Results for Year ended 31 December 2022

• Profitable in Q4 2022 on an underlying basis

• Financials significantly improved year-on-year: 

     o   Underlying revenue increased 31%

      o   NIM improved by 52bps

      o   Underlying costs reduced 3%

• Completed turnaround; 2023 is a transitional year

• Targeting mid-single digit RoTE by 2024

• Resuming store expansion in the North of England

£ in millions

31

December

2022

31 December

2021

Change from

FY 2021

30

June

2022

Change from

H1 2022

Assets

£22,119

£22,588

(2%)

£22,566

(2%)

Loans

£13,102

£12,290

7%

£12,364

6%

Deposits

£16,014

£16,448

(3%)

£16,514

(3%)

Loan to deposit ratio

82%

75%

7pps

75%

7pps

CET1 capital ratio

10.3%

12.6%

(230bps)

10.6%

(30bps)

Total capital ratio (TCR)

13.4%

15.9%

(250bps)

13.8%

(40bps)

MREL ratio

17.7%

20.5%

(280bps)

18.3%

(60bps)

Liquidity coverage ratio

213%

281%

(68pps)

257%

(44pps)

£ in millions

FY

2022

FY

2021

Change from

FY 2021

H2

2022

H1

2022

Change from

H1 2022

Total underlying revenue¹

£522.1

£397.9

31%

£285.9

£236.2

21%

Underlying loss before tax²

(£50.6)

(£171.3)

(70%)

(£2.6)

(£48.0)

(95%)

Statutory loss before tax

(£70.7)

(£245.1)

(71%)

(£10.5)

(£60.2)

(83%)

Net interest margin

1.92%

1.40%

52bps

2.11%

1.73%

38bps

Lending yield

3.67%

3.07%

60bps

3.93%

3.40%

53bps

Cost of deposits

0.20%

0.24%

(4bps)

0.25%

0.14%

11bps

Cost of risk

0.32%

0.18%

14bps

0.33%

0.29%

4bps

Underlying EPS

(30.5p)

(101.1p)

(70%)

(2.0p)

(28.5p)

(93%)

Tangible book value per share

£4.29

£4.59

(7%)

£4.29

£4.30

(0%)

·          

Underlying profit in Q4 achieved as a result of the bank’s commitment to strong cost control and the successful balance sheet optimisation strategy.

·          

Underlying revenue increased by 31% to £522.1 million reflecting the shift in deposit and asset mix, the impact of the higher Bank of England base rate, and a recovery in customer activity.

·          

Underlying costs reduced 3% to £532.8 million despite inflationary pressures, reflecting management actions to control cost and leverage the fixed cost base for profitable growth.

·          

Operating jaws³ for 2022 were 34%.

·          

Underlying loss before tax for the year improved by 70% to £50.6 million as a result of the strong income growth, cost discipline and prudent risk management.

·          

Statutory loss before tax of £70.7 million, improved 71%, as legacy issues, and their associated remediation costs, concluded.

·          

Legacy PRA and FCA issues addressed regarding investigations into historical RWA reporting, and the OFAC investigation was closed during the year.

·          

Targeting mid-single digit ROTE by 2024.

·          

Resuming store expansion in the important economic areas and communities that make up the North of England, supported by funding from the Capability and Innovation Fund.

·          

Continued commitment to customers, communities and colleagues, voted the highest rated high street bank for overall service quality for personal customers and the best bank for service in-store for personal and business customers⁴ for the 10^th time in a row. Unique culture provides local communities with the support they need and builds long-lasting and personal relationships with customers.

·          

Pillar 2A capital requirement reduced to 0.50% in June 2022, further reduced to 0.36% effective January 2023.

·          

The Resolution Directorate of the Bank of England adjusted the bank's existing £250 million 5.5% Tier 2 Notes to remain eligible for MREL until 26 June 2025, following implementation of the holding company.

·          

2023 is a transitional year and the bank will focus on serving customers and maintaining cost discipline whilst continuing to invest in infrastructure and build sustainably.

£ in millions

31

December

2022

31 December

2021

Change from

FY 2021

30

June

2022

Change from

H1 2022

Demand: current accounts

£7,888

£7,318

8%

£7,770

2%

Demand: savings accounts

£7,501

£7,684

(2%)

£7,817

(4%)

Fixed term: savings accounts

£625

£1,446

(57%)

£927

(33%)

Deposits from customers

£16,014

£16,448

(3%)

£16,514

(3%)

Retail customers (excl. retail partnerships)

£5,797

£6,713

(14%)

£6,267

(7%)

SMEs⁵

£5,080

£4,764

7%

£4,892

4%

£10,877

£11,477

(5%)

£11,159

(3%)

Retail partnerships

£1,949

£1,814

7%

£1,871

4%

Commercial customers (excluding SMEs⁵)

£3,188

£3,157

1%

£3,484

(8%)

£5,137

£4,971

3%

£5,355

(4%)

5.      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.

·          

Current accounts increased by 8% in the year to £7,888 million, the underlying service-led core deposit franchise continued to grow. The focus remained on increasing share of relationship deposits whilst allowing the fixed term deposits to roll off. As a result, total deposits fell 3% to £16,014 million as at 31 December 2022 (31 December 2021: £16,448 million). Current account and demand deposits now make up 96% of the total deposit base (31 December 2021: 91%).

·          

Cost of deposits decreased to 20bps for the year (2021: 24bps) reflecting improvements in deposit mix and the value of the service-led business model, partially offset by the recent trend of increased competition and pricing in the market.

·          

Customer account growth of 0.2 million in the year to 2.7 million (2021: 2.5 million) reflects continued organic growth in the underlying franchise, with 188,000 personal current accounts and 42,000 business current accounts opened in the year.

·          

Stores remain at the heart of the bank’s service offering and the network will continue to expand as opportunity exists for further market penetration in significant locations where there are currently no stores present. The bank remains committed to opening stores in the North of England, the operational costs post-launch of which will be funded in part by the Capability and Innovation Fund. These stores are expected to be opened in 2024 and 2025.

·          

Future stores have been redesigned and will be built for significantly less cost than previous stores, but will not lose the distinctive Metro Bank style. Our refreshed approach will incorporate appropriate break clauses and will have less surplus floor space and more cost-effective fixtures and fittings.

£ in millions

31

December

2022

31 December

2021

Change from

FY 2021

30

June

2022

Change from

H1 2022

Gross Loans and advances to customers

£13,289

£12,459

7%

£12,535

6%

Less: allowance for impairment

(£187)

(£169)

11%

(£171)

9%

Net Loans and advances to customers

£13,102

£12,290

7%

£12,364

6%

Gross loans and advances to customers consists of:

Retail mortgages

£7,649

£6,723

14%

£6,785

13%

Commercial lending⁶

£2,847

£3,220

(12%)

£2,993

(5%)

Consumer lending

£1,480

£890

66%

£1,269

17%

Government-backed lending⁷

£1,313

£1,626

(19%)

£1,488

(12%)

6.      Includes CLBILS.

7.      BBLS, CBILS and RLS.

·          

Total net loans as at 31 December 2022 were £13,102 million, up 7% from £12,290 million as at 31 December 2021 reflecting growth in residential mortgages and consumer lending, offset by the targeted reduction of commercial term loans including commercial real estate and portfolio buy-to-let exposures. Focus remains on optimising the mix for risk-adjusted return on capital.

·          

Retail mortgages increased by 14% during the year to £7,649 million as at 31 December 2022 (31 December 2021: £6,723 million) and remained the largest component of the lending book at 58% (31 December 2021: 54%). The DTV of the portfolio as at 31 December 2022 was 56% (31 December 2021: 55%) and 82% of originations in 2022 were <80% LTV, compared to 59% in 2021.

·          

Commercial loans (excluding BBLS, CBILS and RLS) decreased by 12% during the year to £2,847 million as at 31 December 2022 (31 December 2021: £3,220 million) reflecting active portfolio management reducing commercial real estate to £681 million (31 December 2021: £837 million) and portfolio buy-to-let to £731 million (31 December 2021: £950 million), as part of the balance sheet optimisation strategy to target higher risk-adjusted return on capital.

·          

Consumer lending increased by £590 million to £1,480 million in the year and now makes up 11% of the of the total loan book (31 December 2021: 7%). The increase is driven by high quality new organic lending, for originations in Q4 2022 the average customer income was £52,000. Non-performing loans for consumer unsecured were 3.38% at 31 December 2022 (31 December 2021: 2.36%). The portfolio has a conservative ECL coverage of 5.07% (31 December 2021: 4.72%).

·          

Government-backed lending reduced by more than £300 million in the year to £1,313 million as at 31 December 2022 (31 December 2021: £1,626 million) as balances continued to roll off, following effective collections management supported by the British Business Bank.

·          

Capital constraints currently limit loan growth, asset originations were in line with replacement levels in Q4 2022.

·          

Cost of risk increased to 32bps for the year (2021: 18bps). Whilst the credit quality of new lending remains strong, the movement reflects the bank’s prudent approach to provisioning in response to the uncertain macro-economic environment and the growth in the consumer unsecured portfolio.

·          

Non-performing loans decreased to 2.65% (31 December 2021: 3.71%) driven by effective management of BBLS collections and reduced commercial exposures. Overall arrears levels have remained broadly stable and there have been no signs of increased stress. Excluding government-backed lending, non-performing loans were 2.02% as at 31 December 2022 (31 December 2021: 2.65%).

·          

The loan portfolio remains highly collateralised and conservatively provisioned. Average DTV for retail mortgages was 56% (2021: 55%) and for commercial lending 55% (2021: 57%). The ECL provision as at 31 December 2022 is £187 million with a coverage ratio of 1.41%, compared to £169 million with a coverage ratio of 1.36% as at the end of 2021.

·   

Net interest margin (NIM) of 1.92% is up 52bps in the year (2021: 1.40%) reflecting the successful balance sheet optimisation strategy of shifting towards higher yielding assets and rolling off more expensive fixed term deposits, also supported by the higher Bank of England base rate. Exit-NIM for December 2022 was 2.22%.

·   

Underlying net interest income increased 37% to £404.2 million for the year (2021: £295.7 million) driven by controlled asset growth and significant reshaping of lending and deposits supported by the rising interest rate environment.

·   

Underlying net fee and other income increased 16% to £117.9 million for the year (2021: £101.5 million) driven largely by higher customer transactions, increased safe deposit box usage and foreign currency activity, as volumes normalised following Covid-related restrictions in 2021.

·   

Underlying costs reduced 3% to £532.8 million for the year (2021: £546.8 million) despite inflationary pressures, reflecting management actions to control cost.

·   

Positive operating jaws of 34% for 2022 (2021: 4%) underpinned a reduction in the underlying cost:income ratio from 137% in 2021 to 102% in 2022.

·   

Underlying loss before tax improved by 70% to £50.6 million for the year (2021: £171.3 million) as a result of the strong income growth and continued cost discipline. Underlying profit before tax achieved in Q4 2022.

·   

Statutory loss before tax of £70.7 million, improved 71% as legacy issues, and their associated remediation costs, concluded.

£ in millions

31

December

2022

31 December

2021

Change from

FY 2021

Minimum capital requirement⁸

CET1 capital ratio

10.3%

12.6%

(230bps)

4.8%

Total capital ratio (TCR)

13.4%

15.9%

(250bps)

8.5%

MREL ratio

17.7%

20.5%

(280bps)

17.0%

·    

While the bank continues to operate within capital buffers, the capital position has been managed above all regulatory minimum requirements⁸ and the balance sheet continues to be actively managed within capital constraints.

·    

During the year, the Prudential Regulation Authority reduced the bank’s Pillar 2A capital requirement from 1.11% to 0.50%, effective as of 27 June 2022. The Resolution Directorate of the Bank of England also agreed that the bank’s binding MREL applicable from 27 June 2022 shall be equal to the lower of:

i)              18% of the bank’s RWAs; or

ii)             Two times the sum of the bank’s Pillar 1 and Pillar 2A

Therefore the bank’s minimum MREL requirement⁸ was reduced to 17.0%.

Effective 1 January 2023, the Prudential Regulation Authority has further reduced the bank's Pillar 2A capital requirement from 0.50% to 0.36%, the reduction implies that the bank's MREL requirement⁸ would therefore reduce from 17.0% to 16.7%.

·    

The Bank of England's Resolution Directorate has agreed to provide a temporary, time-limited, adjustment for the bank's existing £250 million 5.5% Tier 2 Notes with respect to MREL eligibility until 26 June 2025.

·    

Common Equity Tier 1 (CET1) ratio of 10.3% as at 31 December 2022 (31 December 2021: 12.6%) compares to a minimum CET1 requirement of 4.8%⁸ (or 8.3% including buffers⁹) and minimum Tier 1 requirement of 6.4%⁸ (or 9.9% including buffers⁹).

·    

Total Capital ratio of 13.4% as at 31 December 2022 (31 December 2021: 15.9%) compares to a minimum requirement of 8.5%⁸ (or 12.0% including buffers⁹).

·    

Total Capital plus MREL ratio of 17.7% as at 31 December 2022 (31 December 2021: 20.5%) compares to a minimum requirement of 17.0%⁸ (or 20.5% including buffers⁹).

·    

Strong liquidity and funding position maintained. All customer loans are fully funded by customer deposits with a loan-to-deposit ratio of 82% as at 31 December 2022 (31 December 2021: 75%). Strong Liquidity Coverage Ratio (LCR) of 213% as at 31 December 2022 (31 December 2021: 281%) and a Net Stable Funding Ratio (NSFR) of 134%, both far in excess of requirements.

·    

Total RWAs as at 31 December 2022 were £7,990 million (31 December 2021: £7,454 million). The increase reflects actions taken to improve the loan mix whilst managing loan growth within current capital constraints.

·    

UK leverage ratio¹⁰ was 4.2% as at 31 December 2022 (31 December 2021: 5.2%).

·    

The bank’s AIRB application continues to progress, and the requirement to implement a holding company for ‘bail in’ purposes is on track to be completed by the deadline in June 2023.

2022

2023

NIM

1.92%

NIM accretion limited by fewer anticipated base rate moves.

Lending yield

3.67%

Continue optimising mix for maximum risk-adjusted return on regulatory capital.

Cost of deposits

0.20%

Pricing will reflect rate environment and competitive pressures, expect strong account acquisition to offset lower average customer balances.

Underlying costs

£533m

Inflationary pressures expected to moderately outweigh cost initiatives.

Cost of risk

0.32%

Watchful of economic cycle but not yet seeing signs of stress.

RWA

£8.0b

Managed for optimal risk-adjusted return on regulatory capital as lending growth constrained by capital.

MREL

17.7%

Continue to operate within buffers with increasing headroom to regulatory minima.

Balance Sheet

YoY

change

31-Dec

2022

30-Jun

2022

31-Dec

2021

£'million

£'million

£'million

Assets

Loans and advances to customers

7%

£13,102

£12,364

£12,290

Treasury assets¹¹

£7,870

£9,036

£9,142

Other assets¹²

£1,147

£1,166

£1,156

Total assets

(2%)

£22,119

£22,566

£22,588

Liabilities

Deposits from customers

(3%)

£16,014

£16,514

£16,448

Deposits from central banks

£3,800

£3,800

£3,800

Debt securities

£571

£577

£588

Other liabilities

£778

£706

£717

Total liabilities

(2%)

£21,163

£21,597

£21,553

Total shareholder's equity

£956

£969

£1,035

Total equity and liabilities

£22,119

£22,566

£22,588

Year ended

Profit & Loss Account

YoY

change

31-Dec

2022

31-Dec

2021

£'million

£'million

Underlying net interest income

37%

£404.2

£295.7

Underlying net fee and other income

16%

£117.9

£101.5

Underlying net gains/(losses) on sale of assets

-

£0.7

Total underlying revenue

31%

£522.1

£397.9

Total underlying costs

(3%)

(£532.8)

(£546.8)

Expected credit loss expense

78%

(£39.9)

(£22.4)

Underlying loss before tax

(70%)

(£50.6)

(£171.3)

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

(£9.7)

(£24.9)

Transformation costs

(£3.3)

(£8.9)

Remediation costs

(£5.3)

(£45.9)

Business acquisition and integration costs

-

(£2.4)

Gain on mortgage portfolio sale (net of costs)

-

£8.3

Holding company insertion

(£1.8)

-

Statutory loss before tax

(71%)

(£70.7)

(£245.1)

Statutory taxation

(£2.0)

(£3.1)

Statutory loss after tax

(71%)

(£72.7)

(£248.2)

Year ended

Key metrics

31-Dec

2022

31-Dec

2021

Underlying earnings per share – basic and diluted

(30.5p)

(101.1p)

Number of shares

172.5m

172.4m

Net interest margin (NIM)

1.92%

1.40%

Lending yield

3.67%

3.07%

Cost of deposits

0.20%

0.24%

Cost of risk

0.32%

0.18%

Arrears rate

3.2%

4.1%

Underlying cost:income ratio

102%

137%

Tangible book value per share

£4.29

£4.59

HoH change

Half year ended

Profit & Loss Account

31-Dec

2022

30-Jun

2022

31-Dec

2021

£'million

£'million

£'million

Underlying net interest income

23%

£223.3

£180.9

£162.1

Underlying net fee and other income

£62.6

£55.3

£54.8

Underlying net gains/(losses) on sale of assets

-

-

£1.2

Total underlying revenue

21%

£285.9

£236.2

£218.1

Total underlying costs

-

(£266.5)

(£266.3)

(£271.6)

Expected credit loss expense

(£22.0)

(£17.9)

(£7.8)

Underlying loss before tax

(95%)

(£2.6)

(£48.0)

(£61.3)

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

(£1.5)

(£8.2)

(£17.4)

Net BCR costs

-

-

£0.3

Transformation costs

(£2.3)

(£1.0)

(£7.1)

Remediation costs

(£2.3)

(£3.0)

(£20.5)

Business acquisition and integration costs

-

-

(£0.1)

Gain on mortgage portfolio sale (net of costs)

-

-

(£0.1)

Holding company insertion

(£1.8)

-

-

Statutory loss before tax

(83%)

(£10.5)

(£60.2)

(£106.2)

Statutory taxation

(£0.5)

(£1.5)

(£0.9)

Statutory loss after tax

(82%)

(£11.0)

(£61.7)

(£107.1)

Half year ended

Key metrics

31-Dec

2022

30-Jun

2022

31-Dec

2021

Underlying earnings per share – basic and diluted

(2.0p)

(28.5p)

(36.0p)

Number of shares

172.5m

172.4m

172.4m

Net interest margin (NIM)

2.11%

1.73%

1.51%

Lending yield

3.93%

3.40%

3.14%

Cost of deposits

0.25%

0.14%

0.17%

Cost of risk

0.33%

0.29%

0.20%

Arrears rate

3.2%

3.1%

4.1%

Underlying cost:income ratio

93%

113%

125%

Tangible book value per share

£4.29

£4.30

£4.59