H1 highlights
- Continued strong deposit growth of £2,067m, up 40% year-on-year to £13.7b
- Net deposit growth per store per month of £6.2m ($8.2m) in H1 2018 representing annualised deposit growth per store of £74m ($99m)
- Record lending growth of £2,393m, up 55% year-on-year to £12.0b, leading to a loan to deposit ratio of 87%, already within our 2020 and 2023 target range.
- Underlying profit before tax1 at £24.1m ($32.0m), a four-fold increase from £6.0m ($8.0m) in H1 2017, and exceeding the £20.8m ($27.7m) total in full year 2017
- Successful inaugural debt issuance raising £250m of Tier 2 capital
- 201,000 increase in customer accounts in the six months from 31 December 2017 to 1,418,000
- Opened a new store in Watford in June as well as Southampton in July, growing the network to 57. On track to open 12 new locations in 2018, with eight stores already in build
- Further growth supported by proposed equity capital raise announced separately today
Note: All figures contained in this trading update are unaudited. All figures in US$ have been translated at a rate of $1.33 to the £.
| £ in millions | 30 June 2018 | 30 June 2017 | Change from H1 17 | 31 December 2017 | Change from H2 17 |
|---|---|---|---|---|---|
| Assets | £19,135 | £13,094 | 46% | £16,355 | 17% |
| Loans | £12,013 | £7,750 | 55% | £9,620 | 25% |
| Deposits | £13,736 | £9,805 | 40% | £11,669 | 18% |
| Loan to deposit ratio | 87% | 79% | 82% |
| £ in millions | H1 18 | H1 17 | Change from H1 17 | H2 17 | Change from H2 17 |
|---|---|---|---|---|---|
| Total revenue | £189.8 | £131.1 | 45% | £162.6 | 17% |
| Underlying profit before tax 1 | £24.1 | £6.0 | 301% | £15.5 | 55% |
| Statutory profit before tax |
£20.8 | £4.4 | 373% | £14.3 | 45% |
| Customer NIM | 2.22% | 2.17% | 5bp | 2.22% | - |
|
Customer NIM + fees |
2.68% | 2.67% | 1bp | 2.71% | (3bp) |
| Net interest margin | 1.85% | 1.97% | (12bp) | 1.91% | (6bp) |
| Underlying EPS - basic | 20.6p | 3.7p | 457% | 13.4p | 54% |
| Underlying EPS - diluted | 20.1p | 3.6p | 458% | 13.2p | 52% |
1 Underlying profit before tax excludes Listing Share Awards, the FSCS levy, impairment of property, plant & equipment (“PPE”) and intangible assets, and costs relating to the RBS alternative remedies package application. Underlying profit after tax for H2 17 also excludes the effect of changes in the tax rate on the deferred tax asset. Statutory Profit after tax is included in the Profit and Loss Account.
Craig Donaldson, Chief Executive Officer at Metro Bank said:
“Almost eight years to the day we opened the doors to our first store and I’m delighted with the momentum demonstrated by the performance in the first half of 2018. We have delivered a 55% growth in lending and 40% growth in deposits year-on-year, and welcomed a record 201,000 new customer accounts. Every day, every month and every quarter Metro Bank continues to win customers and grow through our disruptive service-led model.
“Our investment in the customer experience continues, delivering the best in store, online and mobile banking. So far this year we have opened two new stores – Southampton and Watford – with a further eight in build and over 20 more in the pipeline, and launched our online Current Account opening service. This month, we launched our developer portal, which opens up our banking platform to third parties to develop products and services to help make customers’ lives easier. Our AI-powered money management service ‘Insights’ will also be available to customers using our banking app in the coming weeks. This commitment to meeting the digital and physical needs of our customers continues to attract new FANS every day.”
Vernon Hill, Chairman and Founder at Metro Bank, added:
“From a standing start of literally zero, we have won over 1.4 million customer accounts from the big banks, proving British consumers and businesses are turning their backs on poor customer experience and demanding more. Our blend of service, convenience and award winning technology is not just attracting new customers in London and the South, it is helping to make us famous across the UK. The Revolution goes from strength to strength.”
Financial highlights for the Half Year Ended 30 June 2018
Deposits
- Total deposits increased to £13,736m as at 30 June 2018, up from £11,669m at 31 December 2017 and £9,805m at 30 June 2017; representing year-on-year growth of 40% and 18% growth in the last six months. Deposits from commercial customers continue to be strong, representing 54% of 30 June 2018 total deposits (31 December 2017: 53%).
- Net deposit growth per store per month of £6.2m in H1 2018, representing annualised deposit growth per store of £74m ($99m).
- Comparative store deposit growth (a “like for like” measure of deposit growth using deposit numbers from stores that have been operating for more than a full year) is 37%.
- Continued growth in current accounts, largely non-interest bearing, now comprise 31% of total deposits. Online current account opening has complemented the store network.
| £ in millions | 30 June 2018 | 30 June 2017 | Change from H1 17 | 31 December 2017 | Change from H2 17 | |
|---|---|---|---|---|---|---|
| Demand: current accounts | £4,238 | £2,998 | 41% | £3,682 | 15% | |
| Demand: savings accounts | £6,155 | £4,715 | 31% | £5,303 | 16% | |
| Fixed term: savings accounts | £3,343 | £2,092 | 60% | £2,684 | 25% | |
| Deposits from customers | £13,736 | £9,805 | 40% | £11,669 | 18% | |
| Deposits from customers includes: | ||||||
| Deposits from retail customers | £6,381 | £4,750 | 34% | £5,476 | 17% | |
| Deposits from corporate customers | £7,355 | £5,055 | 45% | £6,193 | 19% |
- Cost of deposits of 57bps in H1 2018 (H1 2017: 57bps). Quarter-on-quarter cost of deposits rose 3bps to 59bps due to an increased customer preference for fixed deposits over variable as expectations of a base rate increase reduced. We expect cost of deposits to stabilise around this level over the year, absent any base rate movements.
Loans
- Total net loans increased to £12,013m as of 30 June, up from £9,620m at 31 December 2017 and £7,750m at 30 June 2017; an uplift of 25% in the half year and 55% year-on-year. Loans to commercial customers represent 32% of total lending as of 30 June 2018 (31 December 2017: 33%).
- Loan to deposit ratio increased to 87% (31 December 2017: 82%), already within our 2020 and 2023 target range, driven by record organic lending growth of over £1bn in Q2 18 and supported by £523m portfolio acquisition in Q1 18.
| £ in millions | 30 June 2018 | 30 June 2017 | Change from H1 17 | 31 December 2017 | Change from H2 17 | |
|---|---|---|---|---|---|---|
| Gross loans and advances to customers | £12,053 | £7,760 | 55% | £9,635 | 25% | |
| Less: allowance for impairment 2 | £(40) | £(10) | 288% | £(15) | 167% | |
| Net loans and advances to customers | £12,013 | £7,750 | 55% | £9,620 | 25% | |
| Gross loans and advances to customers includes: | ||||||
| Commercial and business loans | £3,905 | £2,611 | 50% | £3,187 | 23% | |
| Residential mortgages | £7,889 | £4,948 | 59% | £6,231 | 27% | |
| Consumer and other loans | £259 | £201 | 29% | £217 | 19% |
2 The allowance for impairment is calculated under IAS 39 as at 30 June 2017 and 31 December 2017, and under IFRS 9 at 30 June 2018.
Credit
- Asset quality remains strong as we grow. Non-performing loans reduced to 0.17% of the portfolio (31 December 2017: 0.27%). Cost of risk remained low at 0.08% in the six months to 30 June 2018 (H1 2017: 0.12%).
- Loan portfolio remains highly collateralised, with average debt to value (“DTV”) of 59% for residential mortgages and 61% for commercial loans.
Profit and Loss Account
- Underlying profit before tax has grown 301% year-on-year to £24.1m, quadrupling from £6.0m in the six months to 30 June 2017. Statutory profit before tax of £20.8m has grown 373% compared to £4.4m in H1 2017.
- Underlying earnings per share of 20.6p in H1 2018 (H1 2017: 3.7p), a year-on-year increase of 457%.
- Improvement in underlying Cost:Income ratio to 85% in H1 2018 from 88% in H2 2017 and 93% in H1 2017 driven by strong positive P&L “jaws”, with total revenue up 45% year-on-year and operating expenses up 33%.
- Customer net interest margin increased to 2.22% (H1 2017: 2.17%). Quarter-on-quarter competitive pressures on mortgage yields, combined with an increased cost of deposits, resulted in Customer NIM declining 4bps. We expect the market to remain competitive on lending yields but anticipate that fees will start to increase with the launch of more services to business customers in H2 2018. Net interest margin for H1 2018 was 1.85%.
Capital
- Capital ratios remain robust. Common Equity Tier 1 Capital (“CET1”) as a percentage of risk weighted assets is 12.7%, currently exceeding our Tier 1 regulatory minimum of 9.7%3. Risk weighted assets at 30 June 2018 were £6,944m. The Regulatory Leverage ratio is 4.6%.
- Successful completion of a £250m Tier 2 debt raise supports growth diversifies our capital base and helps to deliver a total capital ratio of 16.2% as at 30 June 2018, in excess of our current regulatory minimum of 12.1%.3
- Further growth supported by proposed equity capital raise announced separately today. This will enhance already robust capital ratios.
- Our Pillar 2A requirement of 1.7% is currently under review with the PRA. We anticipate receiving capital relief as part of the Pillar 2A offset, in effect temporarily reducing the regulatory minimum and hence increasing management buffers, ahead of transitioning to the advanced internal ratings based approach (AIRB) on residential mortgages, expected H2 2019.
- Whilst our target CET1 ratio remains >12% as we trend towards AIRB implementation we will have sufficient management buffers to be comfortable between 11-12%.
3.Based on current capital requirements, excluding any confidential PRA buffer, if applicable.
Customer Experience
- Brand recognition in London remains consistently high at 88%. Across the UK, brand recognition has risen to 58% according to a recent independent survey conducted by YouGov.4
- Launch of developer portal for open banking. Built in collaboration with Apigee (Google), this enables third-parties to build new and innovative services on top of our platform using APIs, creating more choice and opportunities for customers.
- Expanded the network with store openings in Watford and Southampton. A further ten stores are planned for 2018, with eight currently in build from Bristol to Northampton, and more than 20 in the pipeline.
- Award winning current account opening online continues apace, named Retail Banker’s 2018 “Best Digital Onboarding Strategy”, with c.70% of accounts opened around the existing store network.
- Created c.400 new jobs, as we continue to invest in our colleagues and our culture, and celebrated being named in Glassdoor’s “2018 Best Places to Work.”
- Our bid application for the RBS alternative remedies package is complete and we are ready to submit once the process commences in November. This presents a huge opportunity for us to accelerate both our offering and reach across the UK and to deliver real choice for SMEs.
4. All figures, unless otherwise stated, are from YouGov Plc and are taken from four surveys. Total sample size was 1006 adults. Fieldwork was undertaken between 10-12 July 2018. The figures have been weighted and are representative of all London adults (aged 18+). Total sample size was 2079 adults. Fieldwork was undertaken between 10-11 July 2018. The figures have been weighted and are representative of all GB adults (aged 18+).
Summary
- Momentum in the business progresses as the bank grows from strength to strength. We reiterate our 2020 and 2023 targets, apart from a revised 2020 ROE target of c11.5% (from c14%), reflecting the proposed growth capital raise.
Metro Bank PLC
Summary Balance Sheet and Profit & Loss Account
(Unaudited)
|
Balance Sheet |
Annual Growth Rate | 2018 | 2017 | |
|---|---|---|---|---|
|
|
30-Jun |
30-Jun |
31-Dec |
|
|
£m |
£m |
£m |
||
|
Assets |
|
|
|
|
|
Loans and advances to customers |
55% |
12,013 |
7,750 |
9,620 |
|
Treasury assets 5 |
|
6,453 |
4,827 |
6,127 |
|
Other assets 6 |
|
669 |
517 |
608 |
|
Total assets |
46% |
19,135 |
13,094 |
16,355 |
|
Liabilities |
|
|
|
|
|
Deposits from customers |
40% |
13,736 |
9,805 |
11,669 |
|
Deposits from banks |
|
3,801 |
1,823 |
3,321 |
|
Debt securities |
249 |
- |
- |
|
|
Other liabilities |
|
252 |
654 |
269 |
|
Total liabilities |
|
18,038 |
12,282 |
15,259 |
|
Total shareholder's equity |
|
1,097 |
812 |
1,096 |
|
Total equity and liabilities |
|
19,135 |
13,094 |
16,355 |
5. Comprises investment securities, cash & balances with the Bank of England, and loans and advances to banks.
6. Comprises property, plant & equipment, intangible assets and other assets.
| Annual Growth Rate | 2018 | 2017 | |
|---|---|---|---|
|
Profit and Loss Account - Half Yearly |
H1 |
H1 |
|
|
£'000
|
£'000 |
||
|
Net interest income |
|
156,349 |
107,442 |
|
Fee and other income |
|
28,806 |
22,332 |
|
Net gains on sale of securities |
|
4,632 |
1,331 |
|
Total revenue |
45% |
189,787 |
131,105 |
|
Operating costs |
33% |
(161,639)
|
(121,443) |
|
Credit impairment charges |
|
(4,076) |
(3,658) |
|
Underlying profit before tax |
301% |
24,072 |
6,004 |
|
Underlying taxation |
|
(5,867) |
(1,556) |
|
Underlying profit after tax |
309% |
18,205 |
4,448 |
|
Listing Share Awards |
|
(552) |
(744) |
|
FSCS levy (net of tax) |
|
(546) |
(602) |
|
Impairment of property, plant & equipment and
intangible assets
|
(557) |
- | |
|
Costs relating to RBS alternative remedies
package application
|
(1,382) |
||
|
Statutory profit after tax
|
389% |
15,168 |
3,102 |
|
Underlying earnings per share - basic
|
457% |
20.6p |
3.7p |
|
Underlying earnings per share - diluted
|
458% |
20.1p |
3.6p |
| Annual Growth Rate | 2018 | 2017 | ||
|---|---|---|---|---|
|
Profit and Loss Account - Quarterly |
Q2 |
Q1 |
Q2 |
|
| £'000 |
£'000 |
|||
|
Net interest income |
|
81,358 |
74,991 |
56,996 |
|
Fee and other income |
|
14,698 |
14,108 |
11,440 |
|
Net gains on sale of securities |
|
1,972 |
2,660 |
733 |
|
Total revenue |
42% |
98,028 |
91,759 |
69,169 |
|
Operating costs |
30% |
(82,126) |
(79,513) |
(63,040) |
|
Credit impairment charges |
|
(1,809) |
(2,267) |
(2,098) |
|
Underlying profit before tax |
250% |
14,093 |
9,979 |
4,031 |
|
Underlying taxation |
|
(3,647) |
(2,220) |
(1,071) |
|
Underlying profit after tax |
253% |
10,446 |
7,759 |
2,960 |
|
Listing Share Awards |
|
(236) |
(316) |
(391) |
|
FSCS levy (net of tax) |
|
(546) |
- |
(554) |
|
Impairment of property, plant & equipment and
intangible assets
|
(121) |
(436) |
- |
|
|
Costs relating to RBS alternative remedies
package application
|
(792) |
(590) |
- | |
|
Statutory profit after tax
|
334% |
8,751 |
6,417
|
2,015
|
|
Underlying earnings per share - basic
|
219% |
11.8p |
8.8p |
3.7p |
|
Underlying earnings per share - diluted
|
219% |
11.5p |
8.6p |
3.6p |