Metro Bank, the revolution in British banking, reports record results and announces 2023 guidance

• Record Deposit growth of £3.7b; up 47% year-on-year to £11.7b.
• Net deposit growth per store per month of £6.3m ($8.6m); £76m ($103m) growth a year.
• Record Lending growth of £3.8b; up 64% year-on-year to £9.6b. 
• Record underlying profit before tax of £20.8m ¹ compared to underlying loss before tax of £11.7m in 2016.
• First annual statutory profit before tax of £18.7m.
• Underlying earnings per share 18.8p vs. 14.7p loss per share in 2016.
• Record Asset growth of £6.3b; up 63% year-on-year to £16.4b.
• Record 302,000 increase in customer accounts to a total of 1,217,000.
• Brand recognition in London has increased to a record 89% (from 84% in February 2017).

Note: All figures contained in this trading update and preliminary announcement are unaudited. US$ have been translated at a rate of $1.35 to the £.

Craig Donaldson, Chief Executive Officer at Metro Bank said:

“2017 has been a fantastic year for Metro Bank. We’ve reported our first full year of profitability, had continued exceptional growth in both deposits (47%) and lending (64%), and have the privilege now of looking after over one million customer accounts. All of this at the same time as creating a further 600 jobs, taking our total workforce to over 3,000 and winning ‘Most Trusted Financial Provider’ for the second year running.  Metro Bank, creating FANS through ‘bricks and clicks’, continues to be the compelling service offering for British consumers and businesses alike. 

“For SMEs, the backbone of the British economy, Metro Bank is the real competition to the big incumbents.  In our current heartland of London and the South East we are winning 17% of SME business current account switchers ³. These businesses are attracted to our convenient stores which are open seven days a week, along with our online and award winning mobile banking services and our 24/7 contact centres, which are supported by our brilliant local business managers in every community we serve. As we enter new markets across the country, we will continue to create more jobs and bring real competition and choice for personal and business banking customers.”

Vernon Hill, Chairman and Founder at Metro Bank said:

“FANS join us because of our superior customer service combined with a seamless banking experience, whatever the channel.  At Metro Bank we are the fusion of digital and physical, combining face-to-face relationship banking with best in class technology creating record brand recognition of 89% in London.   Our record lending, deposit and customer account growth proves that the Metro Bank model is the future of banking.  2018 will see us grow our FAN base across the UK, create a further 900 jobs and continue to provide real competition to the big high street banks.”

Q4 Highlights

¹Underlying profit before tax for the year excludes costs associated with listing and the Listing Share Awards, impairment of property, plant & equipment (“PPE”) and intangible assets, and costs relating to the RBS alternative remedies package application. Underlying profit after tax for the year also excludes the effect of changes in the tax rate on the deferred tax asset.

²Customer Deposit NIM eliminates the distortions created by the Bank of England Term Funding Scheme drawings. As TFS unwinds (repayments are due four years from drawdown) the simple NIM calculation will move closer to the long term Customer Deposit NIM.

³Source: Charterhouse Research Business Banking Survey, YE Q4 2017.  Based on interviews with businesses that had switched main bank in the 12 months prior to interview. Base size: 402. Data weighted by region and turnover to be representative of businesses in Great Britain.

⁴Underlying profit for the quarter also excludes the FSCS levy.

Outlook & Guidance

• In 2018 we expect to open 12 stores, expanding our network further west to Bristol and Cardiff and north to Birmingham and the Midlands, and creating 900 jobs. We continue our strategy of new stores in Greater London as well as bringing the revolution to new areas.
• We are preparing our bid for the RBS alternative remedies package, which presents a huge opportunity to deliver real choice for SMEs, and will use the funds to accelerate both our offering and reach across the UK.
• Our disruptive model powers from strength to strength. We delivered on our commitment to announce our first full year of profitability in 2017. As we approach 2020, we have refined our 2020 targets to reflect the progress we have made so far.
• We remain a high growth retailer creating a powerful brand and so looking ahead, we are also providing guidance out to 2023, the next staging post in our growth. These targets reflect our current strong growth and earnings momentum and increased brand awareness across the UK and are a natural extension of our 2020 targets.

• Following sustained outperformance we increase the deposits per store per month 2020 target to a range of £5.5m to £6.5m and adjust the store outlook from c.110 to c.100.
• To reflect the momentum of our lending and the market opportunities we see, we increase our loan to deposit ratio in 2020 from c.85% to a range of 85-90%.
• The Bank of England’s Term Funding Scheme has had a distorting effect on NIM + fees so we have introduced “Customer NIM + fees” which more accurately reflects underlying business performance.

Financial Highlights for the Year and Quarter Ended 31 December 2017

Summary

• At 31 December total assets were £16.4b ($22.1b), up from £14.6b at 30 September 2017 and £10.1b at 31 December 2016; representing year-on-year growth of 63% and 12% growth in the quarter.
• Delivered a full year of profitability, following our sixth consecutive quarter of underlying profit. Underlying profit before tax for the quarter to 31st December 2017 was a record £8.3m compared to £1.5m in Q4 2016.
• Customer NIM (which eliminates the distortions caused by the Bank’s drawings from the Bank of England Term Funding Scheme) of 2.19% for 2017, up from 2.13% for full year 2016 reflecting the increased loan to deposit ratio. Net interest margin for the year has decreased to 1.93% compared to 1.97% in 2016 following cash drawn down under the Term Funding Scheme. These drawings are beneficial to increase net income but, in the short to medium term, serve to decrease net interest margin.

Deposits

• At 31 December total deposits were £11.7b ($15.8m), up from £10.8b at 30 September 2017 and £8.0b at December 2016. This represents year-on-year of growth of 47%. Within the quarter deposits increased £909m, representing 8% growth.
• Average net deposit growth per store per month was £5.9m ($8.0m) in Q4 2017 and £6.3m ($8.6m) for 2017. Net deposit growth per store per month remains well in excess of our previous 2020 guidance.
• Average net deposit growth per store in 2017 was £76m ($103m).
• Comparative store deposit growth (a “like for like” measure of deposit growth using deposit numbers from stores that have been operating more than a full year) is 43% (24 months: 39%; 36 months: 35%).
• Non-interest bearing current accounts were £3.7b, up 61% in the year. They represent 32% of total deposits (30 September 2017: 30%) and will provide a funding advantage in a rising rate environment.

• Cost of deposits in Q4 was 52bp, up from 50bp in Q3 2017. This reflects an increase in the Bank of England base rate in November 2017. For the full year, cost of deposits is 54bp, down from 79bp in 2016 due to continued strong growth in non-interest bearing liabilities (current accounts) and repricing decisions taken during the year.

Profit and Loss Account

• £32.5m uplift in Underlying Profit before Tax year on year; £20.8m profit in 2017 compared to a £11.7m loss in 2016.
• Strong and positive income (+51%) and cost (+31%) growth differential.
• Annual operating costs per £1M of deposits of £23k in 2017, down from £25k in 2016, an improvement of 11%.
• 49 of our 55 stores are making a positive contribution to the Bank’s overall profitability.

Capital

• Capital ratios remain robust and well above regulatory requirements. Common Equity Tier 1 Risk Capital (“CET1”) as a percentage of risk weighted assets is 15.3%. Risk weighted assets at 31 December 2017 were £5.9b. Regulatory Leverage ratio is 5.5%.
• The Bank’s AIRB application relating to retail residential mortgages has been submitted.

Customer Experience

• Record customer acquisition. Customer accounts have increased from 1,124,000 at 30 September 2017 to 1,217,000 at 31 December 2017; a record quarterly net increase of 93,000.
• Brand recognition in London has increased to a record 89% (compared to 84% in February 2017); rising to 92% for those working full-time and 89% for the ABC1 demographic. Across the UK, brand recognition has reached 48% (up from 43% in July 2017) according to a recent independent survey conducted by YouGov.₁
• Launched award winning Mobile App.
• We’ve invested in our people, creating 600 new roles this year within the bank, and continued to invest for the long term in technology and stores.
• We opened our 55th store in Swindon on 29 December. We opened seven new stores in the year, growing our store network to 55 and bringing the revolution further north to Peterborough, west to Swindon and east to Canterbury.

¹All figures, unless otherwise stated, are from YouGov Plc and are taken from four surveys:

• Total sample size was 1004 adults. Fieldwork was undertaken between 8-12 February 2018. The figures have been weighted and are representative of all London adults (aged 18+).
• Total sample size was 1021 adults. Fieldwork was undertaken between 14-17 February 2017. The figures have been weighted and are representative of all London adults (aged 18+).
• Total sample size was 2191 adults. Fieldwork was undertaken between 6 -7 February 2018. The figures have been weighted and are representative of all GB adults (aged 18+).
• Total sample size was 2079 adults. Fieldwork was undertaken between 30 June - 3 July 2017. The figures have been weighted and are representatve of all GB adults (aged 18+).

Metro Bank PLC

Summary Balance Sheet and Profit & Loss Account

(Unaudited)

¹Comprises investment securities, cash & balances with the Bank of England, and loans and advances to banks

²Comprises property, plant & equipment, intangible assets and other assets