Metro Bank Holdings PLC (LSE:MTRO) reported its first pre-tax profit in five years and said while deposits are on the up, the effects of its restructuring are likely to be slow to emerge as it cuts more jobs.
The challenger bank said it is "on track" to cut £50 million of costs in the current quarter, as promised, from slashing around 1,000 jobs or over a fifth of headcount, with more costs cutting also now planned.
Statutory profit before tax came in at £30.5 million for 2023, the first since 2018, compared to a £70.7 million loss the year before.
Revenues rose 5% to £546 million, despite a 9% fall in the second half of the year, while underlying losses were down 67% to £16.9 million after a worse second half blotted a profitable first.
The CET1 capital ratio improved to 13.1% from 10.3%.
A crisis engulfed the lender in October following news of an emergency £600 million debt refinancing package to fortify its rocky balance sheet, which was later agreed, with a £325 million rescue equity raise linked to a planned £50 million of cost cutting, including a reported 800 job losses.
Following this, chief executive Daniel Frumkin said the launch of a “deposit campaign” helped attract £16.5 billion of deposits as of the end of February 2024.
“During the year we also launched a cost-saving plan which included reducing store hours and roles across the organisation. These efforts will ensure the bank is right-sized for the future, with a strong focus on both digital and great customer service,” said Frumkin.
He added that 2023 had been “a varied year for performance”, with some positives “offset by continued external headwinds combined with the need to make difficult decisions”.
Higher deposit costs will continue to impact earnings potential into 2024, with the effects of loan and investment repricing not expected until 2026, therefore acting as a drag on near-term results.
Guidance, reflecting the impact of recent market pressures, competition for deposits and the prevailing macroeconomic outlook, included a “marginal reduction” in net interest margin.
Cost guidance has been upgraded as Metro expects to deliver additional annualised savings of £30 million by the end of 2024, making a total of £80 million of annualised cost reductions, all delivered in 2024.
Shares in the bank rose in early trading but had dropped into the red by late morning.
Update and correction: Adds share price and job cuts, also a correction as the RNS originally said £16m deposits but this was corrected to £16bn.