9
Other - 97 97 - 83 83
Total commercial term loans 950 2,113 3,063 1,117 2,252 3,369
Credit risk exposures
Retail mortgages
31 December 2021 31 December 2020
£' million £' million
Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI
12 month ECL Lifetime ECL Lifetime ECL Lifetime ECL 12 month ECL Lifetime ECL Lifetime ECL Lifetime ECL
Up to date 5,544 1,010 38 - 5,911 802 47 -
1 to 29 days past due 2 27 9 - - 18 8 -
30 to 89 days past due - 26 16 - - 43 13 -
90+ days past due - - 51 - - - 50 -
Gross carrying amount 5,546 1,063 114 - 5,911 863 118 -
Consumer lending
31 December 2021 31 December 2020
£' million £' million
Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI
12 month ECL Lifetime ECL Lifetime ECL Lifetime ECL 12 month ECL Lifetime ECL Lifetime ECL Lifetime ECL
Up to date 786 71 2 - 149 38 - -
1 to 29 days past due - 2 - - - 3 - -
30 to 89 days past due - 9 3 - - 2 - -
90+ days past due - - 16 1 - - 12 -
Gross carrying amount 786 82 21 1 149 43 12 -
Commercial lending
31 December 2021 31 December 2020
£' million £' million
Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI
12 month ECL Lifetime ECL Lifetime ECL Lifetime ECL 12 month ECL Lifetime ECL Lifetime ECL Lifetime ECL
Up to date 3,727 656 118 - 4,115 863 96 -
1 to 29 days past due 12 46 2 - - 21 2 -
30 to 89 days past due - 78 23 - - 22 11 -
90+ days past due - - 184 - - - 18 -
Gross carrying amount 3,739 780 327 - 4,115 906 127 -
Loss allowance
The following tables explain the changes in both the gross carrying amount and
loss allowances of the Group's loans and advances during the period.
Significant changes in the gross carrying amount which contributed to changes
in the loss allowance are explained below. Other movements consist of changes
to model assumptions and forward looking information.
Retail mortgages
Gross carrying amount Loss allowance Net carrying amount
£'million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
1 January 2021 5,911 863 118 - 6,892 (5) (17) (4) - (26) 5,906 846 114 - 6,866
Transfers to/(from) stage 1¹ 362 (345) (17) - - (8) 8 - - - 354 (337) (17) - -
Transfers to/(from) stage 2 (469) 477 (8) - - 1 (1) - - - (468) 476 (8) - -
Transfers to/(from) stage 3 (19) (26) 45 - - - 1 (1) - - (19) (25) 44 - -
Net remeasurement due to transfers² - - - - - 7 (1) - - 6 7 (1) - - 6
New lending³ 894 233 - - 1,127 (1) (4) - - (5) 893 229 - - 1,122
Repayments, additional drawdowns and interest accrued (131) (17) (2) - (150) - - - - - (131) (17) (2) - (150)
Transfer to held for sale(4) - - - - - - - - - - - - - - -
Derecognitions(5) (1,002) (122) (22) - (1,146) 1 1 1 - 3 (1,001) (121) (21) - (1,143)
Changes to model assumptions(6) - - - - - 3 1 (1) - 3 3 1 (1) - 3
31 December 2021 5,546 1,063 114 - 6,723 (2) (12) (5) - (19) 5,544 1,051 109 - 6,704
Gross carrying amount Loss allowance Net carrying amount
£'million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
1 January 2020 9,874 502 54 - 10,430 - (3) (5) - (8) 9,874 499 49 -- 10,422
Transfers to/(from) stage 1¹ 109 (106) (3) - - (1) 1 - - - 108 (105) (3) - -
Transfers to/(from) stage 2 (559) 560 (1) - - - - - - - (559) 560 (1) - -
Transfers to/(from) stage 3 (55) (22) 77 - - - 1 (1) - - (55) (21) 76 - -
Net remeasurement due to transfers² - - - - - 1 (8) (1) - (8) 1 (8) (1) - (8)
New lending³ 522 48 1 - 571 (3) (3) - - (6) 519 45 1 - 565
Repayments, additional drawdowns and interest accrued (122) (11) - - (133) - - - - - (122) (11) - - (133)
Transfer to held for sale(4) (289) (7) - - (296) 1 - - - 1 (288) (7) - - (295)
Derecognitions(5) (3,569) (101) (10) - (3,680) 3 1 1 - 5 (3,566) (100) (9) - (3,675)
Changes to model assumptions(6) - - - - - (6) (6) 2 - (10) (6) (6) 2 - (10)
31 December 2020 5,911 863 118 - 6,892 (5) (17) (4) - (26) 5,906 846 114 - 6,866
1. Represents stage transfers prior to any ECL remeasurements
2. Represents the remeasurement between the twelve month and lifetime ECL due
to stage transfer, including any changes to the model assumptions and forward
looking information.
3. Represents the increase in balances resulting from loans and advances that
have been newly originated, purchased or renewed.
4. Represents the loans and advance reclassified as held for sale at year
end.
5. Represents the decrease in balances resulting from loans and advances that
have been fully repaid, disposed of or written off.
6. Represents the change in loss allowances resulting from changes to the
model assumptions, forward looking information and changes in the customers
risk profile
Consumer lending
Gross carrying amount Loss allowance Net carrying amount
£'million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
1 January 2021 149 43 12 - 204 (6) (9) (10) - (25) 143 34 2 - 179
Transfers to/(from) stage 1 8 (8) - - - (1) 1 - - - 7 (7) - - -
Transfers to/(from) stage 2 (6) 6 - - - - - - - - (6) 6 - - -
Transfers to/(from) stage 3 (2) (3) 5 - - - 2 (2) - - (2) (1) 3 - -
Net remeasurement due to transfers - - - - - 1 - (2) - (1) 1 - (2) - (1)
New lending 697 66 12 1 776 (16) (7) (9) - (32) 681 59 3 1 744
Repayments, additional drawdowns and interest accrued (20) (9) (1) - (30) - - - - - (20) (9) (1) - (30)
Derecognitions (40) (13) (7) - (60) 1 2 7 - 10 (39) (11) - - (50)
Changes to model assumptions - - - - - 3 3 - - 6 3 3 - - 6
31 December 2021 786 82 21 1 890 (18) (8) (16) - (42) 768 74 5 1 848
Gross carrying amount Loss allowance Net carrying amount
£'million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
1 January 2020 223 - 10 - 233 (3) (1) (9) - (13) 220 (1) 1 - 220
Transfers to/(from) stage 1 - - - - - - - - - - - - - - -
Transfers to/(from) stage 2 (62) 62 - - - 1 (1) - - - (61) 61 - - -
Transfers to/(from) stage 3 (3) (1) 4 - - - - - - - (3) (1) 4 - -
Net remeasurement due to transfers - - - - - - (7) (3) - (10) - (7) (3) - (10)
New lending 55 2 - - 57 (2) - - - (2) 53 2 - - 55
Repayments, additional drawdowns and interest accrued (14) (20) (1) - (35) - - - - - (14) (20) (1) - (35)
Derecognitions (50) - (1) - (51) - - 1 - 1 (50) - - - (50)
Changes to model assumptions - - - - - (2) - 1 - (1) (2) - 1 - (1)
31 December 2020 149 43 12 - 204 (6) (9) (10) - (25) 143 34 2 - 179
Commercial lending
Gross carrying amount Loss allowance Net carrying amount
£'million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
1 January 2021 4,115 906 127 - 5,148 (19) (43) (41) - (103) 4,096 863 86 - 5,045
Transfers to/(from) stage 1 189 (184) (5) - - (7) 7 - - - 182 (177) (5) - -
Transfers to/(from) stage 2 (297) 304 (7) - - 1 (2) 1 - - (296) 302 (6) - -
Transfers to/(from) stage 3 (181) (81) 262 - - - 3 (3) - - (181) (78) 259 - -
Net remeasurement due to transfers - - - - - 3 (10) (17) - (24) 3 (10) (17) - (24)
New lending 566 58 6 - 630 (6) (2) (1) - (9) 560 56 5 - 621
Repayments, additional drawdowns and interest accrued (167) (31) (13) - (211) - - - - - (167) (31) (13) - (211)
Derecognitions (486) (192) (43) - (721) 3 8 12 - 23 (483) (184) (31) - (698)
Changes to model assumptions - - - - - (2) 10 (3) - 5 (2) 10 (3) - 5
31 December 2021 3,739 780 327 - 4,846 (27) (29) (52) - (108) 3,712 751 275 - 4,738
Gross carrying amount Loss allowance Net carrying amount
£'million Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
1 January 2020 3,929 72 51 - 4,052 (6) (1) (6) - (13) 3,923 71 45 - 4,039
Transfers to/(from) stage 1 13 (11) (2) - - - - - - - 13 (11) (2) - -
Transfers to/(from) stage 2 (678) 679 (1) - - - - - - - (678) 679 (1) - -
Transfers to/(from) stage 3 (84) (20) 104 - - - 1 (1) - - (84) (19) 103 - -
Net remeasurement due to transfers - - - - - - (28) (30) - (58) - (28) (30) - (58)
New lending 1,562 199 9 - 1,770 (6) (13) (3) - (22) 1,556 186 6 - 1,748
Repayments, additional drawdowns and interest accrued (201) 1 (9) - (209) - - - - - (201) 1 (9) - (209)
Derecognitions (426) (14) (25) - (465) 1 1 2 - 4 (425) (13) (23) - (461)
Changes to model assumptions - - - - - (8) (3) (3) - (14) (8) (3) (3) - (14)
31 December 2020 4,115 906 127 - 5,148 (19) (43) (41) - (103) 4,096 863 86 - 5,045
13. Legal and regulatory matters
As part of the normal course of business we are subject to legal and
regulatory matters which, with the exception of the matters set out below, are
not considered to have a material impact on the business.
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 (details of our provisions are set out in note 10). This
is because, based on the facts currently known, it is not practicable to
predict the outcome of any of these matters or reliably estimate any financial
impact. Their inclusion does not constitute any admission of wrongdoing or
legal liability.
Financial crime
In 2017 and 2019 initial disclosures were made to the US Office of Foreign
Assets Control (OFAC) in relation to Cuba and Iran. We completed our review in
respect of these matters in December 2021 and have submitted our findings to
OFAC. We continue to engage and co-operate fully with our regulators. At this
stage it is not practicable to identify the likely outcome or to estimate the
potential financial impact with any certainty.
In addition, we continue to engage and co-operate fully with the FCA's
enquiries regarding the Bank's financial crime systems and controls. These
enquiries remain at a relatively early stage.
14. Fair value of financial instruments
Carrying Quoted market price Level 1 Using observable inputs Level 2 With significant unobservable inputs Level 3 Total
value £'million £'million £'million fair value
£'million £'million
31 December 2021
Assets
Loans and advances to customers 12,290 - - 12,356 12,356
Investment securities held at FVOCI 798 760 38 - 798
Investment securities held at amortised costs 4,776 2,977 1,710 60 4,747
Financial assets held at FVTPL 3 - - 3 3
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 10 - 10 - 10
Repurchase agreements 169 - - 169 169
Carrying Quoted market price Level 1 Using observable inputs Level 2 With significant unobservable inputs Level 3 Total
value £'million £'million £'million fair value
£'million £'million
31 December 2020
Assets
Loans and advances to customers 12,090 - - 11,892 11,892
Investment securities held at FVOCI 773 723 50 - 773
Investment securities held at amortised costs 2,640 1,021 1,567 66 2,654
Financial assets held at FVTPL 30 - - 30 30
Liabilities
Deposits from customers 16,072 - - 16,147 16,147
Deposits from central bank 3,808 - - 3,808 3,808
Debt securities 600 483 - - 483
Financial liabilities held at FVTPL 30 - - 30 30
Derivative financial liabilities 8 - 8 - -
Repurchase agreements 196 - - 196 196
Information on how fair values are calculated for the financial assets and
liabilities noted above 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).
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 generally short
dated.
15. Loss per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary equity holders of Metro Bank by the weighted average number of
ordinary shares in issue during the year.
2021 2020
Earnings attributable to ordinary equity holders of Metro Bank (£'million) (248.2) (301.7)
Weighted average number of ordinary shares in issue - basic ('000) 172,421 172,420
Basic earnings per share (pence) (144.0) (175.0)
Diluted earnings per share has been calculated by dividing the earnings
attributable to ordinary equity holders of Metro Bank 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 the Group made a loss during the years to
31 December 2021 and 31 December 2020 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 earnings per share.
2021 2020
Earnings attributable to ordinary equity holders of Metro Bank (£'million) (248.2) (301.7)
Weighted average number of ordinary shares in issue - diluted ('000) 172,421 172,420
Diluted earnings per share (pence) (144.0) (175.0)
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 EPS.
16. Related parties
Key management personnel
Our key management personnel, and persons connected with them, are considered
to be related parties for disclosure purposes. 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 Leadership Team 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:
2021 2020
£'million £'million
Short-term benefits 5.4 5.3
Post-employment benefits 0.1 0.1
Share-based payment costs 1.3 0.7
Total compensation for key management personnel 6.8 6.1
Short-term employee benefits include salary, medical insurance, bonuses and
cash allowances paid to key management personnel. The share based payment cost
consists of the IFRS 2 charge for the year (including charges associated with
share options awarded in previous years.
Banking transactions with key management personnel
We provide banking services to Directors and other key management personnel
and persons connected to them. Loan transactions during the year and the
balances outstanding at 31 December were as follows:
2021 2020
£'million £'million
Loans outstanding at 1 January 1.9 0.7
Loans relating to persons and companies newly considered related parties - 1.8
Loans relating to persons and companies no longer considered related parties (0.5) (0.6)
Loans issued during the year 1.8 -
Loans outstanding as at 31 December 3.2 1.9
Interest expense on loans payable to the Group (£'000) 30 34
There were three (31 December 2020: three) loans outstanding at 31 December
2021 totalling £3.2 million (31 December 2020: £1.9 million). Of these, two
are residential mortgages secured on property and one is an asset finance
loan; 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 at 31 December were as follows:
2021 2020
£'000 £'000
Credit cards outstanding as at 31 December 5 22
Deposit balances outstanding at 31 December were as follows
2021 2020
£'million £'million
Deposits held at 1 January 2.1 3.3
Deposits relating to persons and companies newly considered related parties 0.1 0.2
Deposits relating to persons and companies no longer considered related (0.1) (0.3)
parties
Net amounts withdrawn (0.6) (1.1)
Deposits outstanding as at 31 December 1.5 2.1
17. Post balance sheet events
There have been no material post balance sheet events.
Underlying to statutory results reconciliation
Year ended 31 December 2020 Statutory Listing Share Awards Impairment and write-off of property, plant, equipment and intangible assets C&I fund Transformation costs Remediation costs Business acquisition and integration costs Mortgage portfolio sale Underlying basis
basis £'million £'million costs £'million £'million £'million £'million £'million
£'million £'million
Net interest income 295.3 - - 0.4 - - - - 295.7
Net fee and commission income 69.6 - - - - - - - 69.6
Net gains on sale of assets 9.4 - - - - - - (8.7) 0.7
Other income 44.2 - - (9.4) - - - (2.9) 31.9
Total income 418.5 - - (9.0) - - - (11.6) 397.9
General operating expenses (536.1) - - 9.0 8.9 45.9 2.4 3.3 (466.6)
Depreciation and amortisation (80.2) - - - - - - - (80.2)
Impairment and write-offs of PPE and intangible assets (24.9) - 24.9 - - - - - -
Total operating expenses (641.2) - 24.9 9.0 8.9 45.9 2.4 3.3 (546.8)
Expected credit loss expense (22.4) - - - - - - - (22.4)
Loss before tax (245.1) - 24.9 - 8.9 45.9 2.4 (8.3) (171.3)
Year ended 31 December 2020 Statutory Listing Share Awards Impairment and write-off of property, plant, equipment and intangible assets C&I fund Transformation costs Remediation costs Business acquisition and integration costs Mortgage portfolio sale Underlying basis
basis £'million £'million costs £'million £'million £'million £'million £'million
£'million £'million
Net interest income 249.7 - - 0.6 - - - - 250.3
Net fee and commission income 59.9 - - - - - - - 59.9
Net gains on sale of assets 73.3 - - - - - - (69.0) 4.3
Other income 49.7 - - (23.3) - - - - 26.4
Total income 432.6 - - (22.7) - - - (69.0) 340.9
General operating expenses (502.3) (0.2) - 22.7 16.7 40.8 5.4 5.3 (411.6)
Depreciation and amortisation (74.4) - - - - - - - (74.4)
Impairment and write-offs of PPE and intangible assets (40.6) - 40.6 - - - - - -
Total operating expenses (617.3) (0.2) 40.6 22.7 16.7 40.8 5.4 5.3 (486.0)
Expected credit loss expense (126.7) - - - - - - - (126.7)
Loss before tax (311.4) (0.2) 40.6 - 16.7 40.8 5.4 (63.7) (271.8)
Key capital disclosures
The information set out within this section does not form part of the
statutory accounts for the years ended 31 December 2021 or 31 December 2020.
Key Metrics
The table below summarises our key regulatory metrics as at 31 December 2021
and 31 December 2020.
31 December 2021 31 December 2020
£'million £'million
Available capital
CET1 capital 936 1,192
Tier 1 capital 936 1,192
Total capital 1,184 1,441
Total capital plus MREL 1,527 1,783
Risk weighted assets (RWAs)
Total risk weighted assets 7,454 7,957
Risk-based capital ratios as % of RWAs
CET1 ratio 12.6% 15.0%
Tier 1 ratio 12.6% 15.0%
Total capital ratio 15.9% 18.1%
Total capital plus MREL 20.5% 22.4%
Additional CET1 buffer requirements as % of RWAs
Countercyclical capital conservation buffer requirement 2.5% 2.5%
Countercyclical buffer requirement 0.0% 0.0%
Total of bank CET1 specific buffer requirements 2.5% 2.5%
Leverage ratio
Leverage ratio 4.41% 5.62%
Liquidity coverage ratio
Liquidity coverage ratio (LCR) 281% 187%
Leverage Ratio
The table below shows the Bank's Tier 1 Capital and Total Leverage Exposure
that are used to derive the Leverage Ratio. The leverage ratio is the ratio of
Tier 1 Capital to Total Leverage exposure.
31 December 2021 31 December 2020
£'million £'million
Common equity tier 1 capital 936 1,192
Additional tier 1 capital - -
Tier 1 capital 936 1,192
CRD IV Leverage exposure 21,230 21,211
Leverage ratio 4.41% 5.62%
Our leverage ratio is 4.41% which is in excess of the minimum capital
requirement of 3.00% as at 31 December 2021.
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 2021 31 December 2020
£'million £'million
Total HQLA 6,754 3,762
Total net cash outflow 2,406 2,011
Liquidity coverage ratio (LCR) 281% 187%
Our LCR was 281% at 31 December 2020 which exceeds the Basel
Committee's minimum of 100%.
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.
31 December 2021 31 December 2020 Pillar 1 capital required
£'million £'million 31 December 2021
£'million
Credit risk (excluding counterparty credit risk (CCR)) 6,709 7,251 537
Of which the standardised approach 6,709 7,251 537
CCR 6 7 0.5
Of which mark to market 3 5 0.3
Of which CVA 3 2 0.2
Market risk 10 14 0.8
Operational risk 729 686 58
Of which basic indicator approach 729 686 58
Amounts below the thresholds for deduction (subject to 250% risk weight) - - -
Total 7,454 7,957 596
Credit risk exposures by exposure class
Metro Bank's Pillar 1 capital requirement for Credit Risk is set out in the
table below.
Exposures subject to the standardised approach Exposure Value RWA Capital Required £'million
£'million £'million
Central governments or central banks 6,847 - -
Multi-lateral development banks 1,327 - -
Institutions 167 33 3
Corporates 507 437 35
Retail 1,320 931 74
Secured by mortgages on immovable property 8,898 3,808 305
Covered bonds 597 60 5
Claims on institutions and corporates with a short-term credit assessment - - -
Securitisation position 1,804 261 21
Exposure at default 209 211 17
Items associated with particularly high risk 8 12 1
Other exposures 1,032 956 76
Total 22,716 6,709 537
Credit risk exposures by exposure class 2020
Exposures subject to the standardised approach Exposure Value RWA Capital Required £'million
£'million £'million
Central governments or central banks 5,131 - -
Institutions 2,767 553 44
Corporates 521 406 32
Retail 572 376 30
Secured by mortgages on immovable property 9,895 4,338 347
Covered bonds 860 86 7
Claims on institutions and corporates with a short-term credit assessment - - -
Securitisation position 1,611 240 19
Exposure at default 247 248 20
Items associated with particularly high risk 14 21 2
Other exposures 1,045 987 79
Total 22,663 7,251 580
Capital Resources
The table below summarises the composition of regulatory capital.
31 December 2021 31 December 2020
£'million £'million
Share capital and premium 1,964 1,964
Retained earnings (694) (392)
(Loss)/profit for the year (248) (302)
Available for sale reserve (5) 3
Other reserves 18 16
Intangible assets (243) (254)
Other regulatory adjustments 144 157
CET 1 capital 936 1,192
Tier 1 capital 936 1,192
Tier 2 capital 249 249
Total capital resources 1,184 1,441
The Bank's capital adequacy was in excess of the minimum required by the
regulators at all times.
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