TIDMMTRO
RNS Number : 9197Q
Metro Bank PLC
23 October 2019
23 October 2019
Metro Bank PLC (LSE: MTRO LN)
Q3 Trading Update 2019
Q3 Summary for 3 months ending 30 September 2019
-- Total deposits of GBP14.2 billion with Q3 growth of GBP528
million.
-- Customer account growth of 106,000 in Q3 2019 (Q2 2019:
93,000) to 1.9 million.
-- Total net loans of GBP14.9 billion broadly flat quarter-on-quarter,
with the loan to deposit ratio reducing to 105% (H1 2019:
109%).
-- Modest quarter-on-quarter reduction in operating costs
and continued growth in fee and other income.
-- Asset quality remains strong, reflected in Q3 cost of
risk of 5 bps (Q2 2019: 6 bps).
-- Strong liquidity and funding position maintained, with
LCR higher than Q2 2019.
-- Underlying loss before tax(1) of GBP2.2 million in Q3
2019 (Q2 2019: GBP6.7 million profit) reflecting the impact
from actions taken to maintain a resilient balance sheet,
including a one-off GBP2.5 million charge following the
GBP521 million portfolio disposal in July 2019.
-- Completed inaugural GBP350 million senior non-preferred
debt issuance with pro forma total capital plus MREL ratio
of 22.6% at 30 September 2019.
-- Retained position as number one bank for overall quality
of service for personal current account customers and
second for business current account customers in the Competition
and Market Authority's latest Service Quality Survey.
-- Metro Bank is further evaluating its future plans to balance
growth, profitability and capital efficiency, the results
of which will be communicated in conjunction with the
full year results.
--- --------------------------------------------------------------------
30 30 Change 30 Change
GBP in millions Sep June From Sept From
2019 2019 H1 19 2018 Q3 18
Assets GBP21,002 GBP21,357 (2%) GBP20,567 2%
Loans GBP14,891 GBP14,989 (1%) GBP13,121 13%
Deposits GBP14,231 GBP13,703 4% GBP14,813 (4%)
Loan to deposit ratio 105% 109% 89%
-------------------------------- ---------- ---------- ------- ------------ --------
GBP in millions 9m to 30 9m to 30 Change
Sep 2019 Sep 2018
Total underlying revenue(2) GBP316.2 GBP294.8 7%
Underlying profit before
tax(1) GBP11.3 GBP39.2 (71%)
Statutory (loss)/profit before
tax (GBP3.3) GBP34.4 (110%)
Net interest margin 1.58% 1.82% (24bps)
Underlying earnings per share
- basic 6.3p 32.6p (81%)
Underlying earnings per share
- diluted 6.3p 31.8p (80%)
-------------------------------- ---------------------- ----------------- ------------
1. Underlying (loss)/profit before tax excludes Listing Share
Awards, the FSCS levy, impairment of property, plant &
equipment ("PPE") and intangible assets, costs relating to the RBS
alternative remedies package application and transformation and
remediation costs.
2. Underlying revenue excludes Capability & Innovation
Funding in respect of the RBS alternative remedies package
Craig Donaldson, Chief Executive Officer at Metro Bank,
said:
"This financial performance reflects a challenging nine months
for the Bank. Despite considerable headwinds, we have made strong
progress in reducing costs, increasing fee income and further
strengthening our capital and liquidity position whilst also
retaining our top position for overall quality of service for
personal current account holders.
"Following our GBP350m MREL-eligible debt issuance and taking
into account the challenging macro-economic environment, we are
further evaluating our future growth plans to strike the right
balance between growth, costs and capital efficiency. We expect to
update the market in conjunction with our full year results."
Financial performance for the quarter ended 30 September
2019
Deposits
-- Strong customer account growth of 106,000 in Q3 2019 (Q2
2019: 93,000) bringing the total to 1.9 million, including
continued growth in personal current accounts and business
current accounts.
-- Deposit growth of GBP528 million in Q3 2019 supported
by the conscious decision to elevate the price of fixed
term retail deposits during Q3. September saw net deposit
outflows of GBP213 million following the postponed senior
non-preferred debt issuance, but we are returning to business
as usual.
-- Cost of deposits was 84 bps in Q3 2019 (Q2 2019: 71 bps)
and 75 bps in the first nine months of 2019. Following
the deposit pricing actions taken in Q2 and Q3 2019, cost
of deposits normalised to business as usual levels as
the quarter progressed and is expected to be marginally
above current base rate of 75 bps for full year 2019.
GBP in millions 30 30 Change 30 Change
Sep Jun From Sep From
2019 2019 H1 19 2018 Q3 18
Demand: current accounts GBP4,181 GBP4,305 (3%) GBP4,502 (7%)
Demand: savings accounts GBP5,700 GBP5,509 3% GBP6,810 (16%)
Fixed term: savings
accounts GBP4,350 GBP3,889 12% GBP3,501 24%
----------- ----------- ------- ---------- -------
Deposits from customers GBP14,231 GBP13,703 4% GBP14,813 (4%)
----------- ----------- ------- ---------- -------
Deposits from customers
includes:
Retail customers (excluding
retail partnerships) GBP6,351 GBP5,555 14% GBP4,879 30%
Retail partnerships GBP1,890 GBP1,954 (3%) GBP1,890 -
----------- ----------- ------- ---------- -------
Deposits from retail
customers GBP8,241 GBP7,509 10% GBP6,768 22%
----------- ----------- ------- ---------- -------
Commercial customers
(excluding SMEs(3)
) GBP2,829 GBP3,064 (8%) GBP5,194 (46%)
SMEs GBP3,161 GBP3,130 1% GBP2,851 11%
----------- ----------- ------- ---------- -------
Deposits from commercial
customers GBP5,990 GBP6,194 (3%) GBP8,045 (26%)
----------- ----------- ------- ---------- -------
3. SME defined as enterprises which employ fewer than 250
persons and which have an annual turnover not exceeding EUR50
million, and/or an annual balance sheet total not exceeding EUR43
million, and have aggregate deposits less than EUR1 million.
Loans
-- Total net loans of GBP14,891 million (Q2 2019: GBP14,989
million), reflecting proactive management of the Bank's
capital and liquidity positions.
-- The loan to deposit ratio was 105% at Q3 2019 (Q2 2019:
109%). The Bank continues to manage the loan to deposit
ratio in a controlled way towards 100%.
-- Asset quality remains robust reflecting our continued low-risk
lending. Cost of risk was 5 bps in the three months to
30 September 2019 (Q2 2019: 6 bps). Non-performing loans
were GBP31 million, representing just 0.20% of the total
loan portfolio (Q2 2019: 0.17%).
GBP in millions 30 30 Change 30 Change
Sep Jun From Sep From
2019 2019 H1 19 2018 Q3 18
Gross loans and advances
to customers GBP14,922 GBP15,020 (1%) GBP13,152 13%
Less: allowance for (GBP31) (GBP31) - (GBP31) -
impairment
----------- ----------- ------- ---------- -------
Net loans and advances
to customers GBP14,891 GBP14,989 (1%) GBP13,121 13%
----------- ----------- ------- ---------- -------
Gross loans and advances
to customers includes:
Commercial lending GBP4,182 GBP4,343 (4%) GBP4,166 -
Residential mortgages GBP10,495 GBP10,412 1% GBP8,715 20%
Consumer lending GBP245 GBP265 (8%) GBP271 (10%)
----------- ----------- ------- ---------- -------
Profit and Loss Account
-- Net interest income in the third quarter was down 7% to
GBP76.6 million (Q2 2019: GBP82.4 million), with a 11bps
reduction in the net interest margin to 1.50% (Q2 2019:
1.61%). This reflects the actions taken in Q2 and Q3 2019
to maintain a resilient balance sheet, including the sale
of GBP1.5 billion non-LCR interest-bearing investment
securities, an increase in fixed term deposit costs, and
the GBP521 million loan portfolio disposal. These actions,
including a moderation of loan growth, reduced revenue
by c.GBP17m in Q3 2019.
-- Fee and other income up 5% in Q3 2019 to GBP25.3 million
(Q2 2019: GBP24.0 million) supported by growth in the
number of transacting customer accounts and benefits from
the recent roll-out of further value-added services. The
reduction in NIM + fees to 1.99% (Q2 2019: 2.07%) was
partially offset by continued fee income growth. Fee growth
is expected to continue into Q4 2019.
-- Reduction in costs quarter-on-quarter, lowering to GBP99.7
million in Q3 2019 from GBP100.3 million in Q2 2019 despite
opening new stores. The slow-down in the pace of the cost
growth reflects delivery within the Bank's cost transformation
programme. We expect cost growth to continue to moderate
with low single digit growth in H2 2019 compared with
H1 2019 with cost growth reflecting the current expansion
of the business in Q4.
-- Underlying cost:income ratio of 100% for Q3 2019 (Q2 2019:
92%).
-- Underlying loss before tax of GBP2.2 million in Q3 2019
(Q2 2019: GBP6.7 million profit). This reflects profitability
impacts from the prudent balance sheet actions, including
a GBP2.5 million charge (comprising of GBP1.8 million
loss from the sale of portfolio and GBP0.7 million of
interest foregone between the beginning of the quarter
and the sale date) following the GBP521 million portfolio
disposal in July 2019.
-- Statutory loss before tax of GBP6.7 million in Q3 2019
(Q2 2019: loss of GBP0.9 million) also reflects the ongoing
costs as we progress the transformation and remediation
programmes.
Capital, Funding and Liquidity
-- Completed GBP350 million senior non-preferred debt issuance
in October. Our pro forma total capital plus MREL resources
are GBP2,086 million with a pro forma total capital plus
MREL ratio of 22.6% at 30 September, exceeding the 21.5%
1 January 2020 interim MREL requirement.
-- Common Equity Tier 1 Capital ("CET1") of GBP1,494 million
as at 30 September 2019 is 16.2% of risk-weighted assets
(Q2 2019: 15.8%), materially exceeding our Tier 1 regulatory
minimum of 10.6%(4) . Total capital as a percentage of
risk-weighted assets is 18.9%.
-- Risk-weighted assets at 30 September 2019 were GBP9,242
million (Q2 2019: GBP9,559 million) reflecting the loan
portfolio disposal and continued rebalancing of the loan
book.
-- Regulatory leverage ratio of 7.1%.
-- Strong liquidity and funding position maintained, reflecting
Q3 2019 deposit growth of GBP528m, the execution of a GBP521
million loan portfolio disposal, the completion of GBP350
million senior non-preferred notes in October and continued
management of lending volumes. As a result, the Bank's
Liquidity Coverage Ratio was higher than the 163% reported
in Q2.
4. Based on current capital requirements, excluding any confidential
PRA buffer, if applicable
Operational Update
-- Developing C&I funded sites in SME hotspots including Liverpool
and Manchester to open in Q4 2019. Expanded store footprint
to the Midlands.
-- Launched artificial intelligence-led, in-app Business Insights
tool to make managing business finances easy, helping customers
make more data-driven decisions and manage their cash flows
better.
-- Signed a trio of fintech and SME partnerships with Funding
Options, Conance and DueDil, to enhance business banking
offering for SMEs.
-- Retained position as number one bank for overall quality
of service for personal current account customers and second
for business current account customers in Competition and
Market Authority's latest Service Quality Survey.
-- Awarded five stars for personal current account and credit
card in the Moneyfacts annual star rating.
Governance
-- As separately announced today, Sir Michael Snyder has been
appointed as interim Chairman, subject to regulatory approval.
Vernon Hill has stepped down from his role as Chairman
and will step down from the Board on 31 December 2019.
The recruitment process for an independent, Non-Executive
Chairperson is progressing.
-- Michael Torpey joined the Board in September as an independent
Non-Executive Director and was appointed as a member of
the Risk Oversight and Audit committees with effect from
1 October. Michael has been appointed Chairman of the Audit
Committee effective 1 November, subject to regulatory approval.
Outlook
-- Margin trends experienced in Q3 2019 are expected to continue
into Q4 2019, in addition to the cost of servicing the
senior non-preferred debt. Deposit growth will moderate
in Q4 as we strike the right balance between growth, cost
of deposits and capital efficiency.
-- Metro Bank is further evaluating future growth plans to
maximise returns, including future expansion, cost initiatives
and optimising capital efficiency.
-- Our plans with regards to C&I commitments remain unchanged.
-- The results of the evaluation process along with revised
targets and KPIs will be communicated in conjunction with
the full year results. In the intervening time the Bank
will optimise capital, continue to progress with its cost
efficiency programme and target further income diversification.
Metro Bank PLC
Summary Balance Sheet and Profit & Loss Account
(Unaudited)
Annual 2019 2018
Growth
Rate
Balance Sheet 30 Sep 30 Jun 30 Sep
GBP'm GBP'm GBP'm
Assets
Loans and advances to customers 13% 14,891 14,989 13,121
Treasury assets(5) 4,837 4,668 6,698
Assets classified as held for - 521 -
sale
Other assets(6) 1,274 1,179 748
------- ------- -------
Total assets 2% 21,002 21,357 20,567
------- ------- -------
Liabilities
Deposits from customers (4%) 14,231 13,703 14,813
Deposits from banks 3,801 3,801 3,801
Debt securities 249 249 249
Other liabilities 959 1,837 300
------- ------- -------
Total liabilities 19,240 19,590 19,163
------- ------- -------
Total shareholder's equity 1,762 1,767 1,404
------- ------- -------
Total equity and liabilities 21,002 21,357 20,567
------- ------- -------
5. Comprises investment securities, cash & balances with
central banks, and loans and advances to banks
6. Comprises property, plant & equipment, intangible assets
and other assets
Annual Growth Nine months to
Rate 30 Sep
Profit & Loss Account-Nine months 2019 2018
YTD
GBP'm GBP'm
Net interest income 242.8 241.1
Fee and other income 71.8 45.0
Net gains on sale of assets 1.6 8.7
-------- --------
Total underlying revenue(7) 7% 316.2 294.8
Operating costs 20% (298.5) (249.6)
Expected credit loss expense (6.4) (6.0)
Underlying profit before tax (71%) 11.3 39.2
Underlying taxation (2.6) (9.4)
Underlying profit after tax (71%) 8.7 29.8
Listing Share Awards (0.4) (0.8)
FSCS levy (0.6) (0.3)
Impairment and write offs of property,
plant & equipment and intangible
assets (1.0) (1.7)
Costs relating to RBS alternative
remedies package application (1.0) (1.9)
Capability & Innovation costs (10.0) -
Capability & Innovation funding 10.0 -
Transformation and remediation costs (9.3) -
Statutory (loss)/profit after tax (114%) (3.6) 25.1
-------- --------
Underlying earnings per share -
basic (81%) 6.3p 32.6p
Underlying earnings per share -
diluted (80%) 6.3p 31.8p
Net interest margin (NIM) 1.58% 1.82%
NIM + fees 2.04% 2.16%
Cost of deposits 0.75% 0.59%
Cost of risk 0.06% 0.07%
Underlying cost: income ratio 94% 85%
7. Underlying revenue excludes Capability & Innovation
Funding in respect of the RBS alternative remedies package
Annual 2019 2018
Growth
Rate
Profit & Loss Account-Quarterly Q3 Q2 Q3
GBP'm GBP'm GBP'm
Net interest income 76.6 82.4 84.8
Fee and other income 25.3 24.0 16.2
Net (loss)/gains on sale of
assets (2.5) 2.8 4.0
------- -------- -------
Total underling revenue (5%) 99.4 109.2 105.0
Operating costs 13% (99.7) (100.3) (87.9)
Expected credit loss expense (1.9) (2.2) (2.0)
Underlying (loss)/profit before
tax (115%) (2.2) 6.7 15.1
Underlying taxation 1.0 (1.8) (3.5)
Underlying (loss)/profit after
tax (110%) (1.2) 4.9 11.6
Listing Share Awards (0.1) (0.1) (0.2)
FSCS levy - (0.6) 0.3
Impairment and write offs of
property, plant & equipment
and intangible assets - (1.0) (1.2)
Costs relating to RBS alternative
remedies package application - 0.2 (0.5)
Capability & Innovation costs (6.2) (3.8) -
Capability & Innovation funding 6.2 3.8 -
Transformation and remediation
costs (3.6) (4.6) -
Statutory (loss)/profit after
tax (149%) (4.9) (1.2) 10.0
------- -------- -------
Underlying earnings per share
- basic (106%) (0.7p) 3.6p 11.9p
Underlying earnings per share
- diluted (106%) (0.7p) 3.6p 11.6p
Net interest margin (NIM) 1.50% 1.61% 1.77%
NIM + fees 1.99% 2.07% 2.11%
Cost of deposits 0.84% 0.71% 0.61%
Cost of risk 0.05% 0.06% 0.06%
Underlying cost:income ratio 100% 92% 84%
Analyst and investor call
An analyst and investor call will be held as follows:
Date: Wednesday 23(rd) October 2019
Time: 5.30pm (BST)
From the UK dial: +44 333 3000 804
From the US dial: + 1 631 9131 422
Participant Pin: 24502748#
URL for other international dial in numbers:
http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
An operator will assist you in joining the call.
For more information, please contact:
Metro Bank PLC Investor Relations
Jo Roberts
+44 (0)20 3402 8900
IR@metrobank.plc.uk
Metro Bank PLC Media Relations
Charlotte Sjoberg / Tina Coates
+44 (0)7970 633255 / +44 (0)7811 246016
pressoffice@metrobank.plc.uk
Teneo
Charles Armitstead / Haya Herbert Burns
+44 (0)7703 330269/ +44 (0) 7342 031051
Metrobank@teneo.com
ENDS
About Metro Bank
Metro Bank is celebrated for its exceptional customer experience
and achieved the top spot in the Competition and Market Authority's
Service Quality Survey among personal current account holders for
its overall service and came second among business current account
holders in August 2019. It was also awarded 'Best All-Round
Personal Finance Provider' at the Moneynet Personal Finance Awards
2019. It is also recognised by Glassdoor in its 'Best Place to Work
UK 2019' top 50 list.
Offering retail, business, commercial and private banking
services, it prides itself on using technology to give customers
the choice to bank however, whenever and wherever they choose.
Whether that's through its growing network of stores open seven
days a week, from early in the morning to late at night, 362 days a
year; on the phone through its UK-based 24/7 contact centres manned
by people not machines; or online through its internet banking or
award-winning mobile app: the bank offers customers real
choice.
The bank employs around 3,500 colleagues and is headquartered in
Holborn, London.
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.
This information is provided by RNS, the news service of the
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END
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