Covid-19 weighs heavily as losses widen at Metro Bank

(Sharecast News) - Metro Bank saw losses widen significantly last year, as the Covid-19 pandemic dented income and saw customers default on loans.
In the 12 months to 31 December, the challenger bank reported an underlying loss before tax of £271.8m, compared to 2019's loss of £11.7m. Once one-off items were included, the statutory loss widened from £130.8m in 2019 to £311.4m.

The impact of Covid-19 was estimated to be £124m, including around £100m in expected credit loss expense and lower transaction fee income.

Total underlying revenues were £340.9m, a 15% decline year-on-year.

Deposits grew 11% to £16.1bn, while loans declined 18% to £12.1bn. Fee income fell 5% to £86.3m after being "materially impacted by lower volumes due to the various Covid-19 lockdowns and regional restrictions implemented through the year", Metro said.

The net interest margin was 1.22% compared to 2019's 1.51%.

Daniel Frumkin, chief executive, said: "It has been a truly unprecedented year for our business, colleagues and customers.

"The pandemic has clearly impacted performance, leading to significant expected credit losses, but our transformation strategy is firmly on track and we have accelerated initiatives to shift our asset mix, bringing higher yield and improving net interest margin as evidence in the second half.

"The purchase of the RateSetter platform has allowed us to enter the unsecured lending market. In addition, we have made progress against each of our strategic pillars, including the sale of part of our residential mortgage portfolio to further optimise our balance sheet, the launch of higher yield products, including specialist mortgages, and we have grown customer accounts to 2.2m."

Metro announced the acquisition of peer-to-peer lending platform RateSetter in August for up to £12m in cash.

However, looking forward, Metro conceded the economic and market outlook remained "uncertain".

It added: "Although the impacts on our retail and business credit portfolios are yet to fully manifest, it is clear that the level of risk has increased, with levels of default expected to increase over time, particularly once government support schemes come to an end."

Shailesh Raikundlia, analyst at Liberum, said: "The group completed the sale of £3.1bn of mortgages, which means a pro-forma CET1 ration of 16.3%. Overall, the acquisition of RateSetter and its back book will improve the mix towards, higher margin unsecured lending but there continue to be NIM pressure, despite improving deposit costs."

As at 0915 GMT, shares in Metro were down 7% at 139.7p.