The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
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Great post as usual RKB.
Can you message me please.
Morning Mister RKB
Highly valuable research and posts here, I think many LTHers here will agree and be grateful.
Shorts lurk here and like to create an environment of doubt - and it sometimes work well for them as some posters here end up selling at a loss and moving on. I am very confident in Metro's future, be it JV/ TO, etc. Bank has solid assets and the much-coveted UK bank license.
I do not care at all about current "low" share price as I see solid value in the product and the bank is extremely undervalued.
Strong and firm hold. We will see shorts try to work their hustle here - they will not get my money.
Gl all.
Annual Results
Part 11
Good Morning Long Term Holders
If you take the time to review the weekend Posts you will notice that we had a very active B.B.
I Posted my take of the Annual Results and it is only a fraction of my distillation. Before I began Posting last Friday I went through every single Post for the previous week and performed the same analysis of each Poster’s history and their “views” on Metro Bank so that I knew “what their agenda could be”. My agenda is to support our share-price and Post the facts and then my interpretation of the facts.
There are many on our B.B. who are not as Postitive for our share-price like I am but if you have not read the Annual Accounts you may want to read the whole of this thread and then draw your own conclusions. No doubt there will be a few Posters who will appear after they have had their coffee this morning to push this Post and any other Poster’s Posts down the B.B. so that you may not see something that is not to their liking.
Conclusion: There is not a problem with Residential Mortgages, Buy-to-Let Mortgages or Commercial Lending, Metro Bank are good in fact very good at their risk assessment when they lend and they do not have the history of the older established Retail Banks.
RKB
BigDano,
thanks for causing me to watch the full podcast. Essential viewing it addressed my doubts/concerns without promising a dramatic turnaround, it gave me hope. Your namesake took full control, although perhaps tiring by the end.
Surely Metro could trim their opening hours without much fuss.
BigDano, thanks I will.
I was getting sucked into RKB's comments but they are not convincing me at the moment. I could be over cautious but there is something not quite right with MTRO. GLA.
Still holding MTRO.
RKB - super work we all appreciate you taking the time out to dig into the numbers.
Jimjam If you haven't had the chance worth having a look at the webcast link ( on RNS ) Dan covers the longer opening hours and the associated costs, sorry I can't recall how far into the presentation but I think it was covered in the first 30mins..
Good Evening Panderman
I have already switched off the laptop and the honest answer is I can’t really say.
What I have said to friends is that when funds become available all of them will go into MTRO as I believe they are grossly undervalued. I do not really care what price I pay as I believe when people actually understand this is a Company going places then holders will be rewarded.
RKB
Mr beekeeper, sorry to be basic but what in your opinion is the net worth per share?
Annual Results
Part 10
Commercial Lending:
In 2019 our Commercial Lending was about £3.5 billion. Now I have no experience of Commercial Lending and for the purpose of this post it could be Commercial Mortgages or Business Loans or start-up finance, at the moment I do not know as I would need to read several past reports in fine detail to fully understand what Metro Bank call Commercial Lending. What I do know is that I did not want to be a Mortgage Broker doing Commercial Lending and before a became a residential / B2L Mortgage Broker I was offered a job with a firm in Glasgow to be a Commercial Mortgage Broker but I turned it down because I knew then that commercial property was over-valued but I was totally blind to the financial crises that was about to unfold.
By its very nature Commercial Lending involves more risk so the Lender has to have tighter lending criteria to protect their money. So in the Mortgage analysis above I began with what was the “book” below 80% LTV and it was 85.54% of all residential mortgages. Then for the B2L Mortgages 98.2% LTV below 80% but for Commercial Lending I think we should use 70% LTV to get the proper comparison and that is 80.06% of the Book value or to put it in to context out of a Loan Book of £3.5 billion over £2.8 billion is under 70% of the total. At under 80% it is 86.29% of the total book and between 80% and 100% of the book value it is 8.77% or £90 million. Now there are £396 million that are over 100% which is 12.55% and before the shorters aim to shoot me down there are often stringent covenants and guarantees in place to protect the Bank like “pledging shares” etc so it is not a concern for me.
Now looking at some further information on Commercial Lending on Page 40 of the PDF file you see the various sectors covered and it is here were I discover that Real Estate lending is £2.4 billion or 66.95% of the £3.5 billion book.
I will only mention a few of the different types of Commercial Lending but you may want to see the full break-down. Hospitality 8.69% (I put this in because of Brexit and before the shorters try to jump on it) Construction 0.99% (tiny if all our European friends desert us or if there is a recession) and Retail 2.82% (well we all know that that is a struggling sector)
Now the good bit: Consumer Lending of over £3.9 billion the clients that are up-to date with their payments is 99.26% and the balance of 0.74% is between 1 to 29 days past their due date. So shorters have a job on their hands.
Conclusion: There is not a problem with Residential Mortgages, Buy-to-Let Mortgages or Commercial Lending, Metro Bank are good in fact very good at their risk assessment when they lend and they do not have the history of the older established Retail Banks.
RKB
Mr Beekeeper,
I still remain of the opinion that McD's coffee is ghastly. However thank you for your thoughts. 'Not sure that the mortgages are a concern for anyone at the moment but, if property prices were to fall as in the late 80/90's then a drop in value of 30% could be seen. This could be accompanied by higher unemployment and higher mortgage interest/borrowing costs and a picture emerges where the banks bad debts rise. On another aspect of the MTRO model the branches are open for more than 70 hours each week compared with less than 40 for the likes of Lloyds/RBS etc., do you have a view about the costs of keeping open for such long hours. Yes they give good service but at a high cost.
Annual Results
Part 9
Buy to Let Mortgages (B2L) The maximum B2L Mortgage is 75% LTV and this is good practice as Tenants can cause some issues and there can be void periods when it is not-let.
So a 2 yr Fix at maximum 75% LTV is 2.64% with a fee of £999 and a SVR after the 2 yrs of 4.75%. Now you may have noticed the rate is slightly higher than the Residential Mortgage above as it was 2.59% but that was 90% LTV and you should also have noticed the SVR is greater as above it was 4.25%. But to understand the real margin difference between Residential & B2L you have to look at a 2 yr fix at 75% for a Residential Mortgage and it is 2.09%. So the true additional mark-up in the above is 0.55% which is a good uplift imo.
Looking now at the B2L figures: Under 50% LTV it is 23.95% of total B2L Mortgage Book and 98.82% is under 80% LTV so the “Risk” for me is again insignificant.
I began to look for the break-down of the B2L mortgages to see how many were up-to-date with their payments and I discovered that in the previous Post the figures taken from P41 included Retail & Buy-to-Let Mortgages so it is a lot more positive for LTH and not so good for the Shorters and just in-case they have selective recall it is:
On page 41 we have the information that shorters will not like. There are 99.99% up to date with their Retail Mortgage Payments & Buy-to-Let Payments and between 1 and 29 days late it is 0.01%.
RKB
Once again RKB - proffesional and informative.
It's a joy to have you on board - go ahead and take the helm !!!!
Cheers
Any thanks, RKB.
Annual Results
Part 8
Before I Post below about Mortgages there is a massive amount of great detail in the 2019 Annual Accounts about our Loans / Mortgages etc and it is broken down into size, location, type, industry and many more. If the Shorters actually understood what was in the Annual Accounts like from Page 38 in the PDF file then maybe they will have second thoughts.
Mortgages: Obviously I know a lot about Mortgages and had many financial qualifications including Lifetime Mortgages which very few Advisors have. What I did this morning was look on my iphone at Metro Banks offering of Mortgages and to see how easy it was to use. It was easy to access and I looked first at the 8 pages of their Residential Mortgages.
What I want to see is no 100% LTV and clear details of the rate, term and any fees and what the rate will revert to. So a 2 yr Fix at maximum 90% LTV is 2.59% with a fee of £999 and a SVR after the 2 yrs of 4.25%. I believe this is reasonable and then you have to work out how much they pay their savers (to fund the mortgage) There were no Mortgages greater than 90% LTV and some Re-mortgages products did not have a fee of £999 but they had a higher interest rate. Now interestingly if you want a Residential Mortgage (not Re-mortgage) then you have to pay the £999 fee.
Looking at paying or not paying a £999 for a Re-mortgage you have to calculate when it is to the customer’s advantage if they should pay the £999 fee or pay a slightly higher rate. You may not think this matters but is does. Looking at a 90% LTV Re-mortgage 2 yr fixed up to £500K it is 2.69% and a £999 fee but without the fee it is 2.84% but.... it is only up to £100K so obviously you would not pay the fee but when you look at the break-down of the Mortgage-Book you will understand the size of the Mortgages.
Residential Mortgages (excluding B2L) is about £8.5 billion and it is split into less than 50% LTV in 10% incremental steps. But I prefer to change the Billions £ to % and then see the true “risk” Under 50% LTV it is 31.17% of total residential mortgage book and 85.54% is under 80% LTV so the “Risk” for me then is that up to 20% but when you look at the mortgages over 90% LTV it is only 0.32% and that is acceptable for me but it gets better.
On page 41 we have the information that shorters will not like. There are 99.99% up to date with their Retail Mortgage Payments and between 1 and 29 days late it is 0.01%.
RKB
PS Just to be crystal clear in my opinion our Mortgage Book is second to none and the risk is not a concern for me even if there is a reduction in BoE Base Rate.
Great analysis today, I'm shocked by the figure of 2 loans per store per month on average.
They need a good plan to turn this around,next couple of months and q1 results will be interesting
You CAN'T apply for the a business account online
meant You can apply for the a business account online
One of many points which for me included:
- the average number of personal loans taken out per branch was only 2 WTF!! imagine if that was even 20 per month.
- Dans story about customers aren't even asked whether they want credit cards, as the process is so poor it would lead to damaging the customer relationship
- Lack of progress on personal current accounts
AND
- You can apply for the a business account online.
There is much more of a positive narrative to come through, plus size of fine under £4m.
How long before you think these issues will implemented??
RKB - Respect and very Impressive.
Thanks mr Beekeeper, 1st class post.
Annual Results
Part 7
Safe Deposit Boxes: There are 5 sizes of Safe Deposit Boxes which generate a lot of revenue. Per year each box costs £240, £270, £360, £525 & £750. From the accounts we are informed that 6 stores opened in 2019 making 71 stores with 3 opened in the past two months. It is not easy to estimate the revenue from Safe Deposit Boxes as it is not separated out but....
But by looking at the 2018 Annual Results there were 65 Stores I can’t find anything of note about Safe Deposit Boxes so it is in the 2017 Annual Results where we are informed that the 55 Stores and on page 28 (of the glossy brochure) there is a case study of the Ealing Store. It opened in June 2013 and in 2017 about 92% of their Safe Deposit Boxes were occupied and covered all the Stores Rental Costs. Now for Londoners I am sure they will be aware of the size of this Store and they may also be aware of the Rental Costs in that area and although Rental Costs vary it is good to know that one particular service (Safe Deposit Boxes) almost covers their Rental Costs.
RKB
Annual Results
Part 6
I need to jump about a bit as already said this morning I do not have the time to complete my analysis (and now am thinking why should I) but I will put a few words down before I make myself a pot of proper coffee to appease a few “detractors”. For the record, real coffee is my drug of choice and the odd bottle or two of red (McD’s is for convenience when I am on the road)
Cost Income Ratio: is not good in fact it is high at 100%. They have a target of 70% - 75% by 2024 and it is this figure that we have to watch closely as that would (should) mean profitability.
We know that loans and deposits are about £14 billion each and that they want loans not to exceed deposits. What brought Northern Rock down in 2007-2008 were funding Mortgages from the Money Markets and offering 125% LTV Mortgages (I was a self-employed Mortgage Broker in Sept 2007 and became self-employed one week after N Rock hit the funding wall)
So how can Metro Bank reduce their Cost Income Ratio? Well basically they have to do a few things like grow their deposits (difficult with low interest rates) make more money from their Products (Loans, Mortgages, C Cards & Services) But in the current climate with interest rates so low the margins could get tighter then they have to cut costs and ensure each Store (Branch) is paying its way by being profitable.
2019 Net Interest Income decreased by £22 million to £308 million.
2019 Net Fee & Other Income increased by £27 million to £90 million but what they don’t beat the drum about is that this is an increase of 42.81%.
2019 Total Underlying Revenue was down 1% to £400 million.
RKB
Annual Results
Part 5
Highlights: continued
Our Assets decreased by £247 Million to £21.4 Billion.
Our Loans increased by £446 Million to £14.7 Billion.
Our Loan to Deposit Ratio moved from 91% to 101%
Our CET 1 Capital Ratio moved from 13.1% to 15.6%
Total Capital Ratio moved from 15.9% to 18.3%
Liquidity Cover Ratio moved from 139% to 197%
Total Underlying Revenue basically the same at £400 Million.
Basic Loss was £11.7 million when previous year there was a profit of £50 million (this has to be looked at in more detail to understand it) and we have to understand how / when we are able to utilise these tax losses as the rules have changed and it is a bit more complicated (I think Fred is the problem because his new Bank racked up so much loses that the Chancellor has to get some tax from them)
Actual Loss was almost £131 million when we made a profit in the previous year of almost £41 million (again we need to look more closely at this but imo it is not as bad as posters are making out)
Net interest margin down from 1.81% to 1.51% and this does give me a concern when the BoE base rate is already so low.
But the good bit for me is that although our earnings per share are negative at 10.8p last year we were at 38.2p and this is really the key as to when / if our share price will increase. Also it should be noted for reference that in 2017 the basic earnings per share was 12.6p. When I do my own personal calculations I can see a substantial increase in earnings but before I can post them I need to do a substantial amount of research and then work out some variables and then proffer them up for scrutiny.
RKB
PS Panderman, I tried on numerous occasions to have quality newspapers publish what I knew about Fred and none would. Why? Because they were aware that all the advertising that they accepted would not continue. Do you still think even quality newspapers are truly independent?
PPS I did have a hand in getting his Pension reduced as I proved his salary and pension pot were out of sync and the powers that be removed a few million £’s. Small conciliation to the millions who were impacted by the financial crash.
Mr Beekeeper, that is so good to read, have you written a book? If you haven't you should.
Keep it coming,
Panderman.