Metro Bank swings back to profit in first half as boss Frumkin claims ‘strategy is working’
Metro Bank achieved profitability in the first half of 2023 as the bank’s recovery from an accounting scandal continues.
In the first half of the year the retail bank reported a pretax profit of £15.4m, swinging from a loss of £10.5m the year before when the bank faced significant restructuring and write-off costs.
The second quarter of the year marked the third straight of profitability.
While underlying revenue increased 21 per cent year on year to £285.6m, this was unchanged from the second half of last year due to the increased cost of deposits and limited loan growth, as the bank has strict capital limits in place.
Its net interest margin increased three basis points to 2.14 per cent half-on-half, but it is unlikely to expand further due as a result of its changing deposit mix and competitive pressures.
Metro Bank’s deposits fell three per cent in the half as customers dipped into savings accounts. This was partially offset by deposits inflows in June and July. It said its market share of cash ISAs and easy access accounts is “well below its current natural market chare” which the bank said represented a significant opportunity.
The lender also re-entered the fixed term deposit market, with fixed term products making up eight per cent of the deposit base, although this also helped increased the cost of deposits.
Analysts at Jefferies said: “Given the contraction in loans and deposits as well as deposit mix shifting towards fixed term product, investors would be right to question the trajectory of NIM and net interest income.”
Arrears levels remained broadly stable and the bank said there have been no “significant signs of increased stress”.
Chief executive Dan Frumkin said: “Our statutory profitability in H1, making this the third consecutive quarter of underlying profitability, demonstrates that our strategy is working.
“We continue to win new customers every day through our service-led franchise, at the same time as showing ongoing cost discipline and pursuing our targeted store expansion,” he continued.
The bank said it remains committed to opening stories in the north of England, with them expected to open in 2024 and 2025.
“The store proposition and the deposit franchise it underpins are increasingly valuable in a more normalised interest rate environment,” the lender said.
At its launch in 2010, Metro Bank became the first new high street bank to launch in the UK in over 150 years.
But following a period of fast-paced growth, the bank hit financial troubles in 2019, announcing that it did not have sufficient capital to meet certain regulatory requirements.
As a result, it was forced to set out a turnaround plan in February 2020 in a bid to rejuvenate its finances.
The announcement saw shares in the bank plummet to depths from which they have never subsequently recovered – down some 90 per cent since their peak in 2018.