Metro Bank Holdings PLC · LSE:MTRO
Metro Bank — Investor Presentation (May 2019)
27 slides from Metro Bank's investor presentation, May 2019
Slide 1: May 2019 Investor Presentation
MAY 2019 INVESTOR PRESENTATION
Slide 2: Disclaimer
Disclaimer THIS DOCUMENT AND ITS CONTENTS ARE CONFIDENTIAL AND ARE BEING SUPPLIED TO YOU FOR INFORMATION ONLY AND NOT FOR RELEASE, REPRODUCTION, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY TO ANY OTHER PERSON OR IN OR INTO OR FROM THE UNITED STATES OF AMERICA, AUSTRALIA,
Slide 3: Transaction details – c.£350m growth capital
Transaction details – c.£350m growth capital Issuer Metro Bank plc Size c.£350 million Common Equity Type MTRO listed on London Stock Exchange Member of the FTSE 250 Index Structure Firm placing (fully underwritten) Launch c.16 May, 2019 General Meeting c.3 June, 2019 Settlement c.4 June, 2019 Chair
Slide 4: The UK market offers a significant opportunity for a disruptive service player
The UK market offers a significant opportunity for a disruptive service player UK deposit market of Business Current Accounts (BCA) market shares by volume(3) c.£2.3 trillion – Metro’s share is currently Big 5 account for c.90% c.0.7%(1) Personal current account market 21.3% dominated by “Big 5”
Slide 5: Metro Bank continues to disrupt the market by creating FANS through its service-led model
Metro Bank continues to disrupt the market by creating FANS through its unique service-led model and culture Creating #1 • Modern-day banking Service for FANS centred around an customers(1) through our Model (Value Differentiating) service-led integrated “bricks & 25 clicks” experience Log-ins to th
Slide 6: Award winning service and colleague engagement
And it is clearly working, with award winning service and colleague engagement Number one service for personal customers… …and well positioned to challenge for the top spot in SME Personal Current Accounts: Overall Quality of Service(1) Business Current Accounts: Overall Quality of Service(1) We hav
Slide 7: Integrated physical & digital footprint driving customer acquisition
With our integrated physical & digital footprint driving customer acquisition Increasing customer Store growth and digital footprint acquisition Customer Accounts (‘000) • 97,000 accounts added in Q1 (1) 2019 – up 10% YoY 1,620 1,217 915 655 447 275 Best Digital Onboarding We continue to build our s
Slide 8: Consistent customer acquisition adding low-cost sticky deposits
Creating consistent strong customer acquisition across personal and business accounts, adding low-cost sticky deposits Current account growth continues to be strong… …with a high proportion of interest-free deposits Current account openings (‘000) 254 £3.9b £4.5b Fixed term: Demand: 214 47 savings c
Slide 9: Driving low risk lending with continued strong asset quality
Driving low risk lending with continued strong asset quality DIVERSIFIED LENDING PORTFOLIO(1) STRONG ASSET QUALITY Retail: 71% of portfolio Commercial: 29% of portfolio (4bps) £0.3b £0.3b 0.22% £2.3b 0.18% £10.7b £4.5b NPL Ratio £8.1b £4.2b Q1 2018 Q1 2019 Residential mortgages Non-performing loans
Slide 10: Liquid, deposit-funded balance sheet
Liquid, deposit-funded balance sheet Unaudited Unaudited Annual £’m Q1 2019 Q1 2018 Growth FY 2018 FY 2017 Growth Loans and advances to customers 15,167 10,974 38% 14,235 9,620 48% Liquid balance sheet with a Treasury assets(1) 5,920 6,269 6,604 6,127 100% loan to deposit ratio and 142% liquidity
Slide 11: Profit and loss account
Profit and loss account Unaudited Unaudited Annual £’m Q1 2019 Q1 2018 Growth FY 2018 FY 2017 Growth • Underlying profit before tax Net interest income 83.8 75.0 330.1 241.0 of £6.9m compares to Fees and other income 22.4 14.1 63.3 49.1 £10.0m in Q1 2018 Net gains on sale of assets 1.3 2.7 10.7 3.7
Slide 12: 2019 is a transitional year: guidance and strategic initiatives
However, 2019 is a transitional year as we evolve our medium-term plan to maximise shareholder value Balance controlled growth, profitability and capital efficiency through our integrated customer experience Strategic initiatives 1 2 3 Expand range of services Rebalance lending mix to Improve cost e
Slide 13: Significant operating cost and capex savings identified
1 Significant operating cost and capex savings identified and a cost transformation program in place Operating expense savings Capex savings vs. 2018 Project completed to Pre-leakage (exit run-rate) vs. 2018 cost base, £m(1) cost base, £m(1) analyse Metro’s cost base growth over the ▪ Reduction in
Slide 14: Initiatives to deliver £15-19m opex exit run-rate savings for 2019
1 A clear set of initiatives have been identified to deliver £15-19m in opex exit run-rate savings for 2019 In February, we shared with investors 10 priorities for 2019 Targeted actions Pilot Robotics Process Automation in payments Total 2019 exit processing IVR, and scripts in the call centres,
Slide 15: 2023 target cost:income ratio equivalent to c.20% cost reduction
1 Applying our 2023 target cost:income ratio to the 2018 cost base would be equivalent to a c.20% cost reduction pre-leakage Potential 2018 opex savings at our target Assuming c.60% of the required cost:income improvement cost:income ratio of c.55-60%(1) is sourced from opex savings(1) Significant o
Slide 16: Expanding fee income with new value added services
2 We will expand our fee income by winning more customers and building new value added services to drive capital efficient income Fee & commission income (as % of deposits)(1) Product roadmap Business Insights – AI analytics in mobile app to support SMEs financial planning 0.72 Cash pick up / dr
Slide 17: Rebalancing lending mix to optimise capital efficiency and ROE
3 Rebalancing our lending mix and growth to optimise capital efficiency and ROE Strategy to rebalance the lending mix Roadmap to delivery Build lending around low risk, cost-efficient and higher ROE Adjust lending mix with significantly less mortgages of c.35% RWA commercial real estate and prof
Slide 18: Equity raise and initiatives provide CET1 headroom for controlled growth
Equity raise and strategic initiatives generate increased returns providing CET1 headroom for controlled growth over the medium-term CET1 Bridge Metro Bank will manage its growth within available equity capital to avoid further medium-term equity raises 3.5% 15.6% Rebalance lending portfolio to be
Slide 19: Ealing Store shows store profitability increasing to 4% ROE in 5 years
Ealing Store shows an example of store profitability increasing to 4% ROE in 5 years Ealing store opened in June 2013 Y1 Y2 Y3 Y4 Y5 £’000 May-14 May-15 May-16 May-17 May-18 Number of customer accounts 10,399 17,603 24,949 31,870 38,784 Deposits 44,581 153,232 226,255 290,347 402,444 Average deposit
Slide 20: Stores 5 years and older deliver an attractive ROE
Stores that are 5 years and older deliver an attractive ROE post strategic initiatives Controlled Increased fee Store Operating Operating asset growth income maturation leverage efficiency Enhanced ROE 2018 Underlying Store ROE by annual cohort – fully loaded and at target cost:income ratio of 55%(1
Slide 21: Increasing operating efficiency
Stores that are 5 years and older deliver an attractive ROE post strategic initiatives Controlled Increased fee Store Operating Operating asset growth income maturation leverage efficiency Enhanced ROE Fully loaded Underlying store ROE(2), modelled with improving operating efficiency Clear ROE impro
Slide 22: Metro Bank will continue to disrupt the market by creating FANS
Metro Bank will continue to disrupt the market by creating FANS as we deliver our medium-term plan of controlled growth with strategic initiatives driving returns Balance controlled growth with Creating strategic initiatives driving returns Model (Value Differentiating) FANS through our service-led
Slide 23: Appendix
APPENDIX
Slide 24: Our evolving strategy will deliver our medium-term guidance
Our evolving strategy will deliver our medium-term guidance Deposit growth c.20% per annum, c.2% share of the market by 2023 Store growth c.8 new stores a year plus C&I funded store growth Average deposits per store >£4m per month Loan to deposit 85% – 90% Cost of risk 15bps – 30bps through the cycl
Slide 25: Capability & Innovation Funding expanding our income streams
Capability & Innovation Funding expanding our income streams The C&I funding brings the … supporting our three strategic … in a financially future forwards…. initiatives…. prudent way ▪ Winner of the top award for the Increase coverage ▪ No “Day 1” capital C&I fund to over two-thirds impacts Re- of
Slide 26: Strength of deposit growth has driven operating leverage
Strength of deposit growth has driven operating leverage Total Number of stores 31 40 48 55 65 Addition of low cost deposits generates GBp6.2 operating leverage as we £13,610 grow • Expense per £1 of deposit has halved since 2014 GBp4.2 £9,785 Expect further reduction in expense per £1 of deposi
Slide 27: Thank You
Thank You