Metro Bank Full Year Results 2024

Highlights

·       2024 statutory profit after tax of £42.5 million, post recognition of the deferred tax asset

·       Underlying profit of £12.8 million in H2 2024, in excess of guidance of returning to profitability during Q4 2024

·       Net Interest Margin at year end of 2.65%, ahead of guidance of 2.50% and up 113bps from nadir of 1.52% in February 2024

·       Cost of deposits at year end of 1.40%, down from a peak of 2.29% in February 2024

·       Corporate and Commercial new loan originations grew by 71% during 2024 and by 40% from H1 2024 to H2 2024

·       Credit approved pipeline for corporate/commercial/SME already at >50% of total 2024 lending

·       Continued balance sheet optimisation through the sale of £2.5 billion prime residential mortgages and £584 million of unsecured personal loans

·       Transformational year in 2024 has created strong momentum; reiterating existing guidance for 2025, 2026 and 2027

£ in millions

31 Dec

2024

31 Dec

2023

Change from

FY 2023

30 Jun

2024

Change from

H1 2024

Assets

£17,582

£22,245

(21%)

£21,489

(18%)

Loans

£9,013

£12,297

(27%)

£11,543

(22%)

Deposits

£14,458

£15,623

(7%)

£15,726

(8%)

Loan to deposit ratio

62%

79%

(17pp)

73%

(11pp)

CET1 capital ratio¹

12.5%

13.1%

(56bps)

12.9%

(36bps)

Total capital ratio (TCR) ¹

14.9%

15.1%

(24bps)

15.0%

(14bps)

MREL ratio¹

23.0%

22.0%

100bps

22.2%

75bps

Liquidity coverage ratio

337%

332%

5pp

365%

(28pp)

£ in millions

FY

2024

FY

2023

Change from

FY 2024

H2

2024

H1

2024

Change from

H1 2024

Total underlying revenue²

£503.5

£546.5

(8%)

£269.5

£234.0

15%

Underlying profit/(loss) before tax³

(£14.0)

(£16.9)

17%

£12.8

(£26.8)

148%

Statutory profit/(loss) before tax

(£212.2)

£30.5

(795%)

(£178.6)

(£33.5)

(433%)

Statutory profit/(loss) after tax

£42.5

£29.5

44%

£75.6

(£33.1)

328%

Net interest margin

1.91%

1.98%

(7bps)

2.22%

1.64%

58bps

Lending yield

5.33%

4.72%

61bps

5.48%

5.18%

30bps

Cost of deposits

1.95%

0.97%

98bps

1.72%

2.18%

(46bps)

Cost of risk

0.06%

0.26%

(20bps)

0.01%

0.10%

(10bps)

Underlying EPS

(2.1p)

(8.4p)

75%

1.9p

(3.9p)

139%

Book value per share

£1.76

£1.70

4%

£1.76

£1.64

7%

Tangible book value per share

£1.21

£1.40

(13)%

£1.21

£1.37

(12)%

£ in millions

31 Dec

2024

31 Dec

2023

Change from

FY 2023

30 Jun

2024

Change from

H1 2024

Demand: current accounts

£5,791

£5,696

2%

£5,662

2%

Demand: savings accounts

£7,534

£7,827

(4%)

£8,108

(7%)

Fixed term: savings accounts

£1,133

£2,100

(46%)

£1,956

(42%)

Deposits from customers

£14,458

£15,623

(7%)

£15,726

(8%)

Deposits from customers includes:

Retail customers (excluding retail partnerships)

£5,968

£7,235

(18%)

£7,170

(17%)

SMEs⁴

£4,442

£3,782

17%

£4,224

5%

£10,410

£11,017

(6%)

£11,394

(9%)

Retail partnerships

£1,785

£1,708

5%

£1,734

3%

Commercial customers (excluding SMEs⁴)

£2,263

£2,898

(22%)

£2,598

(13%)

£4,048

£4,606

(11%)

£4,332

(6%)

4.      SME defined as enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding €50 million, and/or an annual balance sheet total not exceeding €43 million and have aggregate deposits less than €1 million.

·       Customer deposits reduced by 7% at 31 December 2024 to £14.5 billion, down £2.0 billion on February 2024 peak of £16.5 billion (31 December 2023: £15.6 billion) reflecting the deliberate focus to reduce excess liquidity and cost of deposits. The core customer deposit base continues to be predominantly Retail and SME. Higher cost fixed-term deposits have reduced by 46% year-on-year as deposits from the successful Q4 2023 deposit campaign have started to mature and are being allowed to attrite.

·       Cost of deposits for the year ended December 2024 was 1.95% (31 December 2023: 0.97%), with downward momentum and an exit cost of deposits at the end of the year of 1.40%, down 0.89% from a February 2024 peak of 2.29%.  Half-on-half cost of deposits reduced by 0.46%, from 2.18% to 1.72%.

·       Stores remain a key element to the Group’s service offering and strategy as an enabler of our relationship-based approach. Metro Bank will open two new stores in Q2 2025 in Chester and Gateshead with a store in Salford set to open in late 2025, with all locations selected to not only support local consumers but to also support our growing corporate, commercial and SME banking offer. 

£ in millions

31 Dec

2024

31 Dec

2023

Change from

FY 2023

30 Jun

2024

Change from

H1 2024

Gross loans and advances to customers

£9,204

£12,496

(26%)

£11,739

(22%)

Less: allowance for impairment

(£191)

(£199)

(4%)

(£196)

(3%)

Net loans and advances to customers

£9,013

£12,297

(27%)

£11,543

(22%)

Gross loans and advances to customers consists of:

Retail mortgages

£5,145

£7,818

(34%)

£7,512

(32%)

Commercial lending⁵

£2,661

£2,443

9%

£2,437

9%

Consumer lending

£745

£1,297

(43%)

£1,003

(26%)

Government-backed lending⁶

£653

£938

(30%)

£787

(17%)

5.      Includes CLBILS.

6.      BBLS, CBILS and RLS.

·       Total net loans at 31 December 2024 were £9.0 billion, down 27% from 31 December 2023, primarily driven by the £2.5 billion sale of a prime residential mortgage portfolio in H2 2024. Post period-end, Metro Bank has also announced the sale of a £584 million performing unsecured personal loans portfolio. The remainder of the consumer and government-backed lending portfolios are in run-off. Loan to deposit ratio at 31 December 2024 was 62% (31 December 2023: 79%), providing opportunities to further optimise funding costs.

·       Retail mortgages decreased 34% year-on-year to £5.1 billion (31 December 2023: £7.8 billion) following the £2.5 billion mortgage loan, but remain the largest component of the lending book at 56% (31 December 2023: 63%). The Debt to Value (DTV) of the portfolio at 31 December 2024 was 59% (31 December 2023: 58%). The pivot towards specialist mortgages continues, following recent investment to re-platform the mortgage business and enhance the product offering. Metro Bank’s operating model is tailored to more complex underwriting which enables the Group to meet the needs of more customers and scale underserved markets whilst offering improved risk-adjusted returns.

·       Commercial loans (excluding BBLS, CBILS and RLS) increased by 9% at 31 December 2024 to £2,661 million (31 December 2023: £2,443 million) in line with the Group’s strategy. Growth in new corporate, commercial and SME lending was offset by continued attrition of commercial real estate and portfolio buy-to-let portfolios. The DTV of the portfolio at 31 December 2024 was 56% (31 December 2023: 55%) and the portfolio has a coverage ratio of 1.98% (31 December 2023: 2.13%). Metro Bank is committed to supporting local businesses as we continue to pivot towards corporate, commercial and SME lending.

·       Year-on-year gross new Corporate and Commercial lending grew by 71% from £0.7 billion at 31 December 2023 to £1.2 billion at 31 December 2024, demonstrating that our strategic shift into corporate, commercial and SME lending is being delivered at pace.

·       Cost of risk decreased to 0.06% at 31 December 2024 (31 December 2023: 0.26%). The overall impact of risk profile, credit performance and macroeconomic outlook has resulted in a lower cost of risk in the year. The credit quality of new lending continues to be strong through the current macro-economic environment and the Group retains its prudent approach to provisioning.

·       Overall arrears levels have increased to 5.6% at 31 December 2024 (31 December 2023: 3.8%). There has been some observed crystallisation of the prior economic deterioration on customer positions; however, this was less than previously forecasted. The main driver for the increased arrears rate is the sale of retail mortgage assets and the run-off of the unsecured personal loans portfolio.

·       Non-performing loans increased to 5.48% (31 December 2023: 3.11%) as a result of the mortgage asset sale (in which accounts in arrears were excluded), the maturity profile of the unsecured personal loans portfolio that is in run-off, new mortgage defaults primarily due to accounts moving into 90+ day arrears, and large single name individually impaired Commercial cases, partially offset by BBLS claims. Excluding government-backed lending, non-performing loans were 4.78% at 31 December 2024 (31 December 2023: 2.58%).

·       The loan portfolio remains highly collateralised and prudently provisioned. The ECL provision at 31 December 2024 was £191 million with a coverage ratio of 2.07%, compared to £199 million with a coverage ratio of 1.59% at 31 December 2023. The level of post-model overlays currently sits at 9.8% of the ECL stock, or £18.8 million. This has reduced since 31 December 2023 (11.8% of ECL stock, or £23.4 million).

·       Returned to profitability, with underlying profit before tax in H2 2024 of £12.8 million (H1 2024: loss of £26.8 million), primarily driven by improvements in net interest income. Underlying loss before tax at 31 December 2024 was £14.0 million (31 December 2023: £16.9 million).

·       Net interest margin for the year ended December 2024 was 1.91% (31 December 2023: 1.98%), with an exit net interest margin of 2.65%,  ahead of guidance of 2.50% and up 1.13% from nadir of 1.52% in February 2024, reflecting lower cost of deposits and increased asset yields.

·       Underlying net interest income decreased by 8% YoY to £377.9 million (31 December 2023: £411.9 million) driven by increased cost of deposits in H1 2024. Half-on-half underlying net interest income increased by 20% to £206.0 million (H1 2024: £171.9m), reflecting the continued transition towards higher yielding assets and a reduction in cost of deposits.

·       Underlying net fee and other income decreased YoY to £125.6 million (31 December 2023: £134.6 million), primarily reflecting increased competition within FX markets.

·       Underlying costs reduced 4%, or £19.8 million year-on-year, to £510.4 million (31 December 2023: £530.2 million). Annualised run-rate cost savings of £80 million were successfully delivered in 2024, helping to offset inflationary pressures and allowing capacity for investment necessary to support the Group’s future growth plans.

·      Statutory loss before tax of £212.1 million for the year ended 31 December 2024 (31 December 2023: profit of £30.5 million) was primarily driven by £101.6 million loss on the mortgage sale, £44.0 million write-off of intangible assets, £31.1 million in transformation costs and £21.3 million of remediation costs that included the £16.7 million FCA fine.

·       Statutory profit after tax of £42.5 million at 31 December 2024 (31 December 2023: £29.5 million) reflects recognition of £254.6 million deferred tax asset in anticipation of future profitability.

7.      CRD IV buffers

·       Total RWAs at 31 December 2024 were £6.4 billion (31 December 2023: £7.5 billion). The movement reflects the £2.5 billion sale of the prime residential mortgage portfolio and actions taken to optimise the balance sheet. RWA density was 36% compared to 30% at 31 December 2023 reflecting the pivot to corporate, commercial and SME lending.

·       Metro Bank’s MREL ratio was 23.0% as at 31 December 2024, up 100bps year-on-year from 22.0% as at 31 December 2023 (30 June 2024: 22.2%), reflecting ongoing focus on capital management whilst optimising risk-adjusted returns on regulatory capital.

·       Upon completion, the £584 million unsecured personal loans asset sale post-period is expected to result in a pro forma improvement in total capital plus MREL of c152 bps to 24.5% and CET1 of c92 bps to 13.4%.

·       The bank continues to consider opportunities to optimise the capital structure to drive growth momentum in delivering strategy.

·       Strong liquidity and funding position maintained. All customer loans are fully funded by customer deposits with a loan-to-deposit ratio of 62% compared to 79% at the end of 2023. This provides further opportunities to optimise funding costs.

·       Liquidity Coverage Ratio (LCR) was 337% compared to 332% as at 31 December 2023, with cash balances of £2.8 billion.

·       Net Stable Funding Ratio (NSFR) has increased to 169% compared to 145% as at 31 December 2023, driven by the reduction in loan advances, primarily from the £2.5 billion mortgage portfolio sale, offset by the repayment of TFSME with sale proceeds.

·       The Treasury portfolio of £7.3 billion includes £4.5 billion of investment securities, of which 78% are rated AAA and 22% are rated AA. Of the total investment securities, 92% is held at amortised cost and 8% is held at fair value through other comprehensive income.

·       Over the next 3 years more than £2.0 billion of fixed rate treasury assets will mature at an average blended yield of just over 1%, these will be replaced by asset with yields in line with or greater than the prevailing base rate.

·       UK leverage ratio was 5.6% as at 31 December 2024 (31 December 2023: 5.3%).

ROTE

•        Mid-to-upper single digit in 2025, double digit in 2026 and mid-to-upper teens thereafter

NIM

•        Continued NIM expansion driven by asset rotation, and exit NIMs in 2025, 2026 and 2027 to be between 3.00%-3.25%, 3.60%-4.00% and 4.00%-4.50%, respectively

Costs

•        Year-on-year 4-5% reduction in cost for 2025

•        Cost to income ratios in 2026, 2027 and 2028 to be between 75%-70%, 65%-60% and 55%-50% respectively

Balance Sheet

YoY

change

31 Dec

2024

30 Jun

2024

31 Dec

2023

£'million

£'million

£'million

Assets

Loans and advances to customers

(27%)

£9,013

£11,543

£12,297

Treasury assets⁸

£7,301

£8,819

£8,770

Other assets⁹

£1,268

£1,127

£1,178

Total assets

(21%)

£17,582

£21,489

£22,245

Liabilities

Deposits from customers

(7%)

£14,458

£15,726

£15,623

Deposits from central banks

£400

£3,050

£3,050

Debt securities

£675

£675

£694

Other liabilities

£866

£934

£1,744

Total liabilities

(22%)

£16,399

£20,385

£21,111

Total shareholder's equity

£1,183

£1,104

£1,134

Total equity and liabilities

£17,582

£21,489

£22,245

YoY

change

Profit & Loss Account

31 Dec

2024

31 Dec

2023

£'million

£'million

Underlying net interest income

(8%)

£377.9

£411.9

Underlying net fee and other income

(5%)

£125.4

£131.9

Underlying net gains on sale of assets

£0.2

£2.7

Total underlying revenue

(8%)

£503.5

£546.5

Underlying operating costs

(4%)

(£510.4)

(£530.2)

Expected credit loss expense

79%

(£7.1)

(£33.2)

Underlying profit/(loss) before tax

17%

(£14.0)

(£16.9)

Impairment and write-off of property plant & equipment and intangible assets

(£44.0)

(£4.6)

Transformation costs

(£31.1)

(£20.2)

Remediation costs

Mortgage sale

(£21.3)

(£101.6)

-

Capital raise and refinancing

(£0.1)

£74.0

Holding company insertion

-

(£1.8)

Statutory profit/(loss) before tax

(£212.1)

£30.5

Statutory taxation

£254.6

(£1.0)

Statutory profit/(loss) after tax

£42.5

£29.5

Key metrics

31 Dec

2024

31 Dec

2023

Underlying earnings per share – basic

(2.1p)

(8.4p)

Number of shares

672.7m

672.7m

Net interest margin (NIM)

1.91%

1.98%

Lending yield

5.33%

4.72%

Cost of deposits

1.95%

0.97%

Cost of risk

0.06%

0.26%

Arrears rate

5.6%

3.8%

Underlying cost: income ratio

101%

97%

Book value per share

£1.76

£1.69

Tangible book value per share

£1.21

£1.40

Half year ended

Profit & Loss Account

HoH

change

31 Dec

2024

30 Jun

2024

31 Dec

2023

£'million

£'million

£'million

Underlying net interest income

20%

£206.0

£171.9

£190.4

Underlying net fee and other income

2%

£63.4

£62.0

£68.6

Underlying net gains on sale of assets

£0.1

£0.1

£1.9

Total underlying revenue

15%

£269.5

£234.0

£260.9

Underlying operating costs

0%

(£255.8)

(£254.6)

(£272.0)

Expected credit loss expense

(£0.9)

(£6.2)

(£21.9)

Underlying profit/(loss) before tax

148%

£12.8

(£26.8)

(£33.0)

Impairment and write-off of property plant & equipment and intangible assets

(£43.7)

(£0.3)

(£4.6)

Transformation costs

(£26.6)

(£4.5)

(£20.2)

Remediation costs

(£19.5)

(£1.8)

(£0.8)

Mortgage sale

(£101.6)

-

-

Capital raise and refinancing

-

(£0.1)

£74.0

Holding company insertion

-

-

(£0.3)

Statutory profit/(loss) before tax

(£178.6)

(£33.5)

£15.1

Statutory taxation

£254.2

£0.4

£1.7

Statutory profit/(loss) after tax

£75.6

(£33.1)

£16.8

Half year ended

Key metrics

31 Dec

2024

30 Jun

2024

31 Dec

2023

Underlying earnings per share – basic

1.9p

(3.9p)

(12.2p)

Number of shares

672.7m

672.7m

672.7m

Net interest margin (NIM)

2.22%

1.64%

1.85%

Lending yield

5.48%

5.18%

4.91%

Cost of deposits

1.72%

2.18%

1.29%

Cost of risk

0.01%

0.10%

0.34%

Arrears rate

5.6%

3.8%

3.8%

Underlying cost:income ratio

95%

109%

104%

Book value per share

£1.76

£1.64

£1.70

Tangible book value per share

£1.21

£1.37

£1.40

Risk weighted assets (RWAs)

£6,442m

£7,239m

£7,533m

Risk weight density (RWAs / total assets)

36.6%

35.9%

33.9%