The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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Metro is 100% deposit funded, so without growth in deposits (as they now pay lower rates of deposit interest than many others), there'll be next to no loan book growth. MREL omly helps to reduce required capital backing for new loans, its not a source for making new loans, they need £billions to make a mark on existing loan book
The other side of the loan book is the customer base and their deposits. This thing is built around creating low cost deposits, and before the horrors of 2019 it did have one of the lowest cost of deposits. Their intention was never on profits but growth.
Zzcax, not true. Their loan book shrank in 2019 and is expected (by Ceo) to shrink again in 2020, and that was before covid impacts and base rate cuts.
No point counting retail customer numbers, loan book is what pays the bills
Jinny I disagree re losing customers, they are gaining them at a rate of 100k per quarter. So about 20% growth pa.
If all assets are sold and all leases paid off upfront, shareholder value will still be much higher than today.
The alternative is to carry on as they're doing, making huge losses (as a % of revenues), losing customers to more competitive/hungrier rivals while the 9.5% MREL acts as a vampire.
No choice really
Jinny not convinced in truth, I've looked at two big shiny branches locally in Bath and Bristol. Not enough footfall when we weren't locked down ! And I'm definitely not convinced about the safety deposit boxes paying a large % of the branch running costs - a fireproof safe bolted to the wall at home costs less than 1 year of fees and the insurance for my Tiara is pretty cheap if it's locked away in it. Why would anyone want to lock stuff away that they then can't wear and pay big fees for the privelidge ??!
Jinny, their leases have an average tenure of 20 years. Plus they have spent a tonne of money in leasehold improvements about £3m per location.
Sutely,in a crisis like this, its survival mode and not sure desperate Dan is the right man(northern rock) for the job.
NOVE - think the branches are not a big problem. Expand safe deposit box capacity (theres huge demand in many locations) and run down the leases. Or re-assign leases peicemeal to third parties in many locations
I haven't seen what I like to see from a CEO looking at Dan since the start of his tenure.
He mentioned the market's lack of trust towards metro, but has done nothing to communicate with shareholders than he/ C-level is getting the job done and executing. Clearer communication is a must when boarding a new unsteady ship.
He will have had a full quarter to execute on his cost-cutting plans, so I'd want to see that communicated clearly. And freeing up Countercyclical funds can be of big benefit - if used wisely. We don't know enough of what's going on and Dan would be smart to communicate more.
agree jinny - but what about the big expensive branches and the long leases ?
if they break it up where is the overall value - the positives are surely offset by the cr@p business model and the running costs of the rest of it ?!
Yes that’s always been the best option for shareholder value but probably means the CEO gets less money. After watching the presentation, if I was interested as a prospective buyer beforehand, I certainly wouldn’t be after watching it. I would not want to inherit the headache and cost of fixing all the processes and systems.
Huge asset sales to incumbent players is now more likely here.
Not sure how they can ever turn a profit in next few years with covid, fierce competition, rock bottom base rate and 9.5% MREL weighing on their back.
Theo, agree !
not a time for takeovers - even when it is again why would you buy metro's model when you could have one of the major players with billions of profits (post corona) for a knockdown price ?
not deramping as each drop costs me a few quid but I'm genuinely worried about the next update - shorts aren't closing for a reason at these levels - if the share price can hold at 90ish for a few days then it could be more bullish though
I'd probably focus on some big structural problems closer to home and wait for things to settle a bit - then if I was still interested I'd pick them up on the cheap because the price I would need to pay would be much lower..
Why don't you ask matlot what he thinks ?
if you were a US bank, with access to cheap cash, looking at the UK market - and you read: "More radical solutions are being discussed - including the government or the banks - or both - taking an ownership stake in thousands of business. Treasury sources told the BBC that this is "not on the table right now - it depends on how things evolve." https://www.bbc.co.uk/news/52208032. And there is lingering Metro, less than 10% book value. What would do you ???