Metro Bank returns to profit amid specialist lending pivot
Metro Bank swung back to profitability in the second half of the year as the bank pressed on with a move away from retail banking and towards specialist lending.
The high street bank pulled ahead of guidance in its full-year posting, after a strong performance in the second half of 2024.
The FTSE 250 lender recorded a pre-tax profit of £12.8m in the second half of the year, after a loss of £26.8m in the first six months of 2024. Total net interest income for the year was up at £935m, compared to £856 in 2023.
However, shares dropped as much as 10 per cent following Thursday’s market open to a low of nearly 85p.
Metro reported a net interest margin of 2.65 per cent, marking a strong recovery from the low of 1.52 per cent in February 2024, and ahead of the 2.5 per cent forecast.
The firm’s corporate and commercial sector loans grew 71 per cent over the year, amidst the bank’s shift in focus onto the areas.
The bank announced the £584m sale of its personal loan book in its switch to specialist lending – the portfolio’s buyer remains undisclosed.
Metro showing ‘positive developments’
“Having set out an ambitious and transformative strategy aiming to generate returns above the sector average, management is now showing how it may be able to deliver on its plans even more rapidly than its already tight stated timeframe,” analysts at Peel Hunt said.
The analysts did not change any guidance but said they would update further recommendations shortly.
Total assets at the bank fell to £17.58bn, marking a 21 per cent decrease.
Customer deposits dipped seven per cent to £14.46bn, as the firm cited a “deliberate strategy to reduce excess liquidity and the cost of deposits”.
Chief executive Daniel Frumkin said the year was “transformational” for Metro and “substantial progress” had been made.
He added: “We have successfully continued our pivot towards higher margin business in the form of corporate, commercial and SME lending and specialist mortgages, while also taking significant steps to reduce our costs and optimising our funding model.
“We have simplified and strengthened our balance sheet, and as a result, end the year with a robust capital position.
“Our network of stores helps us grow our target markets, with our specialist relationship banking colleagues driving positive outcomes for customers and communities across the UK. We are delivering on our strategy.
“Looking forward, we are confident that Metro Bank has a strong and compelling plan, differentiated model and clear path forward to further growth.”