Metro Bank swings to £240 million loss in the fiscal first half

Metro Bank (LON: MTRO) revealed to have swung to a loss of £240 million in the first half (H1) of the current fiscal year on Wednesday. The company attributed the decline to higher loan loss provisions due to the Coronavirus pandemic. Combined with lower transaction fees, the pandemic resulted in a £109 million hit for Metro Bank in H1.

Shares of the company opened more than 3% down on Wednesday and tanked another 10% in the next hour. At 107 pence per share, Metro Bank is currently a little under 50% down year to date in the stock market after recovering from an even lower 71 pence per share in late May. Learn more about how to invest in the stock market.  

Metro Bank’s customer deposits surge by 14%

In the same period last year, the bank had seen £3.4 million of profit. Despite the loss, however, the British bank expressed confidence that its transformation plan was undisrupted. According to CEO Daniel Frumkin of Metro Bank:

“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.”

In H1, Metro Bank’s customer deposits surged by 14% on a year over year basis to £15.6 billion.

The report on Wednesday also highlighted the retail and commercial bank’s core capital level to have sunk from 15.6% at the start of 2020 to 14.5% by the end of H1. In terms of cost of risk, Metro Bank reported an increase last year from 0.06% to 1.55%.

In its report on Wednesday, the London-based bank also accentuated that in H1 next year, it may have to resort to raising debt capital of £300 million.

Metro Bank buys Ratesetter for £2.5 million

Metro Bank’s report comes days after it announced to have bought RateSetter for £2.5 million. By bringing peer-to-peer platform under its umbrella, the bank wishes to establish a new source of revenue.

Analyst John Cronin of Goodbody also commented on Metro Bank’s report on Wednesday and said:

“Some will question should Metro Bank be writing new business at all given serious questions regarding line of sight on its ability to earn anything close to its cost of capital on marginal lending activity.”

At the time of writing, Metro Bank has a market cap of £185.27 million.