The test for Metro Bank (MTRO) in achieving its target of profitability by the end of next year is whether its costly store expansion programme will generate the loan growth management expects. It's a high-risk strategy, given the current pressures on retail banking, but these maiden first-half results indicate progress. While operating expenses increased by a third to £100m, net interest income grew by more than three-quarters to £66.7m, lessening pre-tax losses.
Customer loans doubled year on year to £4.6bn, with the retail mortgage book up from £1.2bn to £2.9bn. However, the bank's net interest margin declined five basis points to 1.94 per cent, against a target of 3 per cent by 2020. Of Metro's 42 stores, which chief executive Craig Donaldson says are the "powerhouse of the bank", 33 are making a positive contribution. Six more are due for completion by the end of 2016.
Metro ploughed a further £854m into investment securities, which back a proportion of customer deposits. Mr Donaldson says 86 per cent of these are made up of cash, gilts and AAA-rated securities, including mortgage-backed securities. He argues this unusual approach gives the bank's assets a greater degree of liquidity and prudence.
Broker Jeffries expects tangible book value per share of 922p at the end of December 2016, compared with 596p a year earlier.
METRO BANK (MTRO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,061p | MARKET VALUE: | £1.65bn | |
| TOUCH: | 2,061-2,077p | 12-MONTH HIGH: | 2,283p | LOW: 1,507p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 989p | LEVERAGE: | 11.4 | |
| Half-year to 30 Jun | Total operating income (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 55.9 | -20.7 | -28 | nil |
| 2016 | 84.1 | -18.1 | -24 | nil |
| % change | +50 | - | - | - |
Ex-div:na Payment:na | ||||
