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Metro Bank reports record customer growth and 77% increase in quarter on quarter profit

25th October 2017

Metro Bank PLC (LSE: MTRO) has delivered a strong trading performance in the third quarter of 2017.

Q3 Highlights

  • Deposits from customers up £955m, 10% quarter-on-quarter to £10.8b ($14.4b), whilst the cost of deposits reduced from 53bp in Q2 2017 to 50bp in Q3 2017.
  • Lending up £858m, 11% quarter-on-quarter to £8.6b ($11.5b) and a 1% increase in the loan to deposit ratio to 80%.
  • Underlying profit before tax[1] at £7.2m, a 77% increase from £4.0m in Q2 2017. Year to date underlying profit before tax [1] is £13.2m versus £12.4m loss 2016. 
  • A record quarterly growth of 79,000 customer accounts to 1,124,000, up 33% year-on-year.
  • Successful cash placing of 8m ordinary shares in July raising gross proceeds of £278m at no discount to market price.
  • We celebrated our seventh birthday and the opening of our 50th store in Peterborough.

Note: All figures contained in this trading update are unaudited.  All figures in US$ have been translated at a rate of $1.34 to the £.  

 

Quarter ending £ in millions30 Sept 201730 Jun 2017% Change In Qtr.30 Sept 2016% Change In Year
Assets £14,574 £13,094 11% £9,005 62%
Loans £8,608 £7,750 11% £5,193 66%
Deposits £10,760 £9,805 10% £7,297 47%
Loan to Deposit ratio 80% 79%   71%  
           
Underlying profit before tax [1] £7.2 £4.0 77% £0.6 1,161%
Total Revenue £78.1 £69.2 13% £53.4 46%
 Net interest margin 1.94% 1.92%   1.95%

Customer Deposit net interest margin [2] 2.22% 2.15%   2.08%  
           
Underlying Profit after tax per share - basic 6.3p 3.7p 70% 0.0p n/a
Underlying Profit after tax per share - diluted 6.2p 3.6p 72% 0.0p n/a

[1] Underlying profit after tax excludes listing and related costs, the FSCS levy and impairment of property, plant & equipment and intangible assets. Statutory Profit after tax is included in Profit and Loss Account.
[2] The Bank has added Customer Deposit NIM to the range of reported KPIs. Customer Deposit NIM is based on the key driver of the business – the generation of low cost sticky deposits. It eliminates the distortions created by items such as TFS drawings and provides a real measure of how effectively the customer deposits are being put to work. As such it best reflects our business model and the long term prospects of the business. As TFS unwinds (repayments are due four years from drawdown) the simple NIM calculation will move closer to the long term Customer Deposit NIM.

Craig Donaldson, Chief Executive Officer at Metro Bank said:
“In Q3 deposits and lending saw double digit growth, the cost of deposits reduced, and the loan to deposit ratio increased to 80% for the first time. We also welcomed a record 79,000 new Business and Personal customer accounts. All of which helped to deliver our fifth quarter of underlying profitability, and an underlying profit before tax of £7.2 million, up 77% from the last quarter.

“We continued to support the SME sector, the backbone of British business, and are on track to meet our January pledge to lend £1bn of net lending to businesses during 2017. We also opened the doors of our 50th store, and by the end of the year our store network will extend further north, east and west, and we will have strengthened our Greater London presence. ”

Vernon Hill, Chairman and Founder at Metro Bank, added:
“Metro Bank continues to win FANS, attract deposits, lend to consumers and businesses, and generate profits that are re-invested for the benefit of our customers. We are the Revolution in British banking, offering real choice to consumers and businesses. Our store model, combined with easy to use online and mobile banking services and UK based contact centres, show that consumers and businesses are crying out for a bank built around them. As we take the revolution to the high streets of Swindon, Canterbury and Peterborough, we are giving those urban communities and businesses a real alternative and a reason to love their bank at last.”

Highlights for the Third Quarter Ended 30 September 2017

Summary

  • The loan to deposit ratio increased to 80% (30 June 2017: 79%; 30 September 2016: 71%) as momentum in our lending continues.
  • As of 30 September total assets were £14,574m, up from £13,094m at 30 June 2017 and £9,005m at 30 September 2016; representing 11% growth in the quarter and year-on-year growth of 62%.
  • Net interest margin of 1.94% for the quarter up from 1.92% driven by the increase in loan to deposit ratio. Customer Deposit NIM (eliminating the distortions caused by the Bank’s drawings from the Bank of England Term Funding Scheme) of 2.22% up from 2.15% quarter on quarter and 2.16% for full year 2016.

Deposits

  • As of 30 September total deposits were £10,760m, up from £9,805m at 30 June 2017 and £7,297m at 30 September 2016; representing 10% growth in the quarter and year-on-year growth of 47%. Deposits from Business customers represent 53% of 30 September 2017 total deposits (30 June 2017: 52%).
  • Cost of deposits in Q3 was 50bps, a reduction from 53bps in Q2 2017. This reflects the continued strong growth in non-interest bearing liabilities (current accounts).
  • Net deposit growth per store per month of £6.6m ($8.8m) in Q3 2017 versus £5.5m ($7.4m) in Q2 2017, and £5.6m ($7.5m) in Q3 2016, exceeding our guidance owing to strong growth across the entire network with a particularly strong quarter for business deposits. Annualised this represents £78m ($105m) growth per store.
  • 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 42%.
  30 Sept
2017
30 June
2017
Change
In
Quarter
30 Sept
2016
Change
In
Year
Demand: non-interest bearing £3.274 £2,998 9% £2,019 62%
Demand: interest bearing £5,113 £4,715 8% £3,167 61%
Fixed term £2,373 £2,092 13% £2,111 12%
Deposits from customers £10,760 £9,805 10% £7,297 47%

Deposits from customers include:

  30 Sept
2017
30 June
2017
Change
In
Quarter
30 Sept
2016
Change
In
Year
Deposits from retail customers £5,108 £4,750 8% £3,537 44%
Deposits from corporate customers £5,652 £5,055 12% £3,760 50%

Lending

  • Total loans as of 30 September were £8,608m, up from £7,750m at 30 June 2017 and £5,193m at 30 September 2016; an increase of 66% year-on-year, and an 11% increase in the quarter. Loans to commercial customers represent 34% of total lending as of 30 September 2017 (30 June 2017: 34%).
  • Asset quality remains strong. Non-performing loans were 0.33% of the portfolio. Year-to-date cost of risk remained stable at 0.10% at 30 September 2017.
 30 Sept
2017
30 June
2017
Change
In
Quarter
30 Sept
2016 
 Change
In
Year
Gross Loans and advances to customers £8,620 £7,760 11% £5,202  66%
Less: allowance for impairment £(12) £(10) 12% £(9) 32%
Net Loans and advances to customers £8,608 £7,750 11%  £5,193 66% 

Gross loans and advances to customers include:

 30 Sept
2017
30 June
2017
Change
In
Quarter
30 Sept
2016 
Change
In
Year 
Commercial loans £2,909 £2,611 11% £1,824   59%
Residential mortgages  £5,503  £4,948 11% £3,202 72% 
Consumer and other loans and advances £208 £201 4% £176 18% 

Growth

  • Record customer acquisition. Customer accounts have increased from 1,045,000 on 30 June 2017 to 1,124,000 at 30 September 2017; a record quarterly net increase of 79,000 accounts. This represents an increase of 33% year-on-year and an 8% increase in the quarter.
  • Capital ratios remain robust and well above regulatory requirements. Common Equity Tier 1 Capital (“CET1”) as a percentage of risk weighted assets is 17.4%. Risk weighted assets at 30 September were £5,174m. Regulatory Leverage ratio is 6.2%.
  • Underlying profit before tax has grown 77% quarter-on-quarter to £7.2m (compared to £4.0m in Q2 2017). Statutory profit before tax of £6.7m has grown 131% compared to £2.9m in Q2 2017.
  • We opened our 50th store in Peterborough on 29 September. A further five stores will open this year, including Luton (Store 51) on 27 October.

Outlook

  • We look forward to opening twelve stores next year, including expanding into Birmingham and Bristol.
  • Our AIRB waiver application for residential mortgages will be submitted in Q4 2017 as planned.
  • The Williams & Glyn alternative remedies package presents an opportunity to deliver real choice for SMEs and we are preparing our bid for the funds to accelerate our reach and offering to serve more UK businesses.
  • We remain on track to deliver our first full year of profitability in 2017 and reiterate our 2020 guidance.

Analyst and investor call
An analyst and investor call will be held as follows:

Date: Wednesday October 25 2017
Time: 2.00pm (GMT)
From the UK dial: 0808 237 0030 (Toll Free)
From the US dial: 866 928 7517 (Toll Free)
Participant Pin: 81472834#
URL for other international dial in numbers: http://events.arkadin.com/ev/docs/NE_FEL_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
jo.roberts@metrobank.plc.uk

Metro Bank PLC Media Relations
Tina Coates
+44 (0) 7811 246016
tina.coates@metrobank.plc.uk

Martin Pengelley/ Latika Shah
Tulchan Communications
+44(0)20 7353 4200
metrobank@tulchangroup.com