I do not think the loan loss provisions are the issue here, they may even be slightly over provided for. The real issue is the reduced interest income and the complete inability to reduce costs due to the ridiculous leases commitments signed by the old BOD.
Cud: They have made some progress re costs, when you compare to H1 2019 you have bear in mind their branch network has increased by 15% during the period whilst their expenses have only increased by 2.7%, so there has been some progress.
Ever wonder why MTRO has 2,000 people in head office and what they all do? there will be alot of synergies from this.
Well if they lend out £0.8bn through this channel. Then that is gross income of £62m, if their annual costs are £35m that is a profit of £25-30m. This is before any synergies and having to deal with the PI's as before.
Think of it as an option. Pay up front £2.5m for a business which could potentially provide annual profits of £30-40m into perpetuity, if in 3 years the business does this then they pay the contingent deferred consideration of £9.5m. Pretty low risk from MTRO's perspective. This is also a business which is thinly capitalised so not much of a need to put money in.
Yuri - I have used RS and can tell you it was very good when I did, they have a very good management team. The only reason it went kaput is due to Covid. MTRO now has the best of both worlds a great deposit gathering branch network and a new low cost channel to dole out loans.
HMSO have a very valuable outlet business which has a market value pre-covid of £2.4bn, this is a business which grew 4-5% pa and is considered to be the best retail asset in the whole of Europe. They also have debts of £2.4bn. If HMSO wait 24 months and sell those assets then they can be debt free.