Metro Bank Holdings Plc · LSE:MTRO
Metro Bank — H1 2020 Earnings Presentation
36 slides from Metro Bank's earnings presentation, Aug 5, 2020
Slide 1: 1H 2020 Results Presentation
1H 2020 RESULTS PRESENTATION 5 August 2020
Slide 2: Agenda
Agenda 1 Introduction Daniel Frumkin (CEO) 2 1H20 Financial results David Arden (CFO) 3 Strategy & Operational update Daniel Frumkin (CEO) 4 Q&A 1H20 Agenda 1
Slide 3: Introduction
Introduction Daniel Frumkin (CEO)
Slide 4: Supporting our customers, communities and colleagues through COVID-19
Supporting our customers, communities and colleagues through COVID-19 Community banking has never been more relevant Customers Communities • 100% of store network remained open • Store support for local communities e.g. NHS collections, fundraising activities • Contact centre open daily • Coll
Slide 5: Impact of COVID-19
Impact of COVID-19 Credit Operational Provisioning Fee Margin Income Compression 1H20 Introduction 4
Slide 6: Strategic priorities reaffirmed
Strategic priorities reaffirmed 1 2 3 4 5 Balance sheet Internal and Costs Infrastructure Revenue optimisation external comms Tight cost control through back office Investment in Meeting more Enhanced focus on efficiencies, Improve our integrated channels customer needs and risk-adjusted returns org
Slide 7: 1H20 Financial results
1H20 Financial results David Arden (CFO)
Slide 8: 1H 2020 key performance indicators
1H 2020 key performance indicators Customer Customer Liquidity Total capital accounts deposits coverage ratio + MREL ratio (80bps) (2019: 2.0m) (2019: £14.5b) (2019: 197%) (2019: 22.1%) 29pp 8% 5% 2.1m £15.6b 226% 21.3% Net fee and Net interest Underlying Statutory other income1 margin loss before t
Slide 9: Revenue reduction reflects base rate repricing lag and lower fee income
Revenue reduction reflects base rate repricing lag as well as lower fee income from reduced transaction volumes NIM Bridge Net fee and other income1 (bps) (£m) 46.4 (11) 2 14.0 (10) 36.1 140 (5) FX gains and other 12.7 travel money impacted by 11.1 lockdown 115 ATM and interchange 6.5 lower transact
Slide 10: Disciplined cost growth
Disciplined cost growth Improved cost discipline and successful delivery of planned initiatives contained ‘Run the Bank’ cost growth to 2% Contained growth £21.5m • Growth contained despite: 11% 6 store openings First advertising campaign 2H19 COVID-19 costs: WFH/PPE equipment; ‘Thank You’ fun
Slide 11: Macroeconomic scenarios and COVID-19 provisioning
Macroeconomic scenarios and COVID-19 provisioning Application of scenarios and weighting • 3 probability weighted scenarios: Baseline (40%); Upside (30%) and Downside (30%) • Macro-economic projections provided by Moody’s Analytics 30% 30% Upside • underlying portfolio uses pre-COVID19 scenarios (De
Slide 12: Expected credit loss expense
Expected credit loss expense ECL expense and Cost of Risk COVID-19 impact assessment has leveraged a combination of ECL expense (£m) Cost of Risk (%) modelled results and expert judgement: 1H20 1H19 Change 1H201 FY19 • Model driven analysis, in particular reflecting the impact Retail Mortgages 3 - 3
Slide 13: Asset quality
Asset quality Lending portfolio Non-performing loans Cost of risk 7.35% 1% £0.2b 5.74% £0.8b 4.30% 3.49% 5.51% 5% 2.06% 0.66% 1.55% 1.12% 0.53% 0.96% 2.90% 0.24% 0.39% 1.84% 1.32% 0.60% £3.8b Retail Commercial 1 Consumer Total 0.06% 0.59% 0.23% 26% mortgages 1 Retail Commercial Consumer Total £15.0b
Slide 14: Retail mortgages
Retail mortgages Retail lending portfolio Retail mortgages repayment type Retail mortgages geographical split 9.1% 58% 57% Greater London 3.9% 42% 43% South East 5.3% 44.3% £1.9b FY19 South West 6.1% 18% 1H20 East of England North West 8.1% West Midlands Interest only Capital and interest Rest of UK
Slide 15: Commercial lending
Commercial lending Commercial lending portfolio Commercial lending industry sectors2 Industry sector (£m) 30 Jun 2020 31 Dec 2019 £0.2b £0.2b Real estate (PBTL) 1,167 1,219 6% 4% Real estate (other term loans) 1,070 1,155 £0.8b Hospitality 323 308 17% Health & Social Work 243 263 £4.6b Legal, Accoun
Slide 16: P&L impacted by lower revenues and higher ECL expense
P&L impacted by lower revenues and higher ECL expense £m 1H20 2H19 Change Net interest income 116.2 141.9 (18%) Net fees and other income 36.1 44.0 (18%) Net gains on sale of assets 1.0 (2.5) >100% Total underlying revenue 153.3 183.4 ‘Run the bank’ costs (184.1) (179.7) 2% ‘Change the Bank’ costs (
Slide 17: Balance sheet robust and liquid
Balance sheet robust and liquid £m Jun 2020 Dec 2019 Change Loans and advances to customers 14,857 14,681 1% • Strong deposit growth and lower new business Treasury assets1 6,101 5,554 volume (ex-BBLS and CBILS) reduced LTD to 95% 1,176 1,165 • Other liabilities reduction of £138m includes £50m Othe
Slide 18: Strong deposit growth in H1 with favourable mix shift
Strong deposit growth in H1 with favourable mix shift Continued growth core personal and SME deposits, including balances funded by BBLS Deposits by customer type Favourable mix shift to 34% current accounts (£b) Cost of Deposits in circle 15.6 2H19 1H20 13.8 14.5 2.4 28% 2.5 32% 29% Fixed term: 34%
Slide 19: Capital
Capital Capital position at 1H20 reflects profit and loss dynamics, offset by regulatory actions to alleviate the effects of ECL charges and enhancing the SME support factor Total capital + MREL ratio bridge 4.0% 21.3% 18.3% Net ECL (0.2%) 0.8% 17.3% (0.3%) 0.6% (0.3%) 1.0% (1.6%) (1.2%) Total capit
Slide 20: 1H20 Operational and Strategic Update
1H20 Operational and Strategic Update Daniel Frumkin (CEO)
Slide 21: Impact of COVID-19
Impact of COVID-19 Fee Credit Margin Operational Income Provisioning Compression • 100% stores open, • Lower ATM and card • ECL expense • 65bps cut in March to temporarily with transaction volumes recognised under IFRS9 0.1% reduced hours during lockdown • >85% of ECL expense • Treasury floating rat
Slide 22: Customer activity trends throughout the COVID-19 pandemic
Customer activity trends throughout the COVID-19 pandemic Lockdown Lockdown restrictions Lockdown easing restrictions lifted begins announced for retailers Where are we now 120 compared to pre-COVID? • Card transactions >90% 100 • Account openings, ATM & 80 teller transactions c.80% 60 • Store footf
Slide 23: On track with our strategic priorities whilst adapting for COVID-19
On track with our strategic priorities whilst adapting for COVID-19 Becoming the UK’s best community bank 1 2 3 4 5 Balance sheet Internal and Costs Infrastructure Revenue optimisation external comms Tight cost control through back office Investment in Meeting more Enhanced focus on efficiencies, Im
Slide 24: On track with strategic priorities (1/2)
On track with strategic priorities (1/2) 1 2 Costs Infrastructure Cost initiatives on track, but total costs negatively Infrastructure initiatives on track despite delivery of impacted by macro assumptions under IFRS9 additional services in response to COVID-19 • Cost discipline • Accelerating u
Slide 25: On track with strategic priorities (2/2)
On track with strategic priorities (2/2) 3 4 Revenue Balance sheet optimisation Revenue initiatives on track, but NII and fees negatively Continual assessment of market opportunities impacted by COVID-19 in 1H20 • Customer growth • Structural initiatives • Deposit and account growth • Continually
Slide 26: RateSetter acquisition will accelerate the planned shift in asset mix
RateSetter acquisition will accelerate the planned shift in asset mix • £2.5m initial purchase price, followed by up to £0.5m after 12 months and an earn out of up to £9m after 3 years • Acquisition of RateSetter’s capability, but not business model or existing loans: • Future RateSetter loans will
Slide 27: Summary and Outlook
Summary and Outlook Daniel Frumkin (CEO)
Slide 28: Outlook
Outlook 1H20 February Guidance 2H20 Commentary Performance Deposits Mid-single £15.6b H1 benefited from BBLS deposits and lower spending during digit growth in 2020 +8%1 lockdown, expect H2 to be broadly flat LTD 2024 Target 95% Government-backed lending (CBILS and BBLS) gives confidence <100% to su
Slide 29: Summary
Summary • Unwavering support for customers, communities and colleagues in response to COVID-19 • Financial results challenging over short term given effect of COVID-19 • Deposit growth (8% HoH, 14% YoY) and favourable shift to current accounts (34%) • Strategic plan still appropriate and on track •
Slide 30: Q&A
ETRO BANK Q&A
Slide 31: Appendices
ETRO BANK Appendices
Slide 32: Capital and MREL requirements
Capital and MREL requirements Significant surplus to capital requirements MREL requirements 21.3% 21.5% 20.5% MREL eligible CBR2, 2.5% liabilities, CBR2, 2.5% 4.0% 14.5% 4.9% RWAs Tier 1 surplus Tier 2, 2.8% 9.6%(1) MREL 2×(P1+P2A) MREL requirement, Regulatory requirement, 19.0% 18% CET1, buffers, 2
Slide 33: High quality and liquid balance sheet
High quality and liquid balance sheet 83% of treasury assets LCR1 eligible 97% Rated AA or above Primarily deposit-funded balance sheet £0.2b £0.1b £0.6b £1.0b £3.1b £0.1b £2.7b £9.1b Cash Retail deposits £3.8b AAA LCR eligible Business and RMBS £0.8b commercial deposits £6.1b AA £6.1b £19.4b Govern
Slide 34: Retail mortgages
Retail mortgages Owner occupied retail mortgages Debt-to-value profile Repayment type 31% 31% Average owner occupied DTV(1): 70% 69% 58.7% 21% 22% 16% 16% 17% 17% 14% 14% FY19 30% 31% 1H20 0% 0% 0% 0% < 50% 51-60% 61-70% 71-80% 81-90% 91-100% > 100% FY19 1H20 Interest only Capital and interest Retai
Slide 35: Disclaimer
ETRO BANK Disclaimer
Slide 36: Disclaimer
Disclaimer THIS PRESENTATION AND ITS CONTENTS ARE CONFIDENTIAL AND ARE BEING PROVIDED SOLELY FOR INFORMATION PURPOSES AND FOR USE AT A PRESENTATION TO BE HELD IN CONNECTION WITH METRO BANK PLC (“The Company”) AND THE REVIEW OF ITS CREDIT RATING AND MAY NOT BE REPRODUCED IN ANY FORM OR FURTHER DISTRI