Metro Bank PLC Q3 Trading Update 2017 (5172U)

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RNS Number : 5172U

Metro Bank PLC

25 October 2017

Metro Bank PLC

Q3 Trading Update 2017

October 25, 2017

METRO BANK REPORTS RECORD CUSTOMER GROWTH AND 77% INCREASE IN QUARTER ON QUARTER PROFIT

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

 
 Q3 Highlights 
   *    Deposits from customers up GBP955m, 10% 
        quarter-on-quarter to GBP10.8b ($14.4b), whilst the 
        cost of deposits reduced from 53bp in Q2 2017 to 50bp 
        in Q3 2017. 
 
 
   *    Lending up GBP858m, 11% quarter-on-quarter to GBP8.6b 
        ($11.5b) and a 1% increase in the loan to deposit 
        ratio to 80%. 
 
 
   *    Underlying profit before tax(1) at GBP7.2m, a 77% 
        increase from GBP4.0m in Q2 2017. Year to date 
        underlying profit before tax(1) is GBP13.2m versus 
        GBP12.4m 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 GBP278m at no discount to 
        market price. 
 
 
   *    We celebrated our seventh birthday and the opening of 
        our 50(th) 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 GBP.

 
 Quarter ending                      30          30         Change          30       Change 
  GBP in millions                    Sept        Jun       In Quarter    Sept 2016     In 
                                     2017        2017                                 Year 
 
 Assets                           GBP14,574   GBP13,094       11%        GBP9,005     62% 
 Loans                            GBP8,608    GBP7,750        11%        GBP5,193     66% 
 Deposits                         GBP10,760   GBP9,805        10%        GBP7,297     47% 
 Loan to Deposit ratio               80%         79%                       71% 
 
 Underlying Profit before 
  tax(1)                           GBP7.2      GBP4.0         77%         GBP0.6     1,161% 
 Total Revenue                     GBP78.1     GBP69.2        13%        GBP53.4      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 the 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 GBP7.2 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 GBP1bn of net lending to businesses during 2017. We also opened the doors of our 50(th) 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 GBP14,574m, up from 
       GBP13,094m at 30 June 2017 and GBP9,005m 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 GBP10,760m, up from 
       GBP9,805m at 30 June 2017 and GBP7,297m 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 GBP6.6m ($8.8m) 
       in Q3 2017 versus GBP5.5m ($7.4m) in Q2 2017, and GBP5.6m 
       ($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 
       GBP78m ($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%. 
 
 
 GBP in millions                     30          30     Change         30   Change 
                                   Sept         Jun         In       Sept       In 
                                   2017        2017    Quarter       2016     Year 
 
 Demand: non-interest 
  bearing                      GBP3,274    GBP2,998         9%   GBP2,019      62% 
 Demand: interest bearing      GBP5,113    GBP4,715         8%   GBP3,167      61% 
 Fixed term                    GBP2,373    GBP2,092        13%   GBP2,111      12% 
                            -----------  ----------  ---------  ---------  ------- 
 Deposits from customers      GBP10,760    GBP9,805        10%   GBP7,297      47% 
                            -----------  ----------  ---------  ---------  ------- 
 
 Deposits from customers 
  includes: 
 Deposits from retail 
  customers                    GBP5,108    GBP4,750         8%   GBP3,537      44% 
 Deposits from corporate 
  customers                    GBP5,652    GBP5,055        12%   GBP3,760      50% 
                            -----------  ----------  ---------  ---------  ------- 
 
 

Lending

 
 --   Total loans as of 30 September were GBP8,608m, up from GBP7,750m 
       at 30 June 2017 and GBP5,193m 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. 
 
 
 GBP in millions                          30          30     Change         30   Change 
                                        Sept         Jun         In       Sept       In 
                                        2017        2017    Quarter       2016     Year 
 
 Gross Loans and advances 
  to customers                      GBP8,620    GBP7,760        11%   GBP5,202      66% 
 Less: allowance for impairment      GBP(12)     GBP(10)        12%     GBP(9)      32% 
 Net Loans and advances 
  to customers                      GBP8,608    GBP7,750        11%   GBP5,193      66% 
 
 Gross loans and advances 
  to customers includes: 
 Commercial loans                   GBP2,909    GBP2,611        11%   GBP1,824      59% 
 Residential mortgages              GBP5,503    GBP4,948        11%   GBP3,202      72% 
 Consumer and other loans 
  and advances                        GBP208      GBP201         4%     GBP176      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 GBP5,174m. Regulatory Leverage ratio is 6.2%. 
 --   Underlying profit before tax has grown 77% quarter-on-quarter 
       to GBP7.2m (compared to GBP4.0m in Q2 2017). Statutory profit 
       before tax of GBP6.7m has grown 131% compared to GBP2.9m 
       in Q2 2017. 
 --   We opened our 50(th) 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. 
 

Metro Bank PLC

Summary Balance Sheet and Profit & Loss Account

(Unaudited)

 
                                    Annual 
                                     Growth 
                                      Rate           2017             2016 
 Balance Sheet                                30-Sep   30-Jun       30-Sep 
                                               GBP'm    GBP'm        GBP'm 
 Assets 
 Loans and advances to customers      66%      8,608    7,750        5,193 
 Treasury assets(3)                            5,393    4,827        3,400 
 Other assets(4)                                 573      517          412 
                                             -------  -------  ----------- 
 Total assets                         62%     14,574   13,094        9,005 
                                             -------  -------  ----------- 
 
 Liabilities 
 Deposits from customers              47%     10,760    9,805        7,297 
 Deposits from banks                           2,123    1,823            - 
 Other liabilities                               598      654          901 
                                             -------  -------  ----------- 
 Total liabilities                            13,481   12,282        8,198 
                                             -------  -------  ----------- 
 Total shareholder's equity                    1,093      812          807 
                                             -------  -------  ----------- 
 Total equity and liabilities                 14,574   13,094        9,005 
                                             -------  -------  ----------- 
 

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

(4) Comprises property, plant & equipment, intangible assets and other assets

 
                                    Annual                2017          2016 
                                     Growth 
                                      Rate 
 Profit & Loss Account                              Q3         Q2         Q3 
                                               GBP'000    GBP'000    GBP'000 
 
 Net interest income                            64,244     56,996     40,926 
 Fee and other income                           12,915     11,440      9,197 
 Net gains on sale of securities                   925        733      3,265 
                                             ---------  ---------  --------- 
 Total revenue                        46%       78,084     69,169     53,388 
 
 Operating expenses                   34%     (69,605)   (63,040)   (52,078) 
 Credit impairment charges                     (1,328)    (2,098)      (743) 
 
 Underlying profit before tax         n/a        7,151      4,031        567 
 
 Underlying taxation                           (1,900)    (1,071)      (352) 
 
 Underlying profit after tax          n/a        5,251      2,960        215 
 
 Listing and related costs                       (316)      (391)      (693) 
 FSCS levy (net of tax)                            176      (554)        370 
 Impairment of property, plant 
  & equipment and intangible 
  assets                                         (390)          -      (308) 
 Statutory profit/(loss) after 
  tax                                 n/a        4,721      2,015      (416) 
                                             ---------  ---------  --------- 
 

Analyst and investor call

An analyst and investor call will be held as follows:

Date: Wednesday October 25 2017

Time: 2.00pm (BST)

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

[phone]

[e-mail]

Metro Bank PLC Media Relations

Tina Coates

[phone]

[e-mail]

Martin Pengelley/ Latika Shah

Tulchan Communications

[phone]

[e-mail]

ENDS

About Metro Bank

Metro Bank is the revolution in British banking. It is celebrated for its exceptional customer experience and its trusted products, and was awarded 'Most Trusted Financial Provider' at the Moneywise Customer Service Awards 2017, as well as 'Best Financial Provider' at the Evening Standard Business Awards 2017 and 'Bank of the Year' at the CityAM Awards 2016.

Offering retail, business, commercial and private banking services, it prides itself on using technology to give customers the choice to bank however, whenever and wherever they choose. Whether that's through its growing network of stores open seven days a week, from early in the morning to late at night, 362 days a year; on the phone through its UK-based 24/7 contact centres manned by people not machines; or online through its internet banking or award-winning mobile app.

The bank employs over 2,800 colleagues and is headquartered in Holborn, London.

Metro Bank PLC. Registered in England and Wales. Company number: 6419578. Registered office: One Southampton Row, London, WC1B 5HA. 'Metrobank' is the registered trade mark of Metro Bank PLC.

It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Most relevant deposits are protected by the Financial Services Compensation Scheme. For further information about the Scheme refer to the FSCS website www.fscs.org.uk.

All Metro Bank products are subject to status and approval.

This information is provided by RNS

The company news service from the London Stock Exchange

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October 25, 2017 02:00 ET (06:00 GMT)