Metro Bank Holdings Plc · LSE:MTRO
Metro Bank — Metro Bk Hldgs — H1 2023 Earnings Presentation
29 slides from Metro Bank's earnings presentation, Aug 1, 2023
Slide 1: H1 2023 Interim Results
H1 2023 Interim Results 1 August 2023
Slide 2: Agenda
Agenda Overview Daniel Frumkin, Chief Executive Officer Financial performance James Hopkinson, Chief Financial Officer Strategy Daniel Frumkin, Chief Executive Officer
Slide 3: Overview
Overview Daniel Frumkin Chief Executive Officer
Slide 4: Committed to being the #1 community bank – the model works
Committed to being the #1 community bank – the model works Community focused We’re the best high street bank Strong colleague engagement for in-store service quality for the 10th time 95% of our Voice of the Colleague scores are First ever champion running1 above Glint Global Benchmark of women’s an
Slide 5: 3rd consecutive quarter of underlying profitability
3rd consecutive quarter of underlying profitability Strong, resilient franchise continues Transformed financial performance Primed for profitable growth to win customers New accounts opened in Lending yield continues to improve +207k 1H23 offsetting rising cost of deposits Continued cost discipline
Slide 6: Financial performance
Financial performance James Hopkinson Chief Financial Officer
Slide 7: Customer growth and the balance sheet positioning underpinning profitability in H1
Customer growth and the balance sheet positioning underpinning profitability in H1 £m 1H23 2H22 1H22 HoH YoY NIM up 3bps in 1H23 driven by yield tempered by higher cost of deposits Net interest income 221.5 223.3 180.9 (0.8%) 22.4% NIM, bps Net fees and other income 63.3 62.6 55.3 1.1% 14.5% 39 (4)
Slide 8: Continued disciplined cost management despite inflation
Continued disciplined cost management despite inflation Continued cost discipline – costs down 3% both Y/Y and H/H Cost: income ratio continues to improve Underlying costs, £m Underlying cost: income ratio, % £266.3m £266.5m £258.2m 19 20 Other 113% 20 20 18 12 15 16 14 Professional fees 93% 25 24 2
Slide 9: Resilient, diversified balance sheet but capital constrained
Resilient, diversified balance sheet but capital constrained £m 1H23 2H22 1H22 HoH YoY Lending actively constrained to optimise available capital Loans and advances to customers 12,572 13,102 12,364 (4.0%) 1.7% Treasury assets 8,023 7,870 9,036 1.9% (11.2%) Gross loans to customers, £bn Other assets
Slide 10: Lending managed for risk adjusted returns, credit metrics stable
Lending managed for risk adjusted returns, credit metrics stable Mortgages (59% of lending) – credit quality remains stable Commercial1 (30% of lending) – stable performance, growth opportunity Loans to customers, £bn New lending loan-to-value, % Deposits, £bn Average loan-to-value of commercial ter
Slide 11: Market-wide reductions in current account balances partially offset in June and July
Market-wide reductions in current account balances partially offset in June and July Customer acquisition remains strong Service-led core deposit franchise remains resilient Personal current account Business current account openings, ‘000 openings, ‘000 +207k new account openings in 1H23 +8% +20% +1
Slide 12: Capital accretion is increasing the headroom to minimum requirements
Capital accretion is increasing the headroom to minimum requirements Regulatory capital MREL, % 17.7% (0.3%) 17.4% 0.3% (0.1%) 0.4% 0.1% 18.1% CET1 CET1 CET1 10.3% 10.3% 10.4% Dec'22 IFRS 9 ECL relief 1 Jan'23 P&L ex. ECL ECL RWAs Intangibles & 1H23 step-down other Capital no longer absorbed by loss
Slide 13: 2023 guidance reiterated; targeting mid-single digit RoTE by 2024
2023 guidance reiterated 2022 2023 guidance 1H23 NIM 1.92% NIM accretion over 2023 tempered by limited ability to leverage balance sheet 2.14% Lending yield 3.67% Continue optimising mix for maximum risk adjusted returns on regulatory capital 4.50% Pricing will reflect rate environment and competiti
Slide 14: Strategy
Strategy Daniel Frumkin Chief Executive Officer
Slide 15: Service-led core deposit model advantaged through the cycle
Service-led core deposit model advantaged through the cycle Strong growth in customer numbers driving deposit balances Opportunity to further enhance growth Personal current accounts, ‘000 Business current accounts, ‘000 • Existing stores still growing +58% +42% 1,343 • New Communities – 11 new stor
Slide 16: Deposit growth – other opportunities to increase market share over the medium term
Deposit growth – other opportunities to increase market share over the medium term Cash ISA Retail Easy Access Business Easy Access ~£310bn market1 with material growth expected ~£950bn market1 ~£280bn market1 Metro Bank market shares1 Metro Bank market shares1 Metro Bank market shares1 0.90% 0.90%
Slide 17: Asset origination capabilities – UK's only full-service challenger bank
Asset origination capabilities – UK’s only full-service challenger bank Unsecured Credit cards/ Mortgages Commercial SME Asset finance Invoice Finance Auto finance personal loans overdrafts Product offering ✔✔✔ ✔✔ ✔ ✔✔ ✔✔ ✔✔✔ ✔ ✔ Scaleable ✔✔✔ ✔✔ ✔✔ ✔✔ ✔✔ ✔✔✔ ✔ ✔✔ Systems ✔✔✔ ✔✔ ✔✔ ✔ ✔✔ ✔✔✔ ✔ ✔✔ Exp
Slide 18: Strategic pillars have delivered
Strategic pillars have delivered Revenue Costs Infrastructure Communications Balance sheet +21% vs. 1H22 -3% vs. 1H22 Risk and resilience, Engaged colleagues; optimisation technology platforms brand recognition Optimised mix for risk- adjusted returns Structural advantage in risk-adjusted spreads FY
Slide 19: Q&A
Q&A
Slide 20: Appendix
Appendix
Slide 21: Low risk Treasury Portfolio, strong liquidity position
Low risk Treasury Portfolio, strong liquidity position Portfolio composition and central bank eligibility Non-cash portfolio credit rating and Risk Weights £m £m 1% 2% 9% 12% Cash & Money Market Funds Government Bonds 1 16% 23% AAA Carrying Fair SSAs £m Δ 34% AA value value 8% Covered Bonds 27% £5,3
Slide 22: Wholesale funding profile
Wholesale funding profile TFSME maturities – £3.25bn outstanding Outstanding debt instruments £m 1,860 • Call date: Oct-24 £350m MREL 1,390 • Maturity date: Oct-25 • Not called: Jun-23. Coupon reset to 9.139% • Maturity date: Jun-28 n/a n/a n/a £250m Tier 2 • Remains eligible for MREL until maturity
Slide 23: Retail mortgages – overview
Retail mortgages – overview Retail mortgage portfolio Retail mortgages loan-to-value Average retail LTV: 58% at 1H23 vs 56% at FY22 34% 30% 19% 17% 23% 23% 18% 21% £2.1bn 5% 7% 1% 2% 0% 0% 28% < 50% 51-60% 61-70% 71-80% 81-90% 91-100% > 100% FY22 H123 £7.6bn ECL coverage ratio Balance by IFRS9 stage
Slide 24: Retail mortgages – LTV, repayment type and arrears
Retail mortgages – LTV, repayment type and arrears Owner Occupied Loan-to-value profile Owner Occupied Repayment type Capital and Interest Loan-to-value Profile 64% 65% 36% 34% 22% 24% 25% 25% Average owner occupied LTV: 57% 20% 22% 20% 36% 35% 16% 17% 16% 20% 18% 19% 15% 14% 10% 9% 7% 4% 2% 2% 2% 0
Slide 25: Commercial lending – overview
Commercial lending – overview Commercial lending portfolio Portfolio composition Excluding BBLS Segment 30 Jun 2023 31 Dec 2022 4% Term loans 55% 55% Balance by IFRS9 stage 12% CBILS, CLBILS & RLS 12% 13% 1.4% 1.1% 6.0% 5.9% 24.9% 27.5% ECL BBLS 17% 19% Coverage 85.8% 84.3% Asset & Invoice Finance1
Slide 26: Consumer lending – overview
Consumer lending – overview Consumer Lending portfolio ECL coverage ratio Balance by IFRS9 stages 6% 2% 6.60% 79.8% 72.6% 5.07% 22.6% 16.9% 3.4% 4.8% £1.4bn FY22 H123 Stage 1 Stage 2 Stage 3 92% FY22 H123 Legacy Term Loans, Overdrafts & Credit Cards RateSetter Purchased Portfolio RateSetter New Orig
Slide 27: Macroeconomic scenarios and provisioning
Macroeconomic scenarios and provisioning Application of scenarios and weighting 5% 20% Upside 25% • 4 probability weighted scenarios: Baseline (50%); Upside (20%), Downside (25%) and Severe Baseline Downside (5%) • Macroeconomic projections provided by Moody’s Analytics (June 2023) Downside • House
Slide 28: Significant majority of deposits covered by FSCS
Significant majority of deposits covered by FSCS Deposits from customers, £m Covered under FSCS guarantee, % Average deposit balances, £k 100% Up to 84% 90% covered Up to 75% £k Jun’21 Jun’22 Jun’23 Commercial 80% 5% covered Retail 6.5 5.5 4.6 2,906 70% Retail 18% Commercial, SME 73.9 72.0 63.6 5,64
Slide 29: Disclaimer
Disclaimer Forward-looking statements This presentation and subsequent discussions may contain forward-looking statements. Forward-looking statements are not historical facts but are based on certain assumptions and subjective judgements of management regarding our present and future business strate