Metro Bank Holdings Plc · LSE:MTRO
Metro Bank — H1 2019 Earnings Presentation
28 slides from Metro Bank's earnings presentation, Jul 24, 2019
Slide 1: HY 2019 Investor Presentation
HY 2019 INVESTOR PRESENTATION 24 July 2019
Slide 2: 2019 is a year of transition, positioning for the future
2019 is a year of transition, positioning for the future RWA adjustment • Implementing detailed remediation plan Intense speculation • Net outflows in February and May, returned to growth in June and July Challenging H1 impacted deposit flows • Managed lending volumes and deposit initiatives for Met
Slide 3: Stable performance of retail and SME deposit base despite intense speculation
Stable performance of retail and SME deposit base despite intense speculation Net deposit flows £15.7b £15.1b Deposits have returned to £13.7b growth with net inflows of January trading £700m across June and July statement following the successful Intense speculation completion of the capital rais
Slide 4: Continued customer momentum underpinned by personal and business current account growth
With continued customer momentum underpinned by personal and business current account growth Total customer accounts (‘000) Current accounts (‘000) Balance 1.0 1.7 3.0 4.2 4.3 (£b) 1,810 996 1,418 814 143 1,045 634 120 477 88 780 348 62 853 545 694 41 546 307 415 H1 H1 H1 H1 H1 H1 2015 H1 2016 H1 20
Slide 5: Action taken to maintain a strong and resilient balance sheet
Action taken to maintain a strong and resilient balance sheet Equity raise completed June 2019 issuance upsized from £350m to £375m to meet demand. Pro forma CET1 ratio of 16.1% (1) up from 13.1% Asset disposals LCR increased to 163% from 139% following £1.5bn sale of non-LCR eligible invest
Slide 6: Successful equity raise provides CET1 headroom for controlled growth
Successful equity raise provides CET1 headroom for controlled growth over the medium-term Strong CET1 ratio supported by £375 million equity capital raise 0.3% 16.1% 3.8% 15.8% 13.1% 0.5% 0.3% 0.7% 0.6% 0.3% 10.6% minimum Tier 1 requirement Dec-18 One-off IFRS Annual Lending growth Intangibles / Tre
Slide 7: Strong, liquid balance sheet
Strong, liquid balance sheet Unaudited Unaudited Highly liquid, with Liquidity Coverage Ratio exceeding £’m H1 2019 H1 2018 Growth minimum requirements Loans and advances to customers(1) 14,989 12,013 25% 163% Treasury assets(2) 4,668 6,453 (28%) 141% 139% 136% Assets classified as held for sale 521
Slide 8: Focus on low risk lending is unchanged, with strong asset quality
Focus on low risk lending is unchanged, with continued strong asset quality and low cost of risk Low cost of risk Strong asset quality 2bp 8bps 0.17% 6bps 6bps NPL Ratio(1) 0.15% FY 2018 H1 2019 Non-performing loans £21m £28m H1 2018 H2 2018 H1 2019 Low risk lending portfolio(2) Conservative debt to
Slide 9: Strong fee and revenue growth offset by lower NIM and continued investment
Strong fee and revenue growth offset by lower NIM and continued investment Unaudited Unaudited £’m H1 2019 H1 2018 Growth Solid revenue growth, primarily Net interest income 166.2 156.3 6% driven by fees and other income up Fees and other income 46.4 28.8 61% 61% Net gains on sale of assets 4.1 4.
Slide 10: 2019 outlook in a year of transition
2019 outlook in a year of transition H1 2019 FY 2019 Expectations Store growth 2 Stores Total of c.8 stores plus 2 C&I In keeping with deposit growth in June and July, expected to Deposit growth 0% YoY be broadly in line with 31 December 2018 at £15.7b c.100%, managing back in a measured way towards
Slide 11: Strategic initiatives
Continued progress on the strategic initiatives announced in February 1 Strategic initiatives Balance controlled growth, profitability and capital efficiency through our integrated customer experience 2 3 4 Expand range of services to Rebalance lending mix to Improve cost efficiency create new sourc
Slide 12: Expansion North to SME hotspots will power future growth
1 Expansion North to SME hotspots combined with new products and digital services will power future growth Significant opportunity as we move North Increasing our geographical coverage(1) Midlands - 4 new stores in the Birmingham area Currently Post-expansion North - Manchester 2019, Liverpool 2
Slide 13: Exit run-rate savings expected at the top-end of range for 2019
2 Exit run-rate savings expected at the top-end of range for 2019 and have already captured 60% of the benefits to date Targeted actions to maximise value in 2019 Right-size lending operations teams in line with revised lending mix and volume forecasts Back Lean workflow improvements Total 2019
Slide 14: Significant operating cost and capex savings identified
2 Significant operating cost and capex savings identified and a cost transformation program in place Upgraded savings Operating expense savings Capex savings Pre-leakage(1) (exit run-rate) vs. 2018 cost base, £m (2) vs. 2018 cost base, £m(1) targets Expected top-end of 2019 £15- 19m range £70-80
Slide 15: Continued fee growth will be powered by a focus on our card proposition
3 Continued fee growth will be powered by a focus on our card proposition as well as new product pricing and features Initiatives focused on driving fee growth Evolve our card proposition for business customers +61% Embed and develop FX capability Other Income & Develop paid-for services for r
Slide 16: Capability & Innovation Fund investment in new digital innovations
3 Capability & Innovation Fund investment in new digital innovations will make life easier for SMEs and generate new revenue streams Supporting businesses as they grow with market-leading digital innovations… Open an account at a time that’s convenient to them. At home, at Full integration with work
Slide 17: Rebalancing our lending mix and growth to optimise capital efficiency and ROE
4 Rebalancing our lending mix and growth to optimise capital efficiency and ROE Implementation of initiatives on track Target lending mix reaffirmed Continue to build lending around low risk cost-efficient and higher ROE mortgages Scaled back high RWA lending (incl. commercial real estate) and P
Slide 18: Rebalancing of asset base on track with low cost of risk at 6bps
Model remains strong Deposit flows returned to growth with over £700m of inflows June-July MTD Rebalancing of asset base on track with low cost of risk at 6bps from 8bps at H1 18 Upgraded cost targets and reduced cost to achieve Continued fee income growth, up 61% y-o-y with more services in
Slide 19: Medium-term guidance reaffirmed
Medium-term guidance reaffirmed 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 cycle Cost to income 55% – 60% b
Slide 20: Questions
QUESTIONS
Slide 21: Appendix
APPENDIX
Slide 22: Capital, funding and liquidity
Capital, funding and liquidity CET1 target vs requirements as percentage of RWAs(1) Funding split as at H1 2019(2) Target CET1 £0.2b £1.2b ratio of c.12% Debt Repo Securities 1.0% Countercyclical buffer £3.8b 2.5% Capital Conservation buffer TFS 1.1% Tier 1 component of P2A 10.6% 6.0% Tier 1 compone
Slide 23: Retail mortgage portfolio (1/2)
Retail mortgage portfolio (1/2) Total retail mortgages – Owner occupied and BTL split Total retail mortgages debt-to-value profile >80% are less than 80%LTV £9.6b £10.4b Average retail mortgage lending DTV is 61%, flat 81% 27% 27% YoY 76% 22% 20% 20% 18% 19% 16% 15% 14% 24% 19% 1%2% 0%0% 2018 H1 201
Slide 24: Retail mortgage portfolio (2/2)
Retail mortgage portfolio (2/2) Owner occupied retail mortgages Debt-to-value profile Repayment type Geography 29%28% 70% 68% Greater London 9.9% 19% 19%20% 4.0% 18% South east 40.5% 16%15% 17% 16% 5.7% 30% 32% South west 6.8% East of England 1% 2% 0%0% North west 8.5% 2018 H1 2019 West Midlands 201
Slide 25: Commercial lending
Commercial lending Debt-to-value profile Industry sector 33% 34% Industry Sector 30 Jun 2019 31 Dec 2018 (£m) (£m) 24% 23% 21%21% Real estate (rent, buy and sell) 2,354 2,547 11% 11% Legal, accountancy and consultancy 408 384 7% 8% 3% 2% 1% 1% Health and social work 274 217 < 50% 51-60% 61-70% 71-80
Slide 26: Quarter on quarter performance
Quarter on quarter performance Unaudited Unaudited £’m Q2 2019 Q1 2019 Growth Total revenue growth of 2% reflects Net interest income 82.4 83.8 -2% 7% growth in fees and other Fees and other income 24.0 22.4 7% income growth, as well as the 2.8 1.3 54% gains on sale of treasury assets Net gains on
Slide 27: CET1 ratio compares well against UK peer group
CET1 ratio compares well against UK peer group Big 5 Mid-Size Speciality Lenders Median 19.5% 16.1% 16.2% 16.3% 14.3% 14.5% 13.9% 13.8% 13.3% 13.4% 13.3% 13.0% 12.4% 12.6% (1) 27 (1) Pro-Forma Jun-19 for Metro Bank. Latest available information for UK peer group
Slide 28: Disclaimer
Disclaimer This presentation (the "Presentation") does not constitute or form part of an offer or invitation to sell or a solicitation of an offer to buy or subscribe for or otherwise acquire any securities in any jurisdiction or an inducement to engage in investment activity. There shall be no offe