Metro Bank PLC (LON:MTRO) is edging closer to having one million customers as the challenger lender reported a rise in first-quarter underlying profit driven by growth in deposits and lending.
The FTSE 250-listed firm said its underlying pre-tax profit rose to £2.0mln for to quarter to March 31, a turnaround from a £9.6mln loss in the same period in 2016.
On a quarter-on-quarter basis, Metro’s underlying profit was up 33% from the £1.5mln posted in the final quarter of 2016.
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The bank’s total revenue rose by 7% to £61.9mln for the first quarter, up from £57.6mln in the previous quarter, with net interest income rising to £50.4mln from £46.7mln.
Craig Donaldson, Metro’s chief executive said: "We have now delivered three consecutive quarters of profitability and for the first time have exceeded £1bn net growth in deposits in a single quarter whilst also reducing the cost of those deposits.”
Record 72,000 increase in customer accounts to 987,000
He added: “We have seen double digit growth in lending (11%) and attracted an additional 72,000 accounts, taking us to 987,000 customer accounts across the bank.”
Donaldson concluded: "We continue to grow the business, and remain on track to open a further ten stores before the year end.”
In late afternoon trading, Metro’s shares had rallied from earlier falls, adding 0.3%, or 9p at 3,595p, with the stock having gained over 7.5% in the past month and almost 22% in the year-to-date.
Metro’s deposits were up 13% quarter-on-quarter to £9.01bn, while lending rose by 11% to £6.48bn.
The firm’s net interest margin - the difference between interest received on lending compared to interest paid on deposits - remained broadly stable at 2.02%, but was slightly down on the 2.03% recorded in the fourth quarter of 2016.
In a note to clients, analysts at Panmure Gordon reiterated a ‘sell’ rating on Metro, with a target price of 2,700p.
They said: “Metro Bank 1Q17underlying PBT of £2.0m is up 33% QoQ but c£1.0m below our forecasts of £3.0m, driven by lower than expected loan growth and NIM.”
The analysts added: “Overall, while Metro is making progress the growth this quarter is lower than our expectation and with Metro bank trading at FY2017E P/TBV of 4.0 we believe that the returns potential is more than discounted in the current share price.”
-- Updates share price, adds broker comment --