Metro Bank first-quarter profit, deposit growth up

Metro Bank posted a 41% jump in first-quarter deposit growth on Wednesday as lending and customer numbers grew.

In the quarter to 31 March 2018, deposit growth was up £1.03bn to £12.7bn, with lending growth 69% higher on the year at £11bn, driven by strong organic growth and supplemented by the acquisition of a seasoned mortgage portfolio.

Net deposit growth per store per month was £6.3bn in the first quarter compared to £5.9m in the final quarter of last year, representing annualised deposit growth per store of £76m.

Meanwhile, the loan to deposit ratio came in at 86% compared to 82% in the previous quarter and 72% in the same quarter of 2017 and underlying pre-tax profit was up 21% to a record £10m. In addition, the challenger bank saw its customer accounts increase to 1.3m from 88,000.

However, the bank's Common Equity Tier 1 ratio, a key measure of capital strength, fell 170 basis points to 13.6% at the end of the quarter compared to the end of last year.

Chief executive officer Craig Donaldson said: "We will continue to find new ways to make our customers' lives easier. Over the course of the year we will invest significantly in our digital offering to combine the best of fintech with our fanatical focus on service. Our artificial intelligence 'Insights' tool will be launched this summer on our already award-winning mobile app. We're extending the store footprint into thriving towns and cities in the West and Midlands while strengthening our presence on the South coast, with five stores already in build.

"Our commitment to deliver superior service to SMEs is stronger than ever. For too long, the big five banks have had an unhealthy stranglehold on the SME banking sector and businesses have been crying out for an alternative. In London and the South East - which accounts for 34% of the UK's SME market - we are seeing thousands of businesses switch to us, proving that when there is a credible alternative to the incumbents, businesses vote with their feet."

Metro said it continues to assess appropriate capital to fund its growth and expects a Tier 2 debt issuance this year. The bank also said its bid for the RBS alternative remedies package application is progressing.

The results came a day after the bank's founder, Vernon Hill, was re-elected as chairman despite controversy over payments made to his wife's architecture company. Of the votes cast at the bank's annual general meeting on Tuesday, 96% were in favour of Hill remaining in his role.

Shareholder advisory groups Pirc and Glass Lewis, along with investor Royal London Asset Management had all raised concerns about the payments.

At 0806 BST, the shares were down 4.1% to 3,372p.