Australian broker Macquarie is not a fan of Metro Bank PLC (LON:MTRO), with its analysts starting coverage on the UK challenger lender with an ‘underperform’ rating.
In a note to clients, the analysts said: “We view management targets for 2020 as challenging and think that growth and margins will slow as the next leg of growth is increasingly driven by expansion into less wealthy regions outside of London and the South East.“
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They think that Metro Bank’s return on equity (ROE) targets could prove to be unrealistic.
The analysts said: “In order to achieve its target of 14% ROE by FY20e (the 18% initial target now delayed to FY22e), Metro Bank requires a 40% loan growth CAGR in combination with improving net interest margins (2016a 230bp vs. 2020t: 300bp).
“This suggests growing the mortgage book from circa £5bn today to £14bn (FY20e) in a price competitive and intermediated mortgage market.”
They have set a 2,700p price target on Metro Bank shares, with the stock down 4.4%, or 154p to 3,334p in late morning trading.