Metro Bank shares rise as lender returns to profit

Metro Bank shares soar as it returns to profit and says it has seen no signs of heightened stress for customers

  • Metro Bank shares jumped more than 13% after the group’s update today
  • The lender returned to profit in September and enjoys higher margins

Metro Bank shares hit a double-digit spike today after the group announced it had returned to profit in September.

As the UK languishes in a cost of living crisis, the bank said it strengthened its results after benefiting from higher margins and focusing on cost discipline.

For the third quarter, Metro Bank reported a 17 basis point increase in net interest margins from the prior three months to 1.98%.

Back in the black: Metro Bank announced it returned to profit in September

“Active balance sheet management and prevailing interest rates supported the NIM’s outflow of 2.04%,” the group said.

Daniel Frumkin, the boss of Metro Bank, stressed that the return to profitability was both underlying and statutory, attributing it to a “supportive” interest rate environment, as well as a strict control of the costs and risks.

He said: “While we remain alert to economic conditions and continue to closely monitor our credit metrics, our portfolio remains healthy.”

Metro Bank shares rose 13.77% or 10.02p to 82.82p this morning but the lender’s share price has fallen more than 20% in the past year.

The bank’s loan-to-deposit ratio rose three percentage points in the period, from the previous quarter, to 78%, as loans rose 4% to £12.83bn.

On mortgages, Metro Bank said, “Residential mortgages and unsecured consumer lending increased, partially offset by government-backed loan repayments and reduced commercial real estate lending.”

Current and savings accounts continued to grow, with their share of the company’s deposit base rising to 96%, offset by a targeted reduction in higher-cost fixed-term deposits, the lender said.

Metro Bank incurred a charge of £10 million in the quarter related to probability-weighted estimates of credit losses.

But, he said, “There has been no deterioration in early warning indicators and no signs of stress or increased delinquency in the clientele.”

“Although given the macroeconomic environment, minimum regulatory capital requirements should be met without the need for market-dependent balance sheet measures.”

Last week Lloyds Banking Group, the UK’s biggest lender, revealed it had set aside £668m to cover third quarter loan losses.

Commenting on Metro Bank’s update, Russ Mould, chief investment officer at AJ Bell, said: ‘A long-awaited return to profits at Metro Bank comes after shareholders endured a world of pain for years.

“The company’s branch model, focus on customer service, and little quirks like free water and dog biscuits helped it make a big splash when it entered the market. British scholarship holder six and a half years ago.

“Ultimately, it couldn’t support that in terms of earnings and cash flow fundamentals. He still has to convince the market that he is now on a sustainable path.

Victoria Scholar, Head of Investments at Interactive Investor, said: ‘Investors are applauding Metro Bank’s upbeat trading statement this morning, as the Bank of England’s rate hike trajectory helps lift the challenger bank’s profitability.

“Despite macro-economic pressures from a looming recession and the cost of living crisis, the UK lender has painted a positive consumer picture, which appears to remain robust at least for now with little indication of defaults. for the moment.”

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