RBC Capital downgrades Metro Bank on strong share price performance

RBC noted Metro is now trading at around its price target of 2,700p and has materially outperformed the market.

“We still like Metro, its Q3 results and growth profile, and against an uncertain economic outlook, we reaffirm our confidence that our forecasts remain achievable.

"However, following Metro’s robust share price performance, we believe the fact that the share price approximates our target price, when coupled with the potential downside risk given upcoming Brexit negotiations and economic uncertainty, justifies our downgrade to sector perform.”

Metro said on Wednesday that it swung to an underlying pre-tax profit of £0.6m compared a £3.4m loss in the same quarter last year, as revenue surged 78% to £53.4m.

RBC pointed out that Metro is deposit funded (at below peer rates), maintains conservative ratios and is taking market share, growing at impressive levels, and engages in low risk lending.

“Further, management is best-in-class and Metro’s brand and reputation for exceptional service continue to develop. We remain confident that our forecast of over 250p in earnings per share in 2020 is achievable.”

At 0915 BST, Metro shares were down 0.1% to 2,722p.