Metro Bank takes another step to profitability but challenges loom large

Shares in Metro Bank declined by over 2% early on Wednesday (26 April), even after the challenger bank posted a record set of results as profits and deposits both surged in the first quarter of its financial year.

In the three months to 31 March, the London-listed lender saw pre-tax profits rise to £2m, a 33% increase compared with the previous quarter and a much improved performance compared to the £9.6m loss recorded in the corresponding period last year.

The figure marked the third consecutive quarter of profitability and put the bank on track to achieve its first annual profit.

Meanwhile, assets under control and loans both rose 57% year-on-year to £11.6bn and £6.8bn respectively, while deposits were 53% higher than in corresponding period last year and totalled £9bn.

Metro, which added a record 72,000 customer accounts in the period, bringing the tally to 987,000, said it was the first time in its history that growth in deposits has surpassed the £1bn threshold over the course of 12 months.

"This is another great quarter for Metro Bank, and the results are a testament to the strength of the model and our focus on the integration of stores and technology to create fans," said group chief executive Craig Donaldson.

"We continue to grow the business, and remain on track to open a further 10 stores before the year end."

Donaldson added that lending grew 11% year-on-year, although the loan/deposit ratio fell from 74% to 72% in the first quarter, which was described as "slightly disappointing" by analysts at Jefferies.

"We would have preferred to see a rising loan/deposit ratio and view asset growth as critical to achieve 2020 profitability targets," they added.