Metro Bank Holdings PLC · LSE:MTRO
Metro Bank — Debt Investor Presentation (June 2018)
28 slides from Metro Bank's debt investor presentation, June 2018
Slide 1: Important Information
Important Information NOTE: ELECTRONIC VERSIONS OF THE MATERIALS YOU ARE SEEKING TO ACCESS ARE BEING MADE AVAILABLE ON THIS WEBPAGE BY METRO BANK PLC ("METRO BANK") IN GOOD FAITH AND FOR INFORMATION PURPOSES ONLY. THESE MATERIALS WERE NOT AND SHOULD NOT BE RELEASED, PUBLISHED OR DISTRIBUTED, DIRECTL
Slide 2: Investor Presentation June 2018
INVESTOR PRESENTATION June 2018
Slide 3: Transaction summary
join the revolution Transaction summary Inaugural public debt transaction for Metro Bank plc, listed on the LSE and member of the FTSE 250 since 2016 The first step in diversifying and optimising our capital structure Issuer Metro Bank plc Size GBP [250m] Structure 10NC5 (one-time call) Rating U
Slide 4: Metro Bank plc
Metro Bank plc Metro Bank is the revolution in British Banking A full service retail & commercial bank Britain’s first new High Street bank in over 100 years Founded by Vernon W. Hill II, founder of Commerce Bancorp (CBH) in the US Key highlights Unique customer-service led model, offering 7
Slide 5: Raising Tier 2 to provide more growth capital
raising Tier 2 to provide more growth capital Track record of successful equity raising… Tier 2 issuance is the next step £75m initial seed £400m private capital raised, followed placement and premium Diversification and optimisation of Metro by further £52m £288m private listing on the London pri
Slide 6: Creating FANS
creating FANS Culture Unique Retail-focused customer service proposition Disruptive, deposit-driven + Model Differentiated funding model Simple, straightforward banking + Execution Fanatical Turning customers into “FANS” (customers who recommend their friends, family and colleagues to bank w
Slide 7: Through our unique service-led culture
through our unique service-led culture Service-led, with a relentless Outstanding Net Promoter Scores & brand recognition(2) (4) focus on creating FANS 1,305k 1,217k A culture aligned with simple 1,045k transparent products focused 915k on great Customer outcomes 780k 89% No store sales incent
Slide 8: Powering our differentiated model
powering our differentiated model Growth retailing model for modern-day banking of customers surveyed in a disruptor creating FANS… Integrated service & IT proposition Award-winning service and focus on community 86 per cent 2017 said they would recommend Metro Bank’s services to a friend 89%
Slide 9: Simple, low-risk retail and commercial banking
with simple, low-risk retail and commercial banking Deposits Lending £5,999m £6,703m £7,542m £3,471m Current accounts 47% 53% Mortgage lending (incl. BTL) 68% 32% Cash management £12,702 m Private banking(1) £11,013m Deposits – term & variable at 31 Mar 18 Consumer credit at 31 Mar 18
Slide 10: As we attract low-cost, sticky deposits
as we attract low-cost, sticky deposits Customer deposits (£ bn) • Service-led model attracts low-cost, sticky deposits FY Cost of deposits £12.7 47% £11.7 • £6.3m deposit growth per store per month in Q1 2018, 56% sustaining record 2017 average growth (2016: £5.7m) £8.0 78% £5.1 118% • £76m ($106m(
Slide 11: Enabling us to grow our lending at low risk
enabling us to grow our lending at low risk High growth, low risk increasing our LTD ratio • Strong organic momentum in lending across all asset classes Net customer loans (bn) £11.0 Loan to deposit ratio £9.6 • 86% loan to deposit ratio in Q1 2018, increasing 64% from 72% in Q1 2017 66% £5.9 • 69%
Slide 12: Creating a diversified, low risk loan book
creating a diversified, low risk loan book Distribution of residential mortgage loan book by DTV(1) Distribution of commercial term loan book by sector(2) 60% average DTV Gross Balance Concentration 28% (£’m) (%) 23% 18% 18% Real estate (rent, buy and sell) 1,704.5 61 11% Legal, accountancy and cons
Slide 13: As NPLs and cost of risk remain low
as NPLs and cost of risk remain low Low non-performing loans… NPL 128% 104% 55% Coverage • 0.22% non-performing loan ratio (90 days+ in arrears) ratio at 31 March 2018 £26.2m 25.0 20.0 • Reduced from 0.27% for FY 2017 (2016: 15.0 0.12%) 10.0 £5.1m £7.2m 5.0 • Loan loss reserve covered 55% of Group n
Slide 14: Across an expanding network
across an expanding network 56 stores open, 11 opening in 2018, targeting c. 100 by 2020 14 14
Slide 15: Increasing deposits and profitability as stores mature
with increasing deposits and profitability as our stores mature Store contribution increases for new & existing stores as they mature (quarterly) The mature network is the engine of deposit Positive contribution to net income growth £62.0m Negative contribution to net income £56.7m 39% comparati
Slide 16: Simple, liquid, deposit-funded balance sheet
leading to a simple, liquid, deposit-funded balance sheet FY FY FY • With an 86% loan to deposit ratio at 31 March 2018, the balance sheet is intrinsically liquid, with no reliance on wholesale funding 2016 2017 Annual Q1 2018 (£’m) (£’m) Growth (£’m) • Stable deposits, with a long behavioural life
Slide 17: With a robust capital position
with a robust capital position CET1 position CET1 Ratio 13.1% 18.1% 15.3% 13.6% Robust capital position and leverage ratio, well above regulatory requirements and internal limits £897m £889m £651m Assisted by c.£280m equity raise in July 2017 at market price £300m Metro Bank has prudently pre-
Slide 18: Generating increasing returns
generating increasing returns FY 2016 FY 2017 Annual Q1 2018 £10m profit in Q1 2018, 7th consecutive (£’m) (£’m) Growth (£’m) quarter of profitability, following £21m profit in Net interest income 154.2 241.0 +56% 75.0 FY 2017 and compared to a £12m loss in 2016 Fees and other income 35.5 49.1 +38
Slide 19: Strong results – 7 quarters of increasing profitability
and achieving strong results – 7 quarters of increasing profitability Our Progress FY 2016 FY 2017 FY Increase Q1 2018 Customer deposits £8.0bn £11.7bn +47% £12.7bn Net average deposit growth per store /month £5.7m £6.3m +11% £6.3m Net customer loans £5.9bn £9.6bn +64% £11.0bn Loan to deposit ratio
Slide 20: Tier 2 issuance providing growth capital
with our tier 2 issuance providing growth capital The first step as we start to diversify Illustrative transaction impact and mature our capital base (% RWAs) Tier 2 capital issuance supports our RWA (£m) £5.9bn £6.5bn growth and strategy Leverage 5.5% 5.0% 2018 is the right time to start opti
Slide 21: Progress towards our mid-term targets
as we progress towards our mid-term targets Our Targets 31 Dec 2020 2023 2017 Targets Targets Our Deposits £11.7bn c.£27.5bn £50-55bn Stores 55 c.100 140-160 Monthly deposit growth /store £6.3m £5.5–6.5m £5.5-6.5m Loan to Deposit Ratio 82% 85-90% 85-90% Customer NIM + Fees(1) 2.69% c.3% c.3% Cost:In
Slide 22: Indicative terms of the offering
indicative terms of the offering £[●] [●]% Fixed Rate Reset Callable Subordinated Notes due 2028 Issuer Metro Bank plc Maturity Date [●] 2028 Optional Call Date [●] 2023 subject to regulatory approval (one time call) Rating Unrated The Notes will constitute direct, unsecured and subordinat
Slide 23: Board & executive directors
board & executive directors CHAIRMAN EXECUTIVE DIRECTORS Founded Metro Bank in 2010 Joined Metro Bank in 2010 Joined Metro Bank in 2018 as as CEO and executive CFO and executive member of the Vernon W. Hill, II Previously founder Craig Donaldson member of the Board David Arden Board and Chairman for
Slide 24: Robust governance framework
robust governance framework Chief Executive Metro Bank Board Officer Executive Remuneration Audit Risk Oversight Nomination Committee Management Committee Committee Committee Committee Executive Risk Asset & Liability Credit Policy ExCo Committee Committee & Appetite Committee Chairperson Executive
Slide 25: Three lines of defence
three lines of defence BOARD ERM(1) Policy and Risk Appetite CRO Risk Framework 1st Line: Business Area 2nd Line: Risk Management Team 3rd Line: Internal Audit BUSINESS AREA Business heads: Manage risk in line with CRO: Leads team, co-ordinates risk Independent assurance: All significant strategy an
Slide 26: Prudent approach to credit risk
prudent approach to credit risk Portfolio Management Policy Setting Board approves risk appetite annually Regular portfolio stress tests CRO develops the Risk Framework and policies Ongoing review of scorecards and impairment and monitors granular risk appetite metrics models Monitoring Pre-Acquisit
Slide 27: 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 THE PROPOSED OFFER OF SECURITIES REFERRED TO HEREIN AND MAY NOT BE REPRODUCED IN ANY FORM OR FURTHER DISTRIBUTED TO ANY OT
Slide 28: Disclaimer
disclaimer To the extent available, the industry, market and competitive position data contained in this presentation come from official or third-party sources. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources beli