REG - Metro Bank PLC - Third Quarter 2022 Trading Update

Metro Bank HoldingsAnnouncement

02/11/2022 07:00

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RNS Number : 9909E  Metro Bank PLC  02 November 2022

 
 
            Metro Bank PLC (LSE: MTRO LN)

2 November 2022

 

 

Third Quarter 2022 Trading Update

 

·    Profitable on both an underlying and statutory basis for September,
ahead of previous guidance

·    September performance is encouraging given it is driven by margin
improvement and cost discipline

·    Active balance sheet management and prevailing interest rates
supported exit NIM of 2.04%

·    Expect NIM to improve through 2023 given evolving balance sheet
composition, base rate increases and deposit pricing discipline

·    The pace of NIM improvements will be impacted by capital constraints
limiting lending growth

 

                        30          30        Change from  30          Change from

 £ in millions          September   June      H1 2022      September   Q3 2021

                        2022        2022                   2021

 Assets                 £22,553     £22,555   0%           £22,767     (1%)
 Loans                  £12,830     £12,364   4%           £12,315     4%
 Deposits               £16,371     £16,514   (1%)         £16,412     0%
 Loan to deposit ratio  78%         75%       3pp          75%         3pp

 

 

For the month of September the Bank recorded a profit on both an underlying
and statutory basis, ahead of expectations, driven by assertive balance sheet
action, strong NIM expansion to 2.04% and continued cost discipline.

 

Q3 total deposits of £16,371 million were broadly flat reflecting ongoing
close management of deposits. The Bank continues to attract low-cost
high-quality deposits, evidenced by growth in the underlying deposit franchise
(low-cost demand current and savings accounts) now 96% of the deposit base,
offset by a targeted reduction in higher-cost fixed term deposits.

 

Q3 total net loans of £12,830 million increased 4% both QoQ and YoY, with a
continued mix shift in line with strategy. Residential mortgages and consumer
unsecured lending grew, partially offset by repayments of government-backed
lending and reduction in Commercial real estate lending. The Bank is
appropriately positioned, with a loan to deposit ratio of 78% and 55% of the
loan portfolio being Residential mortgages. Over 90% of the Retail mortgage
portfolio is fixed, with an average repricing duration of 2.1 years, and the
average DTV of 56% remains stable. In aggregate only 5% of Retail mortgages
now have a DTV of over 80%.

 

 Margin metrics       Q3 2022  Q2 2022  Change from  Q3 2021  Change from

                                        Q2 2022               Q3 2021

 Lending yield        3.66%    3.56%    10bps        3.10%    56bps
 Cost of deposits     0.19%    0.15%    4bps         0.20%    (1bps)
 Net interest margin  1.98%    1.81%    17bps        1.46%    52bps

 

 

ECL Charge of £10 million in the quarter. There has been no deterioration in
early warning indicators and no signs of stress or increased delinquency
across the customer base. The Bank continues to monitor all of its portfolios
closely and remains watchful of changes in economic conditions that may impact
provisioning, such as material movements in unemployment from its current
historically low point. Post model adjustments and overlays continue to be
more than 24% of total provision stock.

 

Following a profitable month in September and positive underlying business
momentum, going forward, the main driver of capital consumption is likely to
be loan related RWA growth, which is currently being assertively managed to
ensure the Bank continues to operate within buffers and remains above
regulatory capital minima. Although mindful of the macro environment, minimum
regulatory capital requirements are expected to be met without needing to take
any market-dependent balance sheet action. The Bank will continue to review
market-dependent options to manage regulatory capital and MREL and enhance its
medium-term earnings potential, such as loan sales and securitisations as well
as MREL qualifying debt issuance should market conditions be attractive.
Management continues to engage with key stakeholders around the Tier 2
instrument. In all cases the goal is to create a more efficient balance sheet.
Additionally, the Bank's AIRB application continues to progress.

 

Daniel Frumkin, Chief Executive Officer at Metro Bank, said:

"I am really pleased to see the business return to profit in September on both
an underlying and statutory basis. This performance reflects our tight control
of both costs and risk, close management of our deposit franchise and lending
channels, and the supportive prevailing interest rate environment, all of
which help build a balance sheet that delivers sufficient margin to cover
costs. Whilst we remain watchful of economic conditions and continue to
monitor our credit metrics closely, our book remains in good health. The
underlying potential of our business is encouraging and, though the tight
capital position currently constrains RWA growth, the business still seeks to
grow margins with ongoing optimisation and discipline. We remain focused on
generating a sustainable business supported by the commitment and engagement
of our tremendous colleagues who continue to be there for our customers and
communities."

 

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

Mona Patel

+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 2.6 million customer accounts and is celebrated for its
exceptional customer experience. It is the highest rated high street bank for
overall service quality for personal customers and the best bank for service
in-store for personal and business customers, in the Competition and Market
Authority's Service Quality Survey in August 2022. This year it has been
awarded "Best Mortgage Provider of the Year" in 2022 MoneyAge Mortgage Awards,
"Best Business Credit Card" in 2022 Moneynet Personal Finance Awards and "Best
Current Account for Overseas Use" by Forbes 2022 and accredited as Most Loved
Workplace 2022. It was "Banking Brand of The Year" at the Moneynet Personal
Finance Awards 2021 and received the Gold Award in the Armed Forces Covenant's
Employer Recognition Scheme 2021.

 

The community bank offers retail, business, commercial and private banking
services, and prides itself on giving customers the choice to bank however,
whenever and wherever they choose, and supporting the customers and
communities it serves. Whether that's through its network of 76 stores open
seven days a week, 362 days a year; on the phone through its UK-based contact
centres; or online through its internet banking or award-winning mobile app,
the bank offers customers real choice.

 

Metro Bank PLC. Registered in England and Wales. Company number: 6419578.
Registered office: One Southampton Row, London, WC1B 5HA. 'Metrobank' is the
registered trademark of Metro Bank PLC.

 

It is authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and Prudential Regulation Authority. Most relevant
deposits are protected by the Financial Services Compensation Scheme. For
further information about the Scheme refer to the FSCS website www.fscs.org.uk
(http://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.

 

 

 

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