Metro Bank Holdings Plc · LSE:MTRO
Metro Bank — Debt Investor Presentation (October 2019)
35 slides from Metro Bank's debt investor presentation, October 2019
Slide 1: Investor Presentation October 2019
INVESTOR PRESENTATION October 2019
Slide 2: Disclaimer
Disclaimer NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE U.S. IMPORTANT: You must read the following before continuing. The following applies to the presentation materials following this page, and you are therefore advised to read this carefully before reading, accessing or making any other u
Slide 3: Disclaimer
Disclaimer This presentation is not directed or intended for distribution to, or use by, any person or entity that is a citizen or resident located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to the law or regulati
Slide 4: MREL issuance: summary transaction terms
MREL issuance: summary transaction terms Issuer Metro Bank PLC Notes Senior Non-Preferred Notes The Issuer’s EMTN Programme dated 17 September 2019, as Documentation supplemented by the supplement expected to be dated on or around 2 October 2019 Size GBP300m Format RegS Registered Issuer Ratings BB
Slide 5: Metro Bank PLC current and future organisational structure
Metro Bank PLC current and future organisational structure Current Organisational Structure Post Newco scheme • Sep-19 issuance of Senior Non-Preferred Notes Newco • Future MREL and capital issuance • £250m 2028nc2023 Tier 2 Metro Bank PLC • Sep-19 issuance of Senior Non-Preferred Notes Metro Bank •
Slide 6: Metro Bank Overview
Metro Bank Overview
Slide 7: A full service retail & commercial bank
A full service retail & commercial bank Customer proposition Drives low-cost, Supporting Delivering Simple business differentiated on service & sticky and diversified growth of low- high-quality model convenience customer deposits risk lending earnings (1) Deposits Retail Partnerships Lending £1,954
Slide 8: With an integrated physical & digital footprint
With an integrated physical & digital footprint Unique stores Digital investments • High-visibility, high-specification stores, • Insights launched for personal customers in prime locations where people live, • International payments through the app work and play to achieve an interconnected “networ
Slide 9: Continuing to create FANS
Continuing to create FANS 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) 1 = 82% 1 85% 1 = 82% 2 69% 3 74% 3 66% 4 66% 4 61% 5 64% 5
Slide 10: H1 2019 Update
H1 2019 Update
Slide 11: 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 • Net outflows in February and May, returned to growth in June, July and August supported by Challenging H1 Intense speculation competitively priced fixed-term savings accounts impacted d
Slide 12: 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 £14.4b growth with net inflows of over £13.7b January trading £1b across June, July and statement August following the successful completion of the Intense specul
Slide 13: With 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 1,810 (£b) 1,418 996 814 143 1,045 634 120 780 477 88 348 62 545 853 41 694 546 307 415 H1 H1 H1 H1 H1 H1 2015 H1 2016 H1 20
Slide 14: 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 15: 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 Intangibles / Treasury 2
Slide 16: Strong, liquid balance sheet
Strong, liquid balance sheet £’m Unaudited Unaudited Highly liquid, with Liquidity Coverage Ratio exceeding 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%) Assets classified as held for sale 521 - - 141% 139%
Slide 17: Focus on low risk lending is unchanged, with continued 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 18: 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 19: Strategic Initiatives
Strategic Initiatives
Slide 20: Continued progress on the strategic initiatives announced in February
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 21: 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 22: 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 £70-80m
Slide 23: 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 +61% Evolve our card proposition for business customers Embed and develop FX capability Fees and other Develop paid-for services for r
Slide 24: 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 25: 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 higher risk density commercial real estate and PBTL l
Slide 26: MREL, Capital and Funding
MREL, Capital and Funding
Slide 27: Capital, funding and liquidity
Capital, funding and liquidity CET1 target vs requirements as percentage of RWAs(1) Funding split as at H1 2019(2) 16.1% CET1 pro forma ratio at H1 2019 £0.2b £1.2b Debt Repo Securities Target CET1 Management buffer £3.8b ratio of c.12% 1.0% Countercyclical buffer TFS 2.5% Capital Conservation buffe
Slide 28: Robust capital position
Robust capital position Leverage 7.2% • Committed to maintaining a Ratio 22.5% strong capital position 21.5% • Minimum CET1 ratio of 3.5% Buffers c.12% 18.8% 3.5% Buffers • Regulatory leverage ratio greater than 4% T2, 2.7% Current • Interim MREL requirement plus 2x (P1 + P2A) MREL Requirement Surpl
Slide 29: Summary
Summary
Slide 30: Summary: model remains strong
Model remains strong Deposit flows returned to growth with over £1 billion of inflows in June-August Rebalancing of asset base on track Upgraded cost targets and reduced cost to achieve Continued fee income growth in H1 19, up 61% y-o-y with more services in build Delivery of C&I capability on-
Slide 31: 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 per >£4m month Loan to deposit 85% – 90% Cost of risk 15bps – 30bps through the cycle Cost to income 55% – 60% b
Slide 32: Key credit highlights
Key credit highlights Following a challenging H1, actions taken to strengthen the balance sheet Implementation of strategic initiatives underway to balance growth, profitability and capital efficiency Resilience and significant momentum in the customer franchise with continued strong current a
Slide 33: Appendix
Appendix
Slide 34: Retail mortgage portfolio
Retail mortgage portfolio 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 27%27% Average retail mortgage 81% lending DTV is 61%, flat YoY 76% 22% 20% 20% 18% 16% 19% 15% 14% 24% 19% 1%2% 0%0% 2018 H1 2019 Less
Slide 35: Commercial lending
Commercial lending Debt-to-value profile Industry sector 33% 34% Industry Sector 30 Jun 2019 (£m) 31 Dec 2018 (£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
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