LONDON (Alliance News) - Metro Bank PLC shares plummeted Wednesday after the retail bank warned that it will miss annual profit market estimates.
Shares in Metro Bank were down 30% at 1,548.44 pence each. The challenger bank's share price has been steadily falling throughout 2018, decreasing 58% over the past 12 months. Its price did hit an all-time high in March, however, of 4,034.00p.
For 2018, the bank predicted underlying pretax profit to than double to GBP50 million, from GBP21 million the year before, but below consensus forecast of GBP59 million.
The miss to market views was attributed to a "soft" fourth quarter. Metro Bank said it will give a more detailed update in its annual results due on February 27.
"Metro Bank seems to have no problem attracting new customers, helped by its branches having prime locations on the high street and being open seven days a week. However, banking remains a highly competitive industry and this issue is certainly going to be a key reason behind the profit warning," said AJ Bell Investment Director Russ Mould.
Metro Bank ended the year with 66 branches, with a further seven openings planned, with 100,000 new customer accounts opened in the fourth quarter.
On an underlying basis, the bank reported pretax profit of GBP10.0 million for the first quarter. At the interim stage, Metro Bank recorded profit of GBP24.1 million. Finally, for the nine month period, Metro reported profit of GBP39.2 million.
This implies Metro generated underlying profit of GBP10.0 million in the first quarter, GBP14.1 million in the second, GBP15.1 million in the third and then, finally, GBP10.8 million in the fourth.
Which would mean Metro's fourth quarter represents a decrease in profit growth of 28% compared to the third quarter, following positive quarter-on-quarter growths of 20%, 41% and then 7.1% in the first three periods of 2018.
According to Shore Capital, the company put the "soft" fourth quarter down to continued mortgage margin pressure, costs of opening new branches and a change in "customer behaviour".
Mould added: "Intense competition in the mortgage market is a major issue at the moment and has been flagged by other lenders. Savings rates are also going up across the industry as the Bank of England has started to slowly lift base rates."
"This has created a perfect storm for some banks and is likely to have put pressure on Metro Bank’s net interest margin, which compares the money paid on savings to the interest customers pay on loans."
Metro Bank ended 2018 with loans of GBP14.2 billion compared to GBP9.6 billion at the end of 2017, a 48% increase. The bank's customer loans increased GBP1.1 billion in the fourth quarter.
The bank's deposits increased 34% in 2018 to GBP15.7 billion from GBP11.7 billion. Metro Bank's deposit growth per branch per month however slowed to GBP5.9 million from GBP6.3 million.
Metro's capital ratio at December 31 stood at 15.8%, with a loan to deposit ratio of 91%.
The retail bank's risk weighted assets are expected to be about GBP8.9 billion at year end. The increase is attributed to net loan growth and an adjustment in the risk weighting of certain commercial loans.
Metro Bank (MTRO)