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Metro Bank swings to loss after opening six new branches in first half

“While the pandemic has weighed heavily on our financial performance, we've made early progress delivering against the strategic priorities set out in February,” said CEO Daniel Frumkin

Metro Bank -

Metro Bank PLC (LON:MTRO) swung to an underlying loss in the first half of the year because of expected bad loans from the coronavirus crisis and other costs.

The lender, which dropped out of the FTSE 250 last year after its shares tumbled after revealing an accounting error where some of its assets were classed as less risky than they were, fell to an underlying loss before tax of £183.4mln from a £13.6mln profit a year ago.

READ: Metro Bank to expand unsecured lending after RateSetter acquisition

This included circa £109mln of impact from COVID-19, equivalent to 60% of the loss, comprising £97mln of expected credit losses and lower transaction fee income.

It reported a loss before tax of £241mln for the six months to June 30, increased from £134mln a year ago, as it absorbed a number of one off items including the exit from a central London office and remediation costs.

The net interest margin fell to 1.15% in the half from 1.40% in the second half of last year. 

While the bank opened six new ‘stores’ in the period, the CET1 capital ratio shrank to 14.4% from 15.6% in December.

Analysts at Peel Hunt said the CET1 ratio was “healthy in its own right but vulnerable if the group continues to record losses, as seems likely”. 

The board said that, with the Bank of England minimum requirements for own funds and eligible liabilities (MREL) framework review by the end of 2020, it may consider raising £200-300mln of further MREL in the first half of 2021, depending on the outcome of the review. 

Chief executive Daniel Frumkin said: “We entered 2020 at the start of our transformation journey, and while the pandemic has weighed heavily on our financial performance, we've made early progress delivering against the strategic priorities set out in February.”

Metro this week acquired RateSetter, the peer-to-peer lending platform, which Frumkin said “will help us meet more customer needs through unsecured lending, whilst also demonstrating cost discipline”.

The shares fell 8% on Wednesday morning to 106.14p.

Quick facts: Metro Bank

Price: 121.4 GBX

LSE:MTRO
Market: LSE
Market Cap: £2.09 m
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