Metro Bank Holdings PLC (MTRO)
Metro Bank Holdings PLC: Interim results for half year ended 30 June 2023
01-Aug-2023 / 07:00 GMT/BST
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Metro Bank Holdings PLC
Interim results
Trading update H1 2023
1 August 2023
Metro Bank Holdings PLC (LSE: MTRO LN)
Interim results for half year ended 30 June 2023
Highlights
Underlying profit before tax of GBP16.1 million (H2 2022: loss of GBP2.6 million) represents the third
-- consecutive quarter of underlying profitability, reflecting improved operating margins driven by the
actions taken as part of the turnaround plan to optimise the balance sheet and control cost inflation
for sustainable profitability.
-- Statutory profit before tax of GBP15.4 million (H2 2022: loss of GBP10.5 million) reflects the significant
reduction in exceptional items and has supported capital accretion in the half.
-- Total underlying revenue was up 21% YoY but remained flat HoH at GBP285.6 million (H2 2022: GBP285.9
million, H1 2022: GBP236.2 million) reflecting improved lending yields offset by increased cost of
deposits and limited loan growth given capital availability.
Total underlying operating expenses reduced 3% both YoY and HoH to GBP258.2 million (H2 2022: GBP266.5
-- million, H1 2022: GBP266.3 million), driving positive jaws of 24% YoY and 3% HoH, despite persistent high
inflation, as a result of the continued focus on cost discipline and the successful implementation of
initiatives that enable the bank to scale appropriately.
The bank's service-led core deposit franchise remains resilient to increased competition in the market
-- and continues to attract new customers, opening 106,000 Personal Current Accounts and 23,000 Business
Current Accounts in the half. The bank remained ranked first for customer service in Stores in the CMA
survey.
-- Customer deposits reduced 3% HoH to GBP15.5 billion (31 December 2022: GBP16.0 billion) in line with
prevailing market conditions, though the bank saw net deposit inflows in June, a trend that continued in
July.
-- The bank's MREL ratio was 18.1% as at 30 June 2023, up 40bps from 17.7% as at 31 December 2022 and up
70bps from 17.4% as at 1 January 2023, reflecting the disciplined origination strategy and statutory
profit for the half.
Daniel Frumkin, Chief Executive Officer at Metro Bank, said:
"I am encouraged by the activity across the business. Our
statutory profitability in H1, making this the third consecutive
quarter of underlying profitability, demonstrates that our strategy
is working. We continue to win new customers every day through our
service-led franchise, at the same time as showing ongoing cost
discipline and pursuing our targeted store expansion. Whilst we
remain watchful of macro-economic headwinds, we have the expertise,
capability and infrastructure in place to unlock our future growth
potential."
Key Financials
30 Jun 31 Dec Change from 30 Jun Change from
GBP in millions 2023 2022 FY 2022 2022 H1 2022
Assets GBP21,747 GBP22,119 (2%) GBP22,566 (4%)
Loans GBP12,572 GBP13,102 (4%) GBP12,364 2%
Deposits GBP15,529 GBP16,014 (3%) GBP16,514 (6%)
Loan to deposit ratio 81% 82% (1pp) 75% 6pps
CET1 capital ratio 10.4% 10.3% 10bps 10.6% (20bps)
Total capital ratio (TCR) 13.2% 13.4% (20bps) 13.8% (60bps)
MREL ratio 18.1% 17.7% 40bps 18.3% (20bps)
Liquidity coverage ratio 214% 213% 1pp 257% (43pps)
H1 H2 Change from H1 Change from
GBP in millions 2023 2022 H2 2022 2022 H1 2022
Total underlying revenue1 GBP285.6 GBP285.9 - GBP236.2 21%
Underlying profit/(loss) before tax2 GBP16.1 (GBP2.6) n.m. (GBP48.0) n.m.
Statutory profit/(loss) before tax GBP15.4 (GBP10.5) n.m. (GBP60.2) n.m.
Net interest margin 2.14% 2.11% 3bps 1.73% 41bps
Lending yield 4.50% 3.93% 57bps 3.40% 110bps
Cost of deposits 0.66% 0.25% 41bps 0.14% 52bps
Cost of risk 0.18% 0.33% (15bps) 0.29% (11bps)
Coverage ratio 1.54% 1.41% 13bps 1.36% 18bps
Underlying EPS 7.8p (2.0p) n.m. (28.5p) n.m.
Tangible book value per share GBP4.42 GBP4.29 3% GBP4.30 3% 1. Underlying revenue excludes grant income recognised relating to the Capability & Innovation fund. 2. Underlying profit/(loss) before tax is an alternative performance measure and excludes impairment andwrite-off of property, plant & equipment (PPE) and intangible assets, transformation costs, remediation costs andcosts incurred as part of the holding company insertion.
Investor presentation
A presentation for investors and analysts will be held at 9.30AM
(UK time) on 1 August 2023. The presentation will be webcast
on:
https://webcast.openbriefing.com/mb23h1/
For those wishing to dial-in:
From the UK: 0800 358 1035
From the US: +1 855 979 6654
Access code: 332501
Other global dial-in numbers:
https://www.netroadshow.com/events/global-numbers?confId=52736
Financial performance for the half year ended 30 June 2023
Deposits
30 Jun 31 Dec Change from 30 Jun Change from
GBP in millions
2023 2022 FY 2022 2022 H1 2022
Demand: current accounts GBP7,106 GBP7,888 (10%) GBP7,770 (9%)
Demand: savings accounts GBP7,218 GBP7,501 (4%) GBP7,817 (8%)
Fixed term: savings accounts GBP1,205 GBP625 93% GBP927 30%
Deposits from customers GBP15,529 GBP16,014 (3%) GBP16,514 (6%)
Deposits from customers includes:
Retail customers (excluding retail partnerships) GBP5,647 GBP5,797 (3%) GBP6,267 (10%)
SMEs3 GBP5,066 GBP5,080 - GBP4,892 4%
GBP10,713 GBP10,877 (2%) GBP11,159 (4%)
Retail partnerships GBP1,910 GBP1,949 (2%) GBP1,871 2%
Commercial customers (excluding SMEs3) GBP2,906 GBP3,188 (9%) GBP3,484 (17%)
GBP4,816 GBP5,137 (6%) GBP5,355 (10%)
3. SME defined as enterprises which employ fewer than 250 persons and which have an annual turnover not
exceeding EUR50 million, and/or an annual balance sheet total not exceeding EUR43 million, and have aggregate deposits
less than EUR1 million.
-- Total deposits of GBP15.5 billion as at 30 June 2023 reduced by 3% from the full year position reflecting
the impact of the cost of living crisis as well as seasonal factors such as tax payments in January, partially
offset by growth in June, a trend that continued in July. The core customer deposit base continues to be
predominantly Retail and SME with low average balances, and therefore a significant majority of customer deposits
are protected by the Financial Services Compensation Scheme.
-- The strength of the underlying service-led core deposit franchise is highlighted by continued growth in
customer numbers in the first half, opening 106,000 new Personal Current Accounts and 23,000 new Business Current
Accounts, representing HoH growth in account openings of 8% for PCA and 20% for BCA. Average customer deposit
balances have however reduced from the full year position, a theme consistent across the industry as customers
manage impacts of the cost of living crisis.
-- The bank re-entered the Fixed Term Deposit (FTD) market in the first half as guided at full year, adding
additional duration to the book, FTDs now make up 8% of the total deposit base (31 December 2022: 4%) and
non-interest bearing deposits now total 46% (31 December 2022: 49%). Cost of deposits has increased to 0.66% (H2
2022: 0.25%), reflecting the increase in FTDs, higher pass-through rates on interest bearing liabilities and
increased price competition in the market.
-- The bank's market share of Cash ISAs, Retail Easy Access and Business Easy Access is well below its
current natural market share of Personal and Business Current Accounts, representing significant opportunity for
organic deposit growth supported by recent and continuing investments in digital and switching capabilities.
-- Stores remain at the heart of the bank's service offering and while geographic expansion is planned in
areas where significant opportunity exists, the bank is disciplined in the cost that it will attach to future store
openings and their operation. The bank remains committed to opening stores in the North of England and these stores
are still expected to be opened in 2024 and 2025. The store proposition and the deposit franchise it underpins are
increasingly valuable in a more normalised interest rate environment.
Loans
30 Jun 31 Dec Change from 30 Jun Change from
GBP in millions
2023 2022 FY 2022 2022 H1 2022
Gross loans and advances to customers GBP12,769 GBP13,289 (4%) GBP12,535 2%
Less: allowance for impairment (GBP197) (GBP187) 5% (GBP171) 15%
Net loans and advances to customers GBP12,572 GBP13,102 (4%) GBP12,364 2%
Gross loans and advances to customers consists of:
Retail mortgages GBP7,591 GBP7,649 (1%) GBP6,785 12%
Commercial lending4 GBP2,659 GBP2,847 (7%) GBP2,993 (11%)
Consumer lending GBP1,410 GBP1,480 (5%) GBP1,269 11%
Government-backed lending5 GBP1,109 GBP1,313 (16%) GBP1,488 (25%)
4. Includes CLBILS.
5. BBLS, CBILS and RLS.
-- Total net loans as at 30 June 2023 were GBP12.6 billion, down 4% compared to GBP13.1 billion at 31 December
2022 as the bank continues to focus on optimising risk-adjusted return on regulatory capital through the strategic
allocation of RWAs, noting that unfulfilled demand exists across all lending products. Yields continue to improve
reflecting further rate rises and decisions on mix optimisation. The loan to deposit ratio remained stable at 81%
(31 December 2022: 82%).
-- Retail mortgages of GBP7.6 billion remained flat compared to the full year position (31 December 2022: GBP7.6
billion) as they were constrained to replacement levels. Owner occupied mortgages represent 72% of total portfolio
(31 December 2022: 72%). GBP779 million of retail mortgages matured in the first half at an average yield of 2.28%
and a further GBP1.1 billion is expected to mature in the second half at an average yield of 2.38%. The DTV of the
portfolio was 58% (31 December 2022: 56%) reflecting updated valuations. The bank has signed up to the Mortgage
Charter to provide additional support and ensure the best outcomes are achieved for customers potentially requiring
support.
-- Commercial lending reduced by 7% to GBP2.7 billion reflecting the continued reduction in the buy-to-let and
real estate portfolios. 90% of term lending excluding Professional-Buy-To-Let and Bounce Back Loan Scheme (BBLS) is
floating rate and the book remains highly collateralised. Commercial real estate is down 9% compared to 31 December
2022 and now makes up 23% of the book.
-- Consumer lending reduced by 5% to GBP1.4 billion (31 December 2022: GBP1.5 billion) as the bank continued to
optimise lending mix and capital allocation. High quality application volumes remain strong and for originations in
the first half the average customer income was GBP49,000 (H2 2022: GBP48,000, H1 2022: GBP46,000). Non-performing loans
for consumer unsecured were 4.8% at 30 June 2023 (31 December 2022: 3.4%) in line with the expected maturity
profile, and the portfolio has prudent ECL coverage of 6.6% (31 December 2022: 5.1%).
-- Government backed lending is now closed to new borrowers and continues to reduce as loans are repaid. The
bank continues to have a strong record of claims made to the British Business Bank being upheld.
-- The loan portfolio remains highly collateralised and prudently provisioned. In H1 2023 the average DTV
for retail mortgages was 58% (31 December 2022: 56%) and for commercial lending 55% (31 December 2022: 55%). The
ECL provision as at 30 June 2023 was GBP197 million with a coverage ratio of 1.54%, compared to GBP187 million with a
coverage ratio of 1.41% as at 31 December 2022. The level of Post-Model Overlays and Adjustments remained
appropriate at 12% of the ECL stock, or GBP24 million.
-- Cost of risk decreased to 0.18% for the half (H2 2022: 0.33%). The bank has seen several months in the
first half where repayments and ECL releases from the commercial book lowered the risk costs. The credit quality of
new lending continues to be strong although the macro-economic environment remains uncertain and the bank has
retained its prudent approach to provisioning.
-- Overall arrears levels have remained broadly stable and there have been no significant signs of increased
stress. Non-performing loans increased to 2.9% (31 December 2022: 2.6%) driven by maturation of the consumer
portfolio and impacts of cost of living on the retail mortgages book, partly offset by successful BBLS claims and
repayments of a number of large commercial exposures. Excluding government-backed lending, non-performing loans
were 2.5% as at 30 June 2023 (31 December 2022: 2.0%).
Profit and Loss Account
-- Underlying profit before tax of GBP16.1 million achieved in the first half (H2 2022: loss of GBP2.6 million)
following completion of the turnaround plan that set out to return the bank to profitability. The balance sheet
optimisation strategy has transformed the balance sheet to maximise return on regulatory capital whilst margins
have been improved through disciplined cost control. Growth in profitability from here remains constrained as the
bank assertively manages its capital position.
-- Statutory profit before tax of GBP15.4 million (H2 2022: loss of GBP10.5 million) reflects significantly
reduced exceptional items as one-off remediation programs have been delivered and the holding company was
successfully inserted.
-- Net interest margin (NIM) of 2.14% for the half is up 3bps compared to 2.11% in H2 2022 and 1.73% in H1
2022 reflecting the strategy to optimise lending mix for risk adjusted return on regulatory capital and continued
rate rises. NIM growth is limited by continued pressure on deposit pricing, the increased mix of FTDs and the
capital constraints on asset growth.
-- Underlying net interest income remained broadly flat HoH at GBP221.5 million (H2 2022: GBP223.3 million) as
the bank's ability to grow lending remains constrained by capital and benefits seen from assets maturing into
higher rate environments are offset by increased deposit costs.
-- Underlying net fee and other income increased marginally HoH to GBP63.3 million (H2 2022: GBP62.6 million, H1
2022: GBP55.3 million). The YoY increase of 14% better reflects the seasonal nature of fee income largely driven by
customer activity, the second half includes higher FX income as customers travel more and we have seen growth in
safe deposit box income as more customers return to using stores post-pandemic.
-- Underlying costs reduced 3% to GBP258.2 million (H2 2022: GBP266.5 million) despite rising inflation,
reflecting the bank's continued focus on cost discipline, automation initiatives and investment in infrastructure
to enable the bank to deliver significant increases in volume with only marginal increases in cost, and therefore
improve operational leverage.
Capital, Funding and Liquidity
Position Position Minimum Minimum
Capital ratios 30 June 31 December requirement requirement
2023 2022 including buffers6 excluding buffers
Common Equity Tier 1 (CET1) 10.4% 10.3% 8.2% 4.7%
Tier 1 10.4% 10.3% 9.8% 6.3%
Total Capital 13.2% 13.4% 11.9% 8.4%
Total Capital + MREL 18.1% 17.7% 20.2% 16.7% 6. Based on capital requirements at 30 June 2023 plus buffers, excluding any confidential PRA buffer, ifapplicable.
-- As at 1 January 2023 the bank's MREL ratio was 17.4%
following a step down in the IFRS 9 ECL relief on 1January 2023, as
such the current position reflects the capital accretion of net
70bps as the bank achievedstatutory profitability in the half and
assertively managed asset origination volumes and RWA.
-- Total capital ratio reduced by 20bps in the half reflecting
the impact of the haircut to the Tier 2instrument, arising from
implementation of the holding company in May 2023.
-- Effective 1 January 2023 the Prudential Regulation Authority
(PRA) reduced the bank's Pillar 2A capitalrequirement from 0.50% to
0.36%.
-- Effective 5 July 2023 the Countercyclical Buffer (CCyB)
increased from 1% to 2%. Following the CCyBincrease, the bank is
now operating within both the Tier 1 and MREL buffers and continues
to strategically manageRWA allocation to ensure all regulatory
minimum requirements are met and the group is able to gradually
accretecapital headroom.
-- On 28 July 2023 the Bank of England's Resolution Directorate
agreed to a further extension of theeligibility of the GBP250
million 9.139% Tier 2 Notes (the "Notes") issued by Metro Bank PLC
with respect to MREL forMetro Bank Holdings PLC for the remaining
life of the instrument (June 2028).
-- Total RWAs as at 30 June 2023 were GBP7.8 billion (31
December 2022: GBP8.0 billion) reflecting the bank'sdecision to
strategically limit asset and liability growth to accrete capital
in the near term.
-- Strong liquidity and funding position maintained. Customer
loans continued to be funded fully by customerdeposits with a loan
to deposit ratio of 81% compared to 82% at the end of 2022. The
Liquidity Coverage Ratio (LCR)was 214% compared to 213% at 31
December 2022, and the Net Stable Funding Ratio (NSFR) was 132%
compared to 134% at31 December 2022, both remain significantly
above their respective requirements.
-- The Treasury portfolio of GBP8.0 billion includes GBP5.3
billion of investment securities, of which 77% arerated AAA and 23%
rated AA. The average repricing duration excluding cash is 1.1
years and GBP560 million ofsecurities are due to mature in H2 2023
at an average yield of 3.7%. Of the total investment securities,
91% isheld at amortised cost and 9% is held at fair value through
other comprehensive income.
-- UK leverage ratio was 4.4% as at 30 June 2023 (31 December
2022: 4.2%).
-- The bank's AIRB application is still in progress. As
previously highlighted, the bank continues to reviewits options,
across the capital stack, to strengthen its capital base.
Outlook and Guidance
-- Guidance for 2023 has been re-affirmed including the ROTE target of mid-single digit by 2024.
2022 2023
NIM 1.92% NIM accretion over 2023 tempered by limited ability to leverage balance sheet
Lending yield 3.67% Continue optimising mix for maximum risk-adjusted returns on regulatory capital
Cost of 0.20% Pricing will reflect rate environment and competitive pressures, expect strong account
deposits acquisition to offset lower average customer balances
Underlying GBP533m Inflationary pressures expected to moderately outweigh cost initiatives
costs
Cost of risk 0.32% Watchful of economic cycle but not yet seeing significant signs of stress
RWA GBP8.0b Managed for optimal risk-adjusted returns on regulatory capital as lending growth constrained by
capital availability
MREL 17.7% Continue to operate within buffers with increasing headroom to regulatory minima
Metro Bank Holdings PLC
Summary Balance Sheet and Profit & Loss Account
(Unaudited)
YoY HoH 30 Jun 31 Dec 30 Jun
Balance Sheet
change change 2023 2022 2022
GBP'million GBP'million GBP'million
Assets
Loans and advances to customers 2% (4%) GBP12,572 GBP13,102 GBP12,364
Treasury assets7 GBP8,023 GBP7,870 GBP9,036
Other assets8 GBP1,152 GBP1,147 GBP1,166
Total assets (4%) (2%) GBP21,747 GBP22,119 GBP22,566
Liabilities
Deposits from customers (6%) (3%) GBP15,529 GBP16,014 GBP16,514
Deposits from central banks GBP3,800 GBP3,800 GBP3,800
Debt securities GBP573 GBP571 GBP577
Other liabilities GBP875 GBP778 GBP706
Total liabilities (4%) (2%) GBP20,777 GBP21,163 GBP21,597
Total shareholder's equity GBP970 GBP956 GBP969
Total equity and liabilities GBP21,747 GBP22,119 GBP22,566 7. Comprises investment securities and cash & balances with the Bank of England. 8. Comprises property, plant & equipment, intangible assets and other assets.
Half year ended
YoY
HoH 30 Jun 31 Dec 30 Jun
Profit & Loss Account change
change 2023 2022 2022
GBP'million GBP'million GBP'million
Underlying net interest income 22% (1%) GBP221.5 GBP223.3 GBP180.9
Underlying net fee and other income 14% 1% GBP63.3 GBP62.6 GBP55.3
Underlying net gains on sale of assets GBP0.8 - -
Total underlying revenue 21% - GBP285.6 GBP285.9 GBP236.2
Underlying operating costs (3%) (3%) (GBP258.2) (GBP266.5) (GBP266.3)
Expected credit loss expense (GBP11.3) (GBP22.0) (GBP17.9)
Underlying profit/(loss) before tax GBP16.1 (GBP2.6) (GBP48.0)
Impairment and write-off of property plant & equipment and intangible - (GBP1.5) (GBP8.2)
assets
Transformation costs - (GBP2.3) (GBP1.0)
Remediation costs GBP0.8 (GBP2.3) (GBP3.0)
Holding company insertion (GBP1.5) (GBP1.8) -
Statutory profit/(loss) before tax GBP15.4 (GBP10.5) (GBP60.2)
Statutory taxation (GBP2.7) (GBP0.5) (GBP1.5)
Statutory profit/(loss) after tax GBP12.7 (GBP11.0) (GBP61.7)
Half year ended
30 Jun 31 Dec 30 Jun
Key metrics
2023 2022 2022
Underlying earnings per share - basic 7.8p (2.0p) (28.5p)
Number of shares 172.6m 172.5m 172.4m
Net interest margin (NIM) 2.14% 2.11% 1.73%
Cost of deposits 0.66% 0.25% 0.14%
Cost of risk 0.18% 0.33% 0.29%
Arrears rate 3.5% 3.2% 3.1%
Underlying cost:income ratio 90% 93% 113%
Tangible book value per share GBP4.42 GBP4.29 GBP4.30
Enquiries
For more information, please contact:
Metro Bank PLC Investor Relations
Jo Roberts
+44 (0) 20 3402 8900
IR@metrobank.plc.uk
Metro Bank PLC Media Relations
Tina Coates / Mona Patel
+44 (0) 7811 246016 / +44 (0) 7815 506845
pressoffice@metrobank.plc.uk
Teneo
Charles Armitstead / Haya Herbert Burns
+44 (0) 7703 330269 / +44 (0) 7342 031051
Metrobank@teneo.com
S
About Metro Bank
Metro Bank services 2.8 million customer accounts and is
celebrated for its exceptional customer experience. It is the
highest rated high street bank for overall service quality for
personal customers and the best bank for service in-store for
personal and business customers, in the Competition and Markets
Authority's Service Quality Survey in February 2023. Metro Bank has
also been awarded "2023 Best Lender of the Year - UK" in the
M&A Today, Global Awards, "Best Mortgage Provider of the Year"
in 2022 MoneyAge Mortgage Awards, "Best Business Credit Card" in
2022 Moneynet Personal Finance Awards, "Best Business Credit Card
2022", Forbes Advisor, "Best Current Account for Overseas Use" by
Forbes 2022 and accredited as a top ten Most Loved Workplace 2022.
It was "Banking Brand of The Year" at the Moneynet Personal Finance
Awards 2021 and received the Gold Award in the Armed Forces
Covenant's Employer Recognition Scheme 2021.
The community bank offers retail, business, commercial and
private banking services, and prides itself on giving customers the
choice to bank however, whenever and wherever they choose, and
supporting the customers and communities it serves. Whether that's
through its network of 76 stores open seven days a week, 362 days a
year; on the phone through its UK-based contact centres; or online
through its internet banking or award-winning mobile app, the bank
offers customers real choice.
Metro Bank Holdings PLC (registered in England and Wales with
company number 14387040, registered office: One Southampton Row,
London, WC1B 5HA) is the listed entity and holding company of Metro
Bank PLC.
Metro Bank PLC (registered in England and Wales with company
number 6419578, registered office: One Southampton Row, London,
WC1B 5HA) is authorised by the Prudential Regulation Authority and
regulated by the Financial Conduct Authority and Prudential
Regulation Authority. 'Metrobank' is a registered trademark of
Metro Bank PLC. Eligible deposits are protected by the Financial
Services Compensation Scheme. For further information about the
Scheme refer to the FSCS website www.fscs.org.uk. All Metro Bank
products are subject to status and approval.
Metro Bank is an independent UK bank - it is not affiliated with
any other bank or organisation (including the METRO newspaper or
its publishers) anywhere in the world. Please refer to Metro Bank
using the full name.
METRO BANK HOLDINGS PLC
Interim report for the half year ended 30 June 2023
Forward-looking statements
This interim report contains statements that are, or may be
deemed to be, forward-looking statements. Forward-looking
statements typically use terms such as 'believes', 'projects',
'anticipates', 'expects', 'intends', 'plans', 'may', 'will',
'would', 'could' or 'should' or similar terminology. Any
forward-looking statements in this interim report are based on
Metro Bank Holdings PLC's ("the Group", "the Bank", "we" or "our")
current expectations. By their nature, forward-looking statements
are subject to a number of risks and uncertainties, many of which
are beyond our control, that could cause our actual results and
performance to differ materially from any expected future results
or performance expressed or implied by any forward-looking
statements. As a result, you are cautioned not to place undue
reliance on such forward-looking statements. Past performance
should not be taken as an indication or guarantee of future
results, and no representation or warranty, expressed or implied,
is made regarding future
performance.
No assurances can be given that the forward-looking statements
in this interim report will be realised. We undertake no obligation
to release the results of any revisions to any forward-looking
statements in this interim report that may occur due to any change
in its expectations or to reflect events or circumstances after the
date of this announcement and we disclaim any such obligation.
Basis of preparation
Financial information in this interim report is prepared on a
statutory (taken from our financial statements) and underlying
basis (which we use to assess performance on a management
basis).
Further details on how we calculate underlying performance, as
well as our other alternative performance measures can be found
later in this release.
To meet Bank of England's resolution requirements, on 19 May
2023, Metro Bank Holdings PLC was inserted as the new ultimate
holding company and listed entity of the Group. Prior to this date
Metro Bank PLC was both a banking entity and the ultimate parent
company of the Group but has subsequently become a 100% subsidiary
of Metro Bank Holdings PLC. These financial statements are have
been prepared as if Metro Bank Holdings PLC had been the parent
company throughout the current and prior years, to treat the new
structure as if it has always been in place. Further details on the
insertion of Metro Bank Holdings PLC can be found in note 1 to the
condensed consolidated interim financial statements.
sumMarised interim results
Half year to Half year to Half year to
Change Change
30 Jun 2023 31 Dec 2022 30 Jun 2022
Profit and loss
Underlying profit/(loss) before tax1 GBP16.1m (GBP2.6m) n/a (GBP48.0m) n/a
Statutory profit/(loss) before tax GBP15.4m (GBP10.5m) n/a (GBP60.2m) n/a
Total income (statutory) GBP286.4m GBP287.0m - GBP236.5m 21%
Total operating expenses (statutory) GBP259.7m GBP275.5m (6%) GBP278.8m (7%)
Net interest margin 2.14% 2.11% 3bps 1.73% 41bps
Cost of deposits 0.66% 0.25% 41bps 0.14% 52bps
Return on tangible equity 2% (1%) 3pps (8%) 10pps
30 Jun 2023 31 Dec 2022 Change 30 Jun 2022 Change
Balance sheet
Customer deposits GBP15,529m GBP16,014m (3%) GBP16,514m (6%)
Customer loans GBP12,572m GBP13,102m (4%) GBP12,364m 2%
Loan to deposit ratio 81% 82% (1pp) 75% 6pps
Total assets GBP21,747m GBP22,119m (2%) GBP22,566m (4%)
Tangible book value per share GBP4.42 GBP4.29 3% GBP4.30 3%
Asset quality
Coverage ratio 1.54% 1.41% 13bps 1.36% 18bps
Cost of risk 0.18% 0.33% (15bps) 0.29% (11bps)
Capital ratios
Common Equity Tier 1 (CET1) ratio 10.4% 10.3% 10.6%
Total capital ratio 13.2% 13.4% 13.8%
Total regulatory capital plus MREL ratio 18.1% 17.7% 18.3%
Regulatory leverage ratio 4.4% 4.2% 4.3%
Customer metrics
Customer accounts 2.8m 2.7m 2.6m
Stores 76 76 76
1. Underlying profit/(loss) before tax is an alternative performance measure and excludes items consideredto distort period-on-period comparisons, in order to provide readers with a better and more relevant understandingof the underlying trends in the business. A reconciliation between our statutory and underlying results can befound later in this release.
officers and external auditors
As at 30 June 2023
Board of Directors
Executive Directors
Daniel Frumkin Chief Executive Officer
James Hopkinson Chief Financial Officer
Non-executive Directors
Robert Sharpe Chair (N)
Anna (Monique) Melis Senior Independent Director (A,N)
Catherine Brown Independent Non-Executive Director (N,P,R)
Dorita Gilinski Shareholder-Nominated Non-Executive Director
Anne Grim Independent Non-Executive Director (P)
Ian Henderson Independent Non-Executive Director (A,R)
Paul Thandi CBE Independent Non-Executive Director (P,N)
Michael Torpey Independent Non-Executive Director (A,R)
Independent Non-Executive Director and Designated Non-Executive Director for
Nicholas Winsor MBE
Colleague Engagement (R)
(A) Member of the Audit Committee
(N) Member of the Nomination Committee
(P) Member of the People and Remuneration Committee
(R) Member of the Risk Oversight Committee
Company Secretary
Stephanie Wallace General Counsel and Company Secretary
On 31 July 2023 Clare Gilligan joined as our new Company
Secretary, taking over from Stephanie Wallace (our General Counsel)
who was filling the role on a temporary basis following the
departure of our previous Company Secretary, Melissa Conway in
December 2022.
Independent auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
BUSINESS review
The first six months of 2023 mark our first set of results since
we completed our turnaround at the end of 2022 and has seen us
deliver our strongest financial performance in several years. I am
pleased to report our first half year of statutory profitability,
with a profit before tax of GBP15.4 million (half year to 31
December 2022: loss of GBP10.5 million; half year to 30 June 2022:
loss of GBP60.2 million), as well as our third successive quarter
of profitability on an underlying basis. This was delivered whilst
retaining the top spot as the highest rated high street bank for
overall service quality for personal customers in the CMA's latest
Service Quality Survey, for the tenth time running.
This momentum is evidence that our business model works, and
that combined with continued execution of our strategic priorities
is seeing us deliver on our ambition to be the number one community
bank.
Progress against our strategic priorities
We have always been clear that we are building a business for
the long-term, that can meaningfully scale and unleash its full
capabilities as and when we are able to access additional growth
capital. Our return to profitability on a statutory basis is an
important milestone in this journey.
Key to this has been the continued delivery of our strategic
priorities. At the start of the year, we refreshed these to move
our focus from fixing the problems of the past to leveraging the
strengths of our business model for future growth, whilst keeping
the headline priorities the same.
Revenue
Total revenue increased year-on-year to GBP286.4 million from
GBP236.5 million, but remained flat compared to the second half of
2022 (GBP287.0 million). We continued to see increased momentum in
interest income as rate rises continued to flow through to our
variable rate and front book lending pricing, although net interest
income was constrained by a rise in our cost of deposits, which was
impacted by our return to the fixed term deposit market, as
previously guided. Fixed term deposits increased to GBP1,205
million (31 December 2022: GBP625 million) and now represent 8% of
balances (31 December 2022: 4%) and provide additional duration
into our deposit base.
Overall, we saw our total deposits fall 3% to GBP15,529 million
(31 December 2022: GBP16,014 million) as cost of living pressures
saw customers draw down balances. Whilst the competitive savings
environment put pressures on pricing, our service-led proposition
continues to ensure we maintain a high-quality deposit position. In
the second quarter of the year we saw balances stabilise with
inflows in June, a trend that continued in July. Although average
balances have reduced we continue to win customers, with new
personal and business currents of 106,000 and 23,000 respectively,
demonstrating our proposition continues to resonate in a
competitive marketplace.
Costs
Our total operating expenses fell 7% year-on-year to GBP259.7
million (half year to 31 December 2022: GBP275.5 million; half year
to 30 June 2022: GBP278.8 million), despite a backdrop of
persistently high inflation. This helped drive positive jaws of 28%
year-on-year and 6% half-on-half.
The cost reductions have been achieved through our continued
focus on cost discipline and the successful implementation of
initiatives that enable the Bank to scale appropriately. Operating
costs were aided by roll-off of legacy issues as well as the ending
of our transformation plan.
We incurred additional costs in the first half of the year from
the insertion of our new holding company, Metro Bank Holdings PLC.
We completed this in May and it marks another key step in
delivering our requirements under the Bank of England Resolution
Framework.
Balance sheet optimisation
Over the past three years we have built a suite of products that
will allow us to compete in any interest rate environment, allowing
us to appropriately react to market conditions. A clear example of
this is our RateSetter capabilities, where we were able to
appropriately scale this whilst interest rates were low. As rates
have increased and the economic outlook remains uncertain, we have
been able to moderate originations within this portfolio. This has
seen the average borrower salary increase to GBP49,000 (half year
to 30 June 2022: GBP46,000) ensuring we continue to maintain a
strong level of credit quality.
Our continued discipline to focus on return on regulatory
capital has instead seen us put a greater emphasis on building our
mortgage pipeline as well as focus on the treasury portfolio, both
of which provide meaningfully higher returns than at the start of
the year. As part of this focus we also continue to progress our
AIRB application for residential mortgages.
We continue to let balances in our commercial book attrite,
particularly in the commercial real estate sector, where we have
significantly reduced our exposure over the past few years. This
combined with the run-off of COVID-related government backed
lending has seen commercial lending as a proportion of the total
book fall marginally to 30% of total loans as at 30 June 2023 (31
December 2022: 31%; 30 June 2022: 36%). Despite this fall we
continue to remain committed to maintaining a strong commercial
lending offering but are focused primarily on higher-quality
relationship driven business. This includes the strengthening of
our business overdraft product which we launched in 2022 and a new
business credit card offering that we will launch in the second
half of the year, which as well as supporting lending growth offers
the potential for increased fee income.
Infrastructure
We maintain our focus on building out our digital and physical
infrastructure to both ensure that we keep the Bank safe and secure
today, and invest for the growth of tomorrow. The first half of the
year has seen us lay the groundwork for the expansion of our store
network in the North of England. Whilst competitors continue to
shrink their branch numbers and reduce hours, we are continuing to
see the benefits of being rooted in the communities we serve and
believe this will continue to differentiate our proposition in the
years ahead.
Alongside our physical offering we have worked to enhance our
digital infrastructure. This included a major transformation of our
mortgage origination platform, which will streamline the process
for both mortgage intermediaries and customers. As well as being
beneficial for customers it will allow us to be much more flexible
in the markets we choose to operate in, including our upcoming
products for shared ownership and limited company buy-to-let.
Alongside this we have continued our investment in automating
customer journeys and working to deliver end-to-end digital
products. This includes our auto-finance proposition which we
launched at the end of 2022 and our soon to be launched business
credit card. Ensuring this fully digital approach will allow us to
scale these lending streams up as well as drive greater
productivity and efficiency across the Bank.
In addition to our investment in our lending streams we are
focused on enhancing our deposit proposition, to ensure we retain a
competitive suite of products. This investment will improve our
switching capabilities to better compete within the ISA market as
well as offer a broader range of savings accounts including a
savings-boost propositions and RateSetter branded savings account.
Given earlier investment prioritisation elsewhere, our market share
in these products is lower than for other core products and
therefore represents an opportunity for growth.
Communications
We continue to focus on engaging our colleagues, communities and
other stakeholders to push forward our story.
I am pleased that in the first half of the year we have seen
record levels in colleague engagement scores. We continue to focus
on our culture of promoting from within, with over 40% of the
positions filled in the first half of the year, partly as a result
of colleagues being promoted or moving around the business. For the
remaining hires we have amplified our community focus when
recruiting talent, increased opportunities available for
apprentices from disadvantaged backgrounds into new areas of the
Bank, run a series of roadshows for professional returners trying
to get back into the workplace, and engaged with later in career
populations to support our diverse workforce. We have also
introduced a new optional shift pattern, whereby store colleagues
can now take a three-day break benefiting those colleagues who need
more flexibility in their working week.
We have worked harder than ever for our local communities and
become even more inclusive by rolling out our BSL Sign Language
service which customers can now access in any of our 76 stores, or
on the phone, in app or online.
Our financial education programme Money Zone has now been
delivered to 2,800 schools and 250,000 children - we were even
invited to deliver Money Zone to 1,100 children in just one day at
the Hertfordshire Agricultural Society Food & Farming Day.
Later this year we are extending the scheme with bespoke programmes
for our armed forces' communities as well as to teenagers aged
16-18.
52 of our stores are now designated as Safe Spaces - places
where those suffering domestic abuse can go to safely go to start
the process of rebuilding their lives.
Our colleagues remain supportive of their local communities and
have helped collect and donate thousands of items to local
foodbanks. Colleagues have also volunteered to feed the homeless,
care for abandoned dogs, walked up hill and down dale for charity,
picked up litter, ran miles - sometimes over obstacle courses,
celebrated Pride in London, Birmingham and Cardiff and even
organised our first charity golf day.
We continue to provide support to our customers who are
struggling and during the year we signed up to the government's
recently announced Mortgage Charter.
I'm also delighted that Metro Bank has become the first ever
champion partner of women's and girls' cricket. It represents a
real partnership with purpose built on Metro Bank's commitments to
local communities and diversity and inclusion and will help to
deliver a lasting legacy for women's and girls' cricket.
Capital
I am pleased to say that in the first half of 2023, our return
to profitability and our strategic management of risk-weighted
assets (RWAs) both supported organic capital accretion. Whilst we
continue to operate in capital buffers, we remain in close dialogue
with the regulators regarding our future plans and also the ongoing
work relating to our AIRB application.
The regulators remain supportive and on 1 January 2023 the
Prudential Regulation Authority (PRA) reduced our Pillar 2A capital
requirement from 0.50% to 0.36%. This was followed by a further
extension to the pre-existing adjustment (announced 9 December
2022) with respect to the existing GBP250 million 9.139% Tier 2
Notes issued by Metro Bank PLC regarding minimum requirement for
own funds and eligible liabilities (MREL) eligibility. The Bank of
England's Resolution Directorate has agreed the adjustment now
extends the MREL eligibility to the instrument's maturity date on
26 June 2028.
On 5 July 2023, however, the scheduled increase in the Bank of
England's Countercyclical Buffer (CCyB) came into effect,
increasing the level from 1% to 2%. Accordingly, our Tier 1
requirement, including the combined public buffers, increased from
9.8% to 10.8% and we are therefore now operating within buffers for
Tier 1 capital as well as MREL, however we remain above all of our
minimum capital requirements.
We continue to consider all options, across the capital stack,
that could strengthen our capital base.
Outlook
Over the past few years we have built a stable business
foundation, fixing issues of the past whilst positioning ourselves
for the future. I am pleased our return to profitability in the
first six months, the first since our transformation plan
completed, demonstrates that our approach is working. We have
delivered this despite challenging headwinds and I would like to
acknowledge the dedication and unwavering hard work of each and
every colleague who has helped us to get where we are today.
Our proposition continues to resonate with customers and is
providing a force for good in UK banking. We have created the
infrastructure and capability to enable us to provide a
differentiated customer offering as well as meaningful alternative
to further communities in the years ahead.
Daniel Frumkin
Chief Executive Officer
31 July 2023
Finance review
Our results for the first six months of 2023 mark an important
milestone in our journey, as we report our first full half year of
profitability since 2019. The statutory profit before tax of
GBP15.4 million (half year to 31 December 2022: loss of GBP10.5
million; half year to 30 June 2022: loss of GBP60.2 million)
reflects the improved performance of the business, driven by the
actions taken as part of the turnaround plan and more recent
measures to optimise the return on the balance sheet and mitigate
the impact of cost inflation.
The Bank's return to profitability, combined with a reduction in
RWAs, supported our capital ratios in the first half, although were
impacted by a step down in the IFRS 9 transition relief on 1
January 2023. We ended the period with CET1 capital ratio of 10.4%
and an MREL ratio of 18.1%. These compared to the regulatory minima
including buffers as at 30 June 2023 (excluding any confidential
buffer) of 8.2% for CET1 and 20.2% for MREL. We therefore continue
to operate within our capital buffers, although remained above
regulatory minima throughout the period.
The underlying business has continued to attract new customers,
totalling 129,000 new business and personal current accounts in the
first half of the year. This inflow of new customers has partially
offset the market-wide reduction in average current account
balances. We have started to see our deposits stabilise with
increases in balances in June and July partially offsetting the
outflows seen earlier in the year, aided by our return to the
fixed-term deposit market.
Whilst the performance for the first six months of the year is
positive, we remain cautious given the continued volatile external
economic conditions, the impact of inflation on cost of living and
the increasingly competitive deposit market as interest rates
rise.
Income statement review
Table 1: Summary income statement
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022 Year-on-year
(unaudited) (audited) (unaudited) change
GBP'million GBP'million GBP'million
Net interest income 221.5 223.3 180.8 23%
Net fee, commission and other income 64.1 63.7 55.7 15%
Net gains on sale of assets 0.8 - - n/a
Total income 286.4 287.0 236.5 21%
General operating expenses (221.4) (234.4) (233.2) (5%)
Depreciation and amortisation (38.3) (39.6) (37.4) 2%
Impairment and write-off of PPE and intangible assets - (1.5) (8.2) n/a
Expected credit loss expense (11.3) (22.0) (17.9) (37%)
Profit/(loss) before tax 15.4 (10.5) (60.2) n/a
Taxation (2.7) (0.5) (1.5) 80%
Profit/(loss) after tax 12.7 (11.0) (61.7) n/a
Net interest income
The continued increase in base rate over the past 18 months has
driven growth in net interest income, which rose to GBP221.5
million, up 23% compared to a year ago (half year to 30 June 2022:
GBP180.8 million) aided by a continued disciplined approach with
respect to both pricing and mix.
Half-on-half net interest income reduced marginally from
GBP223.3 million, as a continued increase in asset yield was offset
by increased deposit pricing, in part due to our decision to
re-enter the fixed term deposit market, and the market-wide
reduction in average current account balances. This trend was also
reflected in muted net interest margin growth, which increased
slightly to 2.14% half-on-half (half year to 31 December 2022:
2.11%; half year to 30 June 2022: 1.73%).
The Bank of England base rate rises in the period have flowed
through to our front book loan pricing and variable rate lending.
This has driven an increase in interest income both year-on-year
and half-on-half to GBP400.1 million (half year to 31 December
2022: GBP324.0 million; half year to 30 June 2022: GBP239.7
million).
As at 30 June 2023 91% of our retail mortgages were fixed rate
(31 December 2022: 90%, 30 June 2022: 87%) with a weighted average
life of 2.40 years before they reprice (31 December 2022: 2.45
years; 30 June 2022: 1.97 years). In our consumer term lending and
BBLS (closed to new borrowers) portfolios, all of the loans are
fixed rate, limiting the impact of rising rates on these
portfolios. As our fixed-rate lending rolls-off it will be replaced
with higher-yielding loans. We therefore anticipate seeing
continued interest income growth.
The rise in base rates has also partially flowed through to
deposits, with cost of deposits increasing to 0.66% in the first
six months of the year, up from 0.14% in the first half, and 0.25%
in the second half of 2022. This increase has been driven in part
by our return to the fixed-term deposit market as previously guided
due to the market-wide decline in average balances.
Interest expense was GBP178.6 million in the period, up from
GBP58.9 million in the first half of last year and GBP100.7 million
in the six months to 31 December 2022. The rise in interest expense
over the period also reflects the increase cost of wholesale
funding, notably the amounts borrowed from the Bank of England
under the Term Funding Scheme for SMEs. As the cost of this funding
is directly linked to base rate it has increased significantly in
the first half of the year to GBP78.0 million, compared to GBP13.1
million in the first half of last year and GBP42.4 million in the
last six-month of 2022. We do not rely on this funding for
operational activities and our lending remains entirely deposit
funded. It does however provide an additional form of stable
funding which, whilst dilutive to net interest margin, can be
deployed into high quality floating rate securities or assets.
Fee, commission and other income
Statutory net fee, commission and other income has increased
year-on-year to GBP64.1 million from GBP55.7 million and remained
broadly flat from the last six months (half year to 31 December
2022: GBP63.7 million).
Service charges and other fee income increased year-on-year as
we continue to see increasing customer activity through account
acquisition, although growth slowed in comparison to the second
half of the year as transaction volumes reduced, driven by a
decline in consumer spending, resulting from cost of living
pressures.
Operating expenses
Total statutory operating expenses decreased to GBP259.7 million
from GBP278.8 million in the first six months of 2022 and from
GBP275.5 million in the second half of 2022, reflecting our
continued cost discipline despite high inflation conditions. The
reduction also reflects a continued lessening in our use of
contractors, leading to a reduction in our spend on professional
fees. People-related costs at GBP120.4 million during the period
were broadly flat compared to GBP119.9 million a year earlier and
GBP116.7 million in the second half of 2022, despite delivering an
average pay rise across our workforce of 5% in April 2023.
The reduction in statutory operating expense was aided by the
reduction in non-underlying expenses as we completed our
transformation program and closed outstanding legacy issues. Most
of the non-underlying costs recognised during the period related to
the implementation of our holding company in May this year and as
such are not forecast to recur going forward.
Expected credit loss expense
We recognised an expected credit loss (ECL) expense of GBP11.3
million for the period (half year to 30 June 2022: GBP17.9 million;
half year to 31 December 2022: GBP22.0 million). The ECL charge in
the period reflects the challenging external economic conditions
and the maturation of the loan books, offset by ECL releases from
commercial repayments and management's actions to constrain lending
growth. As part of our approach to calculating ECL we continue to
maintain management overlays and adjustments of GBP24.1 million (31
December 2022: GBP30.9 million) which represent 12% of the total
ECL stock (31 December 2022: 17%). As at 30 June 2023 our coverage
ratio increased to 1.54% (31 December 2022: 1.41%).
Despite the challenging external conditions, we have recognised
fewer individual impairments in the first six months of the year,
particularly in the commercial space as customers remain resilient
despite the economic environment and we have also seen repayments
which have resulted in ECL releases in the period. We continue to
have high levels of collateral with average debt to value for
retail mortgages and commercial term loans as at 30 June of 58% and
55% respectively (31 December 2022: 56% and 55% respectively).
Within our consumer lending portfolio, we undertake a robust
approach to credit decisioning and have seen few signs of
deterioration in credit quality. At a total level non-performing
loans (NPLs) representing 2.86% of gross lending (31 December 2022:
2.65%).
Balance sheet review
Table 2: Summary balance sheet
30 Jun 2023 31 Dec 2022
(unaudited) (audited) Change
GBP'million GBP'million
Assets
Cash and balances with the Bank of England 2,708 1,956 38%
Loans and advances to customers 12,572 13,102 (4%)
Investment securities held at fair value through other comprehensive income 489 571 (14%)
Investment securities held at amortised cost 4,826 5,343 (10%)
Financial assets held at fair value through profit and loss 1 1 -
Derivatives financial assets 26 23 13%
Property, plant and equipment 733 748 (2%)
Intangible assets 207 216 (4%)
Prepayments and accrued income 107 85 26%
Other assets 78 74 5%
Total assets 21,747 22,119 (2%)
Liabilities
Deposits from customers 15,529 16,014 (3%)
Deposits from central banks 3,800 3,800 -
Debt securities 573 571 -
Repurchase agreements 363 238 53%
Derivative financial liabilities 25 26 (4%)
Lease liabilities 238 248 (4%)
Deferred grant 17 17 -
Provisions 5 7 (29%)
Deferred tax liability 12 12 -
Other liabilities 215 230 (7%)
Total liabilities 20,777 21,163 (2%)
Total equity 970 956 1%
Deposits
The Bank remains highly liquid and deposit funded. The Bank's
loan to deposit ratio was 81% as at 30 June 2023 compared to 82% at
the end of 2022. The Bank's deposit mix remains focused on core
deposits (covering current and interest-bearing savings accounts),
representing 92% of total deposits.
During the first six months of the year deposits reduced from
GBP16,014 million to GBP15,529 million, primarily driven by a
reduction in average account balances. This reduction reflects
increased costs of living, including interest costs, paying down
borrowing, as well as seasonal factors such as tax payments in
January and a greater propensity to transfer surplus current
account balances into higher yielding accounts.
Although average balances have reduced our core deposit
franchise remains resilient to increased competition in the market
and continues to attract new customers, opening 106,000 Personal
Current Accounts and 23,000 Business Current Accounts in the first
half. The more recent deposit trajectory has been positive with net
inflows towards the end of the period.
As guided at the full year we have started to re-enter the fixed
term deposit market, after several years of letting these balances
reduce. As at 30 June 2023, fixed term deposits were GBP1,205
million (31 December 2022: GBP625 million) representing only 8% (31
December 2022: 4%) of total deposits. We intend to continue to
gradually increase fixed term deposits as we introduce more tenure
into our deposit profile.
During the period the Bank has invested in building out a
competitive range of products for the current rate environment.
This investment will improve our switching capabilities to better
compete within the ISA market as well as offer a broader range of
savings accounts including savings-boost propositions. Given
earlier investment prioritisation elsewhere, our market share in
these products is lower than for other core products and therefore
represents an opportunity for growth.
Lending
As previously guided the Bank is actively constraining the new
lending to around or below replacement levels. Accordingly, net
lending decreased during the period to GBP12,572 million compared
to GBP13,102 million at the end of 2022.
Gross commercial lending made up the largest component of the
reduction, decreasing 9% to GBP3,768 million from GBP4,160 million
at 31 December 2022. This reflects the continued reduction in the
professional buy-to-let portfolio and commercial real estate
portfolios which reduced by 13% from GBP1,412 million to GBP1,234
million in the period. We also continue to see a reduction in
government-backed lending, which are closed to new borrowers, as
these loans are paid back, with balances reducing from GBP1,313
million as at 31 December 2022 to GBP1,109 million at the end of
June 2023.
Gross consumer lending reduced to GBP1,410 million (GBP1,480
million at 31 December 2022) Whilst the Bank has not sought to
build the consumer lending portfolio during the period, it remains
an important product area through the cycle and we continue to
build out the breadth of our offering including through the launch
of a new motor finance proposition towards the end of 2022.
Gross mortgage balances also reduced slightly to GBP7,591
million from GBP7,649 million at 31 December 2022 as originations
were kept broadly in line with repayments. Our retail mortgage
portfolio continues to be primarily focused on owner occupied
loans. These make up 72% of balances at 30 June 2023 (31 December
2022: 72%) and continue to have a low loan to value profile. We
continue to progress our AIRB application in respect of our retail
mortgages portfolio.
Property, plant & equipment and intangibles
Non-current assets and intangible asset balances continued to
decrease during the period as depreciation and amortisation charges
exceeded the level of additions. Property plant and equipment ended
the first half of the year at GBP733 million, down from GBP748
million at year end, as we did not open any additional stores in
the period. Stores remain core to our service offering and we
continue to evaluate a pipeline of sites to deliver on our
commitment of 11 new stores in the North of England, which we
expected to open in 2024 and 2025, expanding our reach into new
markets.
Intangible assets also continued to decrease to GBP207 million
from GBP216 million as at 31 December 2022, reflecting how we have
reduced the levels of investment from the peaks during the
turnaround period. Alongside key regulatory enhancement projects we
have invested more recently in our deposit proposition as well as
enhancing our core service offering, which includes the delivery of
confirmation of payee which was launched in July 2023, enhanced
business overdrafts which are delivered entirely electronically and
the roll out of our new mortgage platform.
Capital
Our return to profitability in the first half of the year
combined with moderated asset origination, and therefore moderated
RWA deployment, has seen us generate organic capital through the
period. Risk weighted assets ended the period at GBP7,802 million,
a reduction of 2% from GBP7,990 million as at 31 December 2022. The
reduction has been driven by a decrease in lending volumes partly
offset by an increase to our annual operational risk
adjustment.
Table 3: Capital ratios and requirements
30 Jun 2023
Minimum requirement excluding Minimum requirement including
(unaudited) buffers¹ buffers¹
GBP'million
CET1 10.4% 4.7% 8.2%
Tier 1 10.4% 6.3% 9.8%
Total regulatory capital 13.2% 8.4% 11.9%
Total regulatory capital plus 18.1% 16.7% 20.2%
MREL 1. Excluding any confidential buffer, where applicable. Countercyclical buffer increased by 1% to 2% on 5July 2023
The MREL requirement of 16.7% reflects the reduction of our
Pillar 2A requirements from 0.50% to 0.36%, from the 1 January
2023, and the decision by the Bank of England to set our binding
MREL requirement as the lower of 18% and two times the sum of
Pillar 1 and Pillar 2A, which were announced in June 2022.
On 5 July 2023 the scheduled increase in the CCyB came into
effect, increasing the level from 1% to 2%. Accordingly, the Bank's
Tier 1 requirement, including the combined public buffers,
increased from 9.8% to 10.8%. The Bank's Tier 1 ratio as at 30 June
2023 (including profits) was 10.4% and we are therefore now
operating within buffers for Tier 1 capital as well as MREL,
however the Bank remains above all of its minimum capital
requirements.
In May we completed the implementation of our holding company
marking an important milestone in meeting our requirements in
respect of the Bank of England's resolution framework. Upon the
implementation of the holding company our existing MREL debt moved
up to sit within the new holding company entity. This consists of
GBP350 million of 9.5% Senior Non preferred notes which have a call
date on 8 October 2024. The Board continues to review our options,
across the capital stack, to strengthen our capital base, including
the refinancing of this MREL debt.
Our Tier 2 notes however have remained within the existing
banking entity (Metro Bank PLC), although following the agreement
by the Bank of England's Resolution Directorate on 28 July 2023,
these will continue to contribute to our MREL requirements up until
their maturity on 26 June 2028. The Tier 2 notes had a call date
during the first six months of the year and we took the decision
not to exercise this. As a result the coupon on this instrument
reset from 5.500% to 9.139%. By not calling the notes their Tier 2
eligibility will amortise over their remaining life at a rate of
20% each year, calculated on a daily basis. Following the insertion
of the new holding company, these notes are also now subject to a
haircut at the Group level.
Liquidity and wholesale funding
We continue to maintain strong levels of liquidity. We ended 30
June 2023 with a Liquidity Coverage Ratio (LCR) of 214% (31
December 2022: 213%) which continues to be significantly in excess
of the regulatory requirements of 100%.
We remain primarily deposit funded with our loan to deposit
ratio at the 30 June 2023 being 81% (31 December 2022: 82%). Whilst
we utilise wholesale funding in the form of the Bank of England's
Term Funding Scheme (TFSME) and repurchase agreements, these act as
additional stable forms of funding and liquidity.
As at 30 June 2023 the Bank held GBP2,708 million in cash and
balances at the Bank of England (31 December 2022: GBP1,956
million) with a further GBP5,315 million in high quality investment
securities (31 December 2022: GBP5,914 million), which nearly all
are AAA rated or are UK Gilts. Of our total investment securities
GBP4,826 million, 91% are held at amortised cost (31 December 2022
GBP5,343 million; 90%). Given the rising rate environment the fair
value of these securities is GBP4,502 million (31 December 2022:
GBP5,009 million). As we have no intention to sell these
securities, their fair value will pull back to carrying value as
they approach maturity.
The weighted-average repricing duration on the portfolio
(excluding cash) is 1.1 years and virtually all the securities are
Bank of England eligible so are available for entering into
repurchase agreements, should we need additional liquidity. The
remaining GBP489 million of our investment securities are held at
fair value and therefore market movements on these assets are
already reflected in our reserves and capital ratios.
Going concern and outlook
These condensed consolidated interim financial statements are
prepared on a going concern basis, as the Directors are satisfied
that the Group has the resources to continue to operate for a
period of at least twelve months from when the interim financial
statements are authorised for issue. In making this assessment, the
Directors considered a wide range of information relating to
present and future conditions, including future projections of
profitability, liquidity and capital resources as well as factoring
in the uncertainties relating to the economic and market outlook
and future financing requirements.
Given the Bank's year to date performance and taking account of
the external environment, we reiterate the guidance that we are
targeting mid-single digit return on tangible equity by 2024.
James Hopkinson
Chief Financial Officer
31 July 2023
RISK review
As at 30 June 2023, our business model, risk management
framework and risk appetites remain consistent with our 2022 Annual
Report and Accounts. The key risks we face (our 'principal risks')
are unchanged:
-- Credit risk - The risk of financial loss should our borrowers
or counterparties fail to fulfil theircontractual obligations in
full and on time.
-- Capital risk - The risk that we fail to meet minimum
regulatory capital (and MREL) requirements.
-- Liquidity and Funding risk - The risk that we fail to meet
our short-term obligations as they fall due orthat we cannot fund
assets that are difficult to monetise at short notice (i.e.
illiquid assets) with funding thatis behaviourally or contractually
long term (i.e. stable funding).
-- Market risk - The risk of loss arising from movements in
market prices. Market risk is the risk posed toearnings, economic
value or capital that arises from changes in interest rates, market
prices or foreign exchangerates.
-- Operational risk - The risk that events arising from
inadequate or failed internal processes, people andsystems, or from
external events cause regulatory censure, reputational damage,
financial loss, service disruptionand/or detriment to our
customers.
-- Financial crime - The risk of financial loss or reputational
damage due to regulatory fines, restrictionor suspension of
business, or cost of mandatory corrective action as a result of
failing to comply with prevailinglegal and regulatory requirements
relating to financial crime.
-- Regulatory risk - The risk of regulatory sanction, financial
loss and reputational damage as a result offailing to comply with
relevant regulatory requirements.
-- Conduct risk - The risk that our behaviours or actions result
in unfair outcomes or detriment tocustomers and/ or undermines
market integrity.
-- Model risk - The risk of potential loss, poor strategic
decision making and regulatory non-compliance dueto decisions that
could be principally based on the output of models, due to errors
in the assumptions,development, implementation or use of such
models.
-- Strategic risk - The risk of having an insufficiently
defined, flawed or poorly implemented strategy, astrategy that does
not adapt to political, environmental, business and other
developments and/or a strategy thatdoes not meet the requirements
and expectations of our stakeholders.
-- Legal risk - The risk of loss, including to reputation, which
can result from lack of awareness ormisunderstanding of, ambiguity
in, or reckless indifference to, the way law applies to the
Directors, the business,its relationships, processes, products and
services.
We continue to actively monitor and regularly reassess our
exposure to each of these risks, with particular focus on those
that could result in events or circumstances that might harm our
customers, threaten our business model, solvency or liquidity, and
reputation.
Top risks
Our top risks are defined as risks which are considered to be
the most material to the Bank with the potential for the greatest
impact during the forthcoming 12 months and currently consist
of:
-- Macroeconomic risk (credit risk)
-- Capital risk
-- Financial crime risk
-- Regulatory risk
-- Technology risk
Further information on our top and emerging risks are outlined
below.
Credit risk
Credit portfolio performance has remained resilient during the
first half of 2023 despite a challenging external environment for
our customers. Notwithstanding the recent increases in market
expectations for interest rates, the overall macroeconomic outlook
has improved since the end of 2022. The overall impact of risk
profile, credit performance and macroeconomic outlook has resulted
in a cost of risk of 0.18% (six months to 31 December 22: 0.33%).
Expected credit losses
Table 4: Expected credit loss allowances
30 Jun 2023 31 Dec 2022
Change
GBP'million GBP'million
GBP'million
(unaudited) (audited)
Retail mortgages 21 20 1
Consumer lending 93 75 18
Commercial lending 83 92 (9)
Total expected credit loss allowances 197 187 10
ECL have increased during the year by GBP10 million to GBP197
million (31 December 2022: GBP187 million) predominantly driven by
maturation of the consumer portfolio, offset by repayments in
commercial and improvements in macroeconomic scenarios. As part of
our ECL we continue to hold overlays to reflect the continued
macroeconomic uncertainty given the high inflation and cost of
living pressures as well as anticipated interest rate increases not
fully captured in the latest macroeconomic scenarios and IFRS 9
models. Non-performing loans
Table 5: Non-performing loans
30 Jun 2023 (unaudited) 31 Dec 2022 (unaudited)
NPLs NPL ratio NPLs NPL ratio
GBP'million % GBP'million %
Retail mortgages 139 1.83% 111 1.45%
Consumer lending 68 4.82% 50 3.38%
Commercial lending 158 4.19% 191 4.59%
Total 365 2.86% 352 2.65%
NPLs increased to GBP365 million (31 December 2022: GBP352
million) with the overall NPL ratio increasing to 2.86% (31
December 2022: 2.65%). The NPL ratio for mortgages has increased to
1.83% (31 December 2022: 1.45%), driven largely by our legacy
acquired mortgage portfolios. These portfolios were not written
under our organic credit criteria, and we have seen poorer arrears
performance, exacerbated in the recent period as these have on
average poorer risk scores and are more likely to be on a variable
rate. The NPL ratio for consumer customers has increased to 4.82%
(31 December 2022: 3.38%) driven by the maturation of the
RateSetter loans portfolio. The NPL ratio for Commercial has
reduced to 4.19% (31 December 2022: 4.59%) driven by successful
BBLS claims and repayments as well as the write-off of a small
number of large commercial exposures. Cost of risk
Table 6: Cost of risk and coverage ratios
Cost of risk Coverage ratios
Half year to Full year to
30 Jun 2023 31 Dec 2022
30 Jun 2023 31 Dec 2022
(unaudited) (unaudited)
(unaudited) (unaudited)
% %
% %
Retail mortgages 0.02% 0.02% 0.28% 0.26%
Consumer lending 2.95% 2.26% 6.60% 5.07%
Commercial lending (0.52%) 0.11% 2.20% 2.21%
Cost of risk 0.18% 0.32% 1.54% 1.41%
The change in overall cost of risk is primarily driven by
increased ECL for consumer lending (resulting from maturation of
this portfolio) which now equates to 11% of our total lending (31
December 2022: 11%) and carries a higher cost of risk than retail
mortgages and commercial. As at the 30 June 2023 our coverage ratio
on our consumer lending portfolio stood at 6.60%, up from 5.07% as
the year-end. The cost of risk for retail mortgages has remained
flat. The cost of risk for commercial has reduced due to
improvements in macroeconomic scenarios and repayments of a small
number of large commercial exposures. Stage 2 balances
Stage 2 balances are identified using quantitative and
qualitative tests that determine the significant increase in credit
risk (SICR) criteria. In addition, customers that trigger the 30
days back stop classification are also reported in Stage 2, in line
with IFRS 9 standards.
Table 7: Stage 2 balances1
30 Jun 2023 (unaudited) 31 Dec 2022 (unaudited)
Gross carrying amount Loss allowance Gross carrying amount Loss allowance
GBP'million GBP'million GBP'million GBP'million
Quantitative 1,414 36 1,845 38
Qualitative 160 5 189 7
30 days past due backstop 51 6 54 6
Total Stage 2 1,625 47 2,088 51 1. Where an account satisfies more than one of the Stage 2 criteria above, the gross carrying amount andloss allowance has been assigned in the order presented. For example, an account that triggers both quantitativeand qualitative SICR criteria will only be reported as quantitative SICR.
Stage 2 balances have decreased in the first half of 2023, with
the quantitative SICR criteria continuing to be the primary driver
and improvements in macroeconomic outlook resulting in customers no
longer triggering SICR and transferring back to Stage 1. Marginal
decreases in Stage 2 balances have also been observed in the
qualitative and 30 days past due backstop criteria. As at 30 June
2023, 87% (31 December 2022: 88%) of Stage 2 balances triggered
quantitative SICR criteria, 10% (31 December 2022: 9%) triggered
qualitative SICR and the remaining 3% (31 December 2022: 3%)
triggered the 30 days past due backstop criteria. Credit risk
exposure by internal PD rating
Table 8: Credit risk exposure, by IFRS 9 12-month PD rating and
stage allocation1
30 Jun 2023 (unaudited)
Gross lending Loss allowance
GBP'million GBP'million
PD Range % Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Coverage
ratio
Band 1 0.00 - 2.99 8,937 380 - 9,317 33 3 - 36 0.39%
Band 2 3.00 - 16.99 1,346 994 - 2,340 27 25 - 52 2.22%
Band 3 17.00 - 99.99 496 251 - 747 1 19 - 20 2.68%
Band 4 100 - - 365 365 - - 89 89 24.38%
Total 10,779 1,625 365 12,769 61 47 89 197 1.54%
31 Dec 2022 (audited)
Gross lending Loss allowance
GBP'million GBP'million
PD Range % Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Coverage
ratio
Band 1 0.00 - 2.99 8,042 549 - 8,591 32 5 - 37 0.43%
Band 2 3.00 - 16.99 2,209 1,313 - 3,522 33 29 - 62 1.76%
Band 3 17.00 - 99.99 598 226 - 824 1 17 - 18 2.18%
Band 4 100 - - 352 352 - - 70 70 19.89%
Total 10,849 2,088 352 13,289 66 51 70 187 1.41%
1. IFRS 9 12-month PD excludes post model overlays (PMO).
The migration observed across bandings, in particular band 1, is
primarily driven by the improvement in macroeconomic scenarios
feeding through the IFRS 9 models resulting in customers moving to
lower PD bands. Retail mortgage lending
Mortgage balances have been broadly stable in the first six
months of 2023 at GBP7,591 million (31 December 2022: GBP7,649
million) with modest organic book growth offsetting the run-off of
our back book portfolios.
Despite the challenging economic environment, the credit
performance of the portfolio during the first half of 2023 has
remained broadly stable. Debt-to-value (DTV) has increased by 2% to
58% as at 30 June 2023 (31 December 2022: 56%) as a result of
falling house prices. Early arrears cases (one to less than three
months in arrears) have remained stable at 0.63% at 30 June 2023
(31 December 2022: 0.63%). Accounts that are three or more months
in arrears have increased from 0.73% at 31 December 2022 to 0.91%
at 30 June 2023, mainly driven by increases in arrears in the
legacy acquired portfolios that are in run-off and have greater
sensitivity to interest rate rises.
Loan-to-value has been restricted to <=90% resulting in a
small reduction in average loan-to-value for new lending (30 June
2023: 67%; 31 December 2022: 68%).
Table 9: Residential mortgage lending by repayment type
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Retail owner Retail Total retail Retail owner Retail Total retail
occupied mortgages occupied mortgages
buy-to-let buy-to-let
GBP'million GBP'million GBP'million GBP'million
GBP'million GBP'million
Interest 1,936 3,934 2,005 4,052
1,998 2,047
Capital and 3,565 3,657 3,502 3,597
interest 92 95
Total 5,501 7,591 5,507 7,649
2,090 2,142
Table 10: Retail mortgage lending by DTV banding
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Retail owner Retail Total retail Retail owner Retail Total retail
occupied mortgages occupied mortgages
buy-to-let buy-to-let
GBP'million GBP'million GBP'million GBP'million
GBP'million GBP'million
Less than 50% 1,853 453 2,306 2,007 568 2,575
51-60% 875 386 1,261 961 463 1,424
61-70% 1,078 633 1,711 1,088 660 1,748
71-80% 1,037 595 1,632 990 434 1,424
81-90% 517 23 540 374 13 387
91-100% 141 - 141 87 - 87
More than - - - - 4
100% 4
Total 5,501 2,090 7,591 5,507 2,142 7,649
Table 11: Residential mortgage lending by geographic
exposure
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Retail owner Retail Total retail Retail owner Retail Total retail
occupied mortgages occupied mortgages
buy-to-let buy-to-let
GBP'million GBP'million GBP'million GBP'million
GBP'million GBP'million
Greater London 1,937 1,167 3,104 1,937 1,201 3,138
South East 1,442 401 1,843 1,435 408 1,843
East of England 531 158 689 531 163 694
South West 463 93 556 476 99 575
North West 256 68 324 263 68 331
West Midlands 231 76 307 226 76 302
East Midlands 172 54 226 168 54 222
Yorkshire and the 180 34 214 184 34 218
Humber
Scotland 121 12 133 115 11 126
Wales 107 18 125 109 18 127
North East 61 9 70 63 10 73
Total 5,501 2,090 7,591 5,507 2,142 7,649
All of our loan exposures which are secured on property are
secured on UK-based assets. Our current retail mortgages portfolio
is concentrated within London and the South-East, which is
representative of our original customer base and store footprint.
Consumer lending
Consumer balances have reduced to GBP1,410 million as at 30 June
2023 (31 December 2022: GBP1,480 million). The portfolio is now
comprised 95% of lending through the RateSetter brand, including
GBP5 million in secured motor originations, with the remaining of
the portfolio being GBP45 million of overdrafts and GBP23 million
of credit cards. The performance of this portfolio is aligned with
expectations with continual enhancements being performed in
relation to the affordability and creditworthiness assessment in
light of the economic environment. Increases in arrears and
non-performing loans have been observed but are in line with the
growth of the book as well as historical cohorts and our internal
forecasts.
The total ECL coverage position for consumer has increased to
6.6% as a result of the continued maturation of the portfolio and a
post model overlay to reflect the uncertainty due to high inflation
(31 December 2022: 5.1%). Commercial lending
Our commercial lending remains largely comprised of term loans
secured against property and government supported lending. In
addition, commercial lending includes facilities secured by other
forms of collateral (such as debentures and guarantees) as well as
asset and invoice financing.
Our commercial balances have decreased from GBP4,160 million to
GBP3,768 million in the first six months of 2023. This reflects the
business strategy to reduce our professional buy to let and real
estate lending, and run-offs in government supported lending.
Our commercial real estate book covers property investment
lending against both residential and commercial property, with
repayment reliant on rental income from the underlying property. As
at 30 June 2023 35% of the book is covered by residential property,
20% by retail property and 18% by offices. The average DTV for our
commercial real estate loans is 45%, unchanged from 31 December
2022 (31 December 2022: 45%).
Commercial customers are managed through an early warning
categorisation where there are early signs of financial difficulty,
thereby allowing timely engagement and appropriate corrective
action to be taken. Early Warning categories support our IFRS 9
stage classification. Total lending in Early Warning categories has
remained broadly flat since December 2022, However, some
deterioration within early warning categories has been observed.
Close customer management is key to identify issues and supporting
our customers.
Table 12: Commercial term lending (exc. BBLS) by DTV banding
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Professional Other term Total commercial term Professional Other term Total commercial term
loans loans loans loans
buy-to-let buy-to-let
GBP'million GBP'million GBP'million GBP'million
GBP'million GBP'million
Less than 50% 210 790 1,000 278 817 1,095
51-60% 110 340 450 158 433 591
61-70% 135 138 273 219 112 331
71-80% 95 90 185 62 76 138
81-90% 56 29 85 3 53 56
91-100% 6 32 38 5 12 17
More than 3 502 505 6 587 593
100%
Total 615 1,921 2,536 731 2,090 2,821
As of 30 June 2023, 75% of our commercial term lending
(excluding BBLS) had a DTV of 80% or less (31 December 2022: 76%),
reflecting the prudent risk appetite historically applied. Lending
with DTV >100% includes loans which benefit from additional
forms of collateral, such as debentures. The value of this
additional collateral is not included in the DTV but does provide
an additional level of credit risk mitigation. DTV >100% also
includes government backed lending where the facility does not also
benefit from property collateral. The decrease in DTV>100% in
2023 reflects a reduction in government backed lending.
Table 13: Commercial term lending (exc. BBLS) by industry
exposure
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Professional Other term Total commercial term Professional Other term Total commercial term
loans loans loans loans
buy-to-let buy-to-let
GBP'million GBP'million GBP'million GBP'million
GBP'million GBP'million
Real estate (rent, buy 615 619 1,234 731 681 1,412
and sell)
Hospitality - 346 346 - 372 372
Health & social work - 327 327 - 334 334
Legal, accountancy & - 170 170 - 196 196
consultancy
Retail - 147 147 - 161 161
Recreation, cultural and - 76 76 - 87 87
sport
Construction - 50 50 - 62 62
Education - 21 21 - 17 17
Investment and unit - 11 11 - 11 11
trusts
Real estate - 10 10 - 6 6
(development)
Real estate (management - 7 7 - 9 9
of)
Other - 137 137 - 154 154
Total 615 1,921 2,536 731 2,090 2,821
We manage credit risk concentration to individual borrowing
entities and sectors. Our credit risk appetite includes limits for
individual sectors where we have higher levels of exposure.
The sector profile for commercial term lending is broadly
consistent with the position as at 31 December 2022. There has been
an overall reduction in commercial real estate of 13%.
Table 14: Commercial term lending (exc. BBLS) by repayment
type
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Professional Other term Total commercial term Professional Other term Total commercial term
loans loans loans loans
buy-to-let buy-to-let
GBP'million GBP'million GBP'million GBP'million
GBP'million GBP'million
Interest 577 221 798 691 253 944
Capital and 38 1,700 1,738 40 1,837 1,877
interest
Total 615 1,921 2,536 731 2,090 2,821
Table 15: Commercial term lending (exc. BBLS) by geographic
exposure
30 Jun 2023 (unaudited) 31 Dec 2022 (audited)
Professional Other term Total commercial term Professional Other term Total commercial term
loans loans loans loans
buy-to-let buy-to-let
GBP'million GBP'million GBP'million GBP'million
GBP'million GBP'million
Greater London 394 933 1,327 472 1,052 1,524
South East 124 365 489 149 377 526
East of England 42 140 182 45 147 192
North West 11 144 155 13 153 166
South West 18 122 140 22 143 165
West Midlands 7 105 112 8 112 120
East Midlands 10 43 53 12 43 55
Yorkshire and the 2 22 24 3 23 26
Humber
North East 3 21 24 3 19 22
Wales 3 13 16 3 11 14
Scotland - 8 8 - 7 7
Northern Ireland 1 5 6 1 3 4
Total 615 1,921 2,536 731 2,090 2,821
Capital risk
Capital remains the largest constraint on the business as we
continue to operate within our publicly disclosed MREL buffers and
expect to continue to do so for a further period of time. Our
return to profit in the first half of the year combined with a
slight reduction in RWAs has seen us generate organic capital
growth between 1 January and 30 June 2023. As a result we have seen
increases across our regulatory ratios compared to 31 December 2022
except for total capital following the haircut to Tier 2 arising
from implementation of our holding company in May. These increases
are notwithstanding the step down of IFRS 9 transitional relief on
1 January 2023.
Capital requirements
We manage capital in accordance with prudential rules issued by
the PRA and Financial Conduct Authority (FCA) and we are committed
to maintaining a strong capital base, under both existing and
future regulatory requirements.
As at 30 June 2023 our CET1, Tier 1 and MREL requirements were
4.7%, 6.3% and 16.7%, respectively (excluding buffers). Further
details of which can be found in the finance review section
above.
On 5 July 2023 the CCyB rate increased from 1% to 2%. The
increase in the CCyB means we do not have sufficient CET1 resources
to meet the Combined Buffer Requirement for Tier 1. This subjects
the Bank to maximum distributable amount (MDA) restrictions in the
PRA Rulebook, which limit the ability of the Bank to make certain
payments, including dividends on ordinary shares and coupon
payments on Additional Tier 1 instruments as well as other
cash/bonus payments. As we do not currently have any AT1-eligible
instruments and have no imminent plans to make dividend payments on
our ordinary shares there are minimal implications resulting from
this, other than it acting as a limit on the level of variable
remuneration we can pay colleagues.
As set out in the finance review section, in May 2023, we
implemented our new holding company, Metro Bank Holdings PLC, which
became the new listed entity in order to meet the Bank of England's
resolution requirements of having a single point of entry for the
purposes of resolution. There are no changes to our capital
requirements as a result of the holding company insertion other
than that our main capital requirements will now be monitored at
the new Group level.
As Metro Bank Holdings PLC is a clean holding company, it will
primarily hold the Group's external debt and equity and as such
there are limited impacts from its insertion, although the Tier 2
resources which continue to be held at the level of Metro Bank PLC
are now subject to a haircut at the level of the Group.
As part of the holding company insertion we undertook a process
to create distributable reserves within both Metro Bank PLC and
Metro Bank Holdings PLC in line with the Companies Act 2006. The
creation of distributable reserves will allow us to issue and pay
dividends on instruments including AT1 in the future (providing the
MDA restrictions do not apply at the point of payment).
Risk-weighted assets
Risk weighted assets ended the period at GBP7,802 million down
from GBP7,990 million as at 31 December 2022. The reduction has
been driven by a decrease in lending volumes partly offset by an
increase to our annual operational risk adjustment.
The increase in base rates over the period has allowed us to
redeploy capital into low risk-weighted investment securities and
zero risk-weighted deposits at the Bank of England. These provide a
strong return on regulatory capital, especially given limited
capital availability, which constrains our ability to increase
lending on less risk weight efficient assets. We continue to
progress our AIRB application in respect of our retail
mortgages.
We are also continuing to work through the implications of the
implementation of Basel 3.1 on which the PRA published its
consultation at the end of November 2022.
Capital resources
Table 16: Capital resources
30 Jun 2023 31 Dec 2022
(unaudited) (audited)
GBP'million GBP'million
Ordinary share capital - -
Share premium - 1,964
Retained earnings1 962 (1,015)
Other reserves 8 7
Intangible assets (207) (216)
Other regulatory adjustments 50 79
Total Tier 1 capital (CET1) 813 819
Debt securities (Tier 2) 217 250
Total Tier 2 capital 217 250
Total regulatory capital 1,030 1,069
1. Retained earnings as at 30 June 2023 includes the profit of
GBP12.7 million for the first half of the year.
As at 30 June 2023 our total regulatory capital stood at
GBP1,030 million down from GBP1,069 million as at 31 December 2022,
as the profits for the first six months of the year were offset by
a step down in the IFRS 9 transitional relief on the 1 January
2023. The continued accumulation of profit will allow us to accrete
capital going forward. We also plan to access the capital markets,
as and when conditions allow, to allow us to exit our regulatory
buffers as well as provide additional growth capital.
Financial crime risk
Metro Bank maintains its low appetite for customer relationships
or activity that poses a high financial crime risk and has no
appetite for customer relationships or activity that violate our
sanctions obligations. We continue to invest in our systems and
controls as part of ongoing efforts to embed the Financial Crime
Framework throughout the bank. This includes activity to manage our
ongoing sanctions compliance associated with the conflict in
Ukraine. The skills and capability of our colleagues to prevent and
detect financial crime continues to be a key focus, with formal
training delivered to all colleagues and robust consequence
management measures in place.
Regulatory risk
Progress continues to be made on key regulatory initiatives,
including embedding customer-centric enhancements in response to
the new Consumer Duty requirements and other key developments
including Basel 3.1 and the revised UK Corporate Governance Code.
Our risk appetite remains unchanged and subject to active oversight
through targeted risk metrics that are calibrated to reflect
regulatory priorities. The bank's regulatory risk framework and
supporting policies have been revalidated and we continue to
maintain coordinated and proactive engagement with our key
regulators.
Technology risk
We continue to invest and improve our key technology
capabilities that underpin the bank's customer service proposition
and maintain our operational resilience. The bank's technology
estate is continuously reviewed to ensure it remains fit for
purpose and the first half of the year has included prioritisation
of required updates, risk and performance reviews of our material
third party technology providers and independent assessment of our
technology resilience. We continue to patch and upgrade our systems
and platforms and keep an open dialogue with our regulators on
actual or potential disruption events.
Emerging risks
We consider emerging risks to be evolving threats which cannot
yet be fully quantified, with the potential to significantly impact
our strategy, financial performance, operational resilience and/or
reputation. We keep our emerging risks under review, informed by a
horizon scanning process, with escalation and reporting to the Risk
Oversight Committee and Board as necessary.
The emerging risks reported in our 2022 Annual Report and
Accounts have been updated below, many of which are components of
our principal risks, reflecting the rapidly evolving risk landscape
and therefore level of future uncertainties. For example, ongoing
Cyber Risk is managed closely as a subset of Operational Risk on a
day-to-day basis. As anticipated, the macroeconomic and
geopolitical environment has been challenging through the first
half of 2023 and this is forecast to continue for the remainder of
the year. Rising interest rates are placing pressure on household
finances and inflation remains high.
Considered as part of Technological Change, artificial
intelligence has been included as an emerging risk to be monitored
in light of the speed at which the threats and opportunities it
offers are progressing.
Emerging Description Mitigating actions
risks
The first half of 2023 has seen some deterioration in
macroeconomic outcomes, with falls in property prices
in particular. Recent higher than expected inflation We continue to monitor economic and political
has led to increases in market expectations for developments in light of the ongoing uncertainty,
interest rates which is impacting on credit pricing. considering potential consequences for our
While it is anticipated that inflation will fall in customers, products and operating model. We
Rapidly 2023, levels are still likely to be high compared to actively monitor our credit portfolios and
changing recent history, adding to pressure on household undertake internal stress testing to identify
macroeconomic finances and business costs. Alongside this, sectors that may come under stress as a result of
and unemployment is forecast to rise, albeit from an an economic slowdown in the UK. We continue to
geopolitical historic low level, and house prices are predicated to focus on affordability and cost of living
environment continue falling back. The political and central bank assumptions for new lending, on back book
response to these issues continues to evolve and the monitoring, as well as focus on potential impacts
continued inflationary environment will likely see on our customers. The latter includes pro-active
base rates continue to rise through the second half of engagement with vulnerable customers and those
2023. There is a risk of further volatility within that are considered most at risk of payment
financial markets, particularly in respect of yields. difficulties prior to the emergence of arrears.
We continue to invest in our cyber security and
resilience capabilities in response to these
Cyber attacks continue to grow in intensity and rapidly evolving threats. Key areas of focus
complexity, meaning that continuing to evolve our relate to access controls, network security,
Cyber risk ability and methodologies used to safeguard the disruptive technology and the denial of service
confidentiality, integrity and availability and our capability. We actively participate in the sharing
customers' information and services remains crucial. of threat information with other organisations,
helping to ensure the continued availability of
our exceptional service offering while also making
banking safer for all.
Changes in the use of technology by our customers,
along with rapid changes to technology provided by
third parties, requires us to continually assess the We continue to review our use of technology to
need to upgrade our technology estate. This in turn prioritise enhancements where required. We follow
drives increasing demands on our people and our an Agile change methodology and remain focused on
Technological ability to remain operationally resilient, in order to building out a strong digital offering.
change avoid causing harm to our customers.
We are closely monitoring the emergence of
The rapid emergence of artificial intelligence into artificial intelligence including the regulatory,
mainstream commercial and individual applications legal and industry response to its application.
poses opportunities and threats that are currently
being assessed.
The regulatory landscape continues to evolve with the We continue to monitor the regulatory landscape
requirement to respond to both prudential and conduct for emerging regulatory initiatives and to
driven initiatives requiring ongoing prioritisation identify potential impacts on our business model
Regulatory and implementation. Regulatory business plans and and ensure we are well placed to respond
change supervisory priorities are regularly assessed to effectively to regulatory change. Regular monthly
identify emerging themes and ensure our control reporting on material regulatory change programmes
framework remains appropriate. ensures appropriate visibility and escalation
where required.
The UK banking industry is faced with an increasing
volume and complexity of scams perpetrated on our We continue to enhance our approach to identifying
customers by threat actors who continue to develop and preventing potential fraud and are proactive
Fraud risk more sophisticated tactics to commit fraud. The in educating our customers and colleagues in fraud
uncertain economic environment may also result in prevention measures, alerting them to changes in
increased fraud as companies and individuals struggle. the threat landscape as they occur.
This has resulted in increased regulatory
expectations across the financial services industry.
There remain significant uncertainties around the time
horizon over which climate risks will materialise, as Our ESG working groups and steering committee meet
Environment, well as the exact nature and impact of climate change regularly to ensure our responses to emerging ESG
social and on our strategy, performance and operating model. risks are continually enhanced. We continue to
governance There are also risks associated with changing societal focus on sustainability in all forms and take an
(ESG) risk and political requirements from a wide range of ethical approach to doing business, remaining
stakeholders to which our risk and governance committed to the communities we serve.
frameworks must evolve responses.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm to the best of their knowledge these
condensed interim financial statements have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' giving a true and fair view of the
assets, liabilities, financial position and profit or loss as and
as required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- An indication of important events that have occurred during
the first six months ended 30 June 2023 andtheir impact on the
condensed set of financial statements, and a description of the
principal risks anduncertainties for the remaining six months of
the financial year; and
-- Material related-party transactions in the first six months
ended 30 June 2023 and any material changesin the related-party
transactions described in the last annual report.
Signed on its behalf by:
Daniel Frumkin James Hopkinson Robert Sharpe
Chief Executive Officer Chief Financial Officer Chair
Independent review report to Metro Bank Holdings PLC
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Metro Bank Holdings PLC's condensed
consolidated interim financial statements (the "interim financial
statements") in the interim report of Metro Bank Holdings PLC for
the 6 month period ended 30 June 2023 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the Condensed consolidated balance sheet as at 30 June
2023;
-- the Condensed consolidated statement of comprehensive income
for the period then ended;
-- the Condensed consolidated cash flow statement for the period
then ended;
-- the Condensed consolidated statement of changes in equity for
the period then ended; and
-- the explanatory notes to the interim financial
statements.
The interim financial statements included in the interim report
of Metro Bank Holdings PLC have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim report, including the interim financial statements,
is the responsibility of, and has been approved by the directors.
The directors are responsible for preparing the interim report in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. In
preparing the interim report, including the interim financial
statements, the directors are responsible for assessing the group's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the interim report based on our review. Our
conclusion, including our Conclusions relating to going concern, is
based on procedures that are less extensive than audit procedures,
as described in the Basis for conclusion paragraph of this report.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
31 July 2023
CONDENSED Consolidated statement of comprehensive income
(unaudited)
For the half year to 30 June 2023
Half year Half year Half year
to to to
Note 30 Jun 31 Dec 30 Jun
2023 2022 2022
GBP'million GBP'million GBP'million
Interest income 2 400.1 324.0 239.7
Interest expense 2 (178.6) (100.7) (58.9)
Net interest income 221.5 223.3 180.8
Net fee and commission income 42.2 42.3 39.5
Net gains on sale of assets 0.8 - -
Other income 21.9 21.4 16.2
Total income 286.4 287.0 236.5
General operating expenses 3 (221.4) (234.4) (233.2)
Depreciation and amortisation 7,8 (38.3) (39.6) (37.4)
Impairment and write-offs of PPE and intangible assets 7,8 - (1.5) (8.2)
Total operating expenses (259.7) (275.5) (278.8)
Expected credit loss expense (11.3) (22.0) (17.9)
Profit/(loss) before tax 15.4 (10.5) (60.2)
Tax expense 5 (2.7) (0.5) (1.5)
Profit/(loss) for the period 12.7 (11.0) (61.7)
Other comprehensive expense for the period
Items which will be reclassified subsequently to profit or loss where specific
conditions are met:
Movements in respect of investment securities held at fair value through other
comprehensive income (net of tax):
- changes in fair value (0.9) (0.9) (6.7)
Total other comprehensive expense (0.9) (0.9) (6.7)
Total comprehensive income/(loss) for the period 11.8 (11.9) (68.4)
Earnings per share
Basic earnings per share (pence) 13 7.4 (6.4) (35.8)
Diluted earnings per share (pence) 13 7.1 (6.4) (35.8)
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at 30 June 2023
30 Jun 2023 31 Dec 2022 30 Jun 2022
Note
GBP'million GBP'million GBP'million
Assets
Cash and balances with the Bank of England 2,708 1,956 2,862
Loans and advances to customers 6 12,572 13,102 12,364
Investment securities held at FVOCI 489 571 781
Investment securities held at amortised cost 4,826 5,343 5,393
Financial assets held at fair value through profit and loss 1 1 2
Derivative financial assets1 26 23 11
Property, plant and equipment 7 733 748 749
Intangible assets 8 207 216 227
Prepayments and accrued income 107 85 80
Assets classified as held for sale - 1 -
Other assets 78 73 97
Total assets 21,747 22,119 22,566
Liabilities
Deposits from customers 9 15,529 16,014 16,514
Deposits from central banks 3,800 3,800 3,800
Debt securities 10 573 571 577
Repurchase agreements 363 238 166
Derivative financial liabilities1 25 26 19
Lease liabilities 11 238 248 264
Deferred grants 17 17 19
Provisions 5 7 14
Deferred tax liabilities 5 12 12 12
Other liabilities 215 230 212
Total liabilities 20,777 21,163 21,597
Equity
Called up share capital 12 - - -
Share premium account 12 - 1,964 1,964
Retained earnings 962 (1,015) (1,004)
Other reserves 8 7 9
Total equity 970 956 969
Total equity and liabilities 21,747 22,119 22,566 1. Derivative financial assets and liabilities have been split out in the balance sheet as at 30 June 2022,having previously been presented on a net basis.
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
These condensed consolidated interim financial statements were
approved and authorised for issue by the Board of Directors on 31
July 2023 and were signed on its behalf by:
Daniel Frumkin James Hopkinson Robert Sharpe
Chief Executive Officer Chief Financial Officer Chair
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
For the half year to 30 June 2023
Half year Half year Half year
to to to
Note
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
Reconciliation of profit/(loss) before tax to net cash flows from operating
activities
Profit/(loss) before tax 15 (11) (60)
Adjustments for non-cash items (173) (157) (116)
Interest received 392 318 235
Interest paid (149) (59) (65)
Changes in other operating assets 502 (751) (101)
Changes in other operating liabilities (405) (452) 34
Net cash inflows/(outflows) from operating activities1 182 (1,112) (73)
Cash flows from investing activities
Sales, redemptions and paydowns of investment securities 1,226 549 308
Purchase of investment securities (627) (291) (915)
Purchase of property, plant and equipment 7 (5) (28) (1)
Purchase and development of intangible assets 8 (12) (12) (12)
Net cash inflows/(outflows) from investing activities 582 218 (620)
Cash flows from financing activities
Repayment of capital element of leases 11 (12) (12) (13)
Net cash outflows from financing activities (12) (12) (13)
Net increase/(decrease) in cash and cash equivalents 752 (906) (706)
Cash and cash equivalents as at start of period 1,956 2,862 3,568
Cash and cash equivalents as at end of period 2,708 1,956 2,862 1. The presentation of the cash flows from operating activities for the period ended 30 June 2022 has beenupdated to align to the cashflow statement within the 2022 Annual Report and Accounts.
Non-cash items
The table below sets out the non-cash items included in
profit/(loss) before tax which been adjusted for in the cash flow
statements above.
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
Interest income (400) (324) (240)
Interest expense 179 101 59
Depreciation and amortisation 38 40 37
Impairment and write-off of property, plant equipment and intangible assets - 2 8
Expected credit loss expense 11 22 18
Share option charge 2 - 2
Grant income recognised in the income statement - (2) -
Amounts provided for (net of amounts released) (2) 4 -
Gain on sale of assets (1) - -
Total adjustment for non-cash items (173) (157) (116)
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
For the half year to 30 June 2023
Called-up Retained FVOCI Share Total
Share Merger
Share reserve earnings reserve option equity
capital premium reserve
GBP'million GBP'million GBP'million GBP'million GBP'million
GBP'million GBP'million
Balance as at 1 Jan 2023 - 1,964 - (1,015) (13) 20 956
Profit for the period - - - 13 - - 13
Other comprehensive expense (net of tax) relating - - - - (1) - (1)
to investment securities designated at FVOCI
Total comprehensive income - - - 13 (1) - 12
Net share option movements - - - - - 2 2
Cancelation of Metro Bank PLC share capital and - (1,964) - 1,964 - - -
share premium1
Issuance of Metro Bank Holdings PLC share capital - - 965 (965) - - -
1
Bonus issuance 965 - (965) - - - -
Capital reduction of Metro Bank Holdings PLC (965) - - 965 - - -
share capital
Balance as at 30 Jun 2023 - - - 962 (14) 22 970
Balance as at 1 Jul 2022 - 1,964 - (1,004) (11) 20 969
Loss for the period - - - (11) - - (11)
Other comprehensive expense (net of tax) relating - - - - (2) - (2)
to investment securities designated at FVOCI
Total comprehensive loss - - - (11) (2) - (13)
Net share option movements - - - - - - -
Balance as at 31 Dec 2022 - 1,964 - (1,015) (13) 20 956
Balance as at 1 Jan 2022 - 1,964 - (942) (5) 18 1,035
Loss for the period - - - (62) - - (62)
Other comprehensive expense (net of tax) relating - - - - (6) - (6)
to investment securities designated at FVOCI
Total comprehensive loss - - - (62) (6) - (68)
Net share option movements - - - - - 2 2
Balance as at 30 Jun 2022 - 1,964 - (1,004) (11) 20 969
Note 12 12
1. The cancelled called up share capital of Metro Bank PLC and new share capital of Metro Bank Holdings PLCamount to GBP172 and as such have been rounded to GBPnil. The accompanying notes form an integral part of these condensed consolidated interim financial statements. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of preparation and accounting policies 1.1 General information
Metro Bank Holdings PLC ("our" or "we") is the holding company
of Metro Bank PLC, which provides retail and commercial banking
services in the UK. Metro Bank Holdings PLC is a public limited
liability company incorporated and domiciled in England and Wales
and is listed on the London Stock Exchange (LON:MTRO). The address
of its registered office is: One Southampton Row London WC1B 5HA.
1.2 Basis of preparation
The condensed consolidated interim financial statements of Metro
Bank Holdings PLC and its subsidiaries for the half year ended 30
June 2023 were authorised for issue in accordance with a resolution
of the Directors on 31 July 2023.
These condensed consolidated interim financial statements for
the six months ended 30 June 2023 have been prepared in accordance
with UK adopted International Accounting Standards (IAS 34 'Interim
Financial Reporting') and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The comparative financial information as at and for the periods
ending 31 December 2022 and 30 June 2022 do not constitute
statutory accounts as defined in section 434 of the Companies Act
2006. A copy of the statutory accounts for the year ended 31
December 2022 has been delivered to the Registrar of Companies.
These accounts are for Metro Bank PLC, the former listed entity and
ultimate parent company of the Group up until 19 May 2023.
The auditor's report on those accounts was not qualified, did
not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying the report and did
not contain statements under section 498(2) or (3) of the Companies
Act 2006. Insertion of Metro Bank Holdings PLC
To meet Bank of England's resolution requirements, on 19 May
2023, Metro Bank Holdings PLC was inserted as the new ultimate
holding company and listed entity of the Group. Prior to this date
Metro Bank PLC was both a banking entity and the ultimate parent
company of the Group, but has subsequently become a 100% subsidiary
of Metro Bank Holdings PLC. In addition to the insertion of a new
holding company the Group undertook a reduction in capital to
provide the Group with distributable reserves.
The insertion of Metro Bank Holdings PLC has been treated as a
business combination under common control, with the Group
controlled by the same parties both before and after the insertion.
Combinations under common control are outside the scope of IFRS 3
'Business Combinations' and accordingly, the insertion has not been
recognised at fair value and no goodwill or fair value acquisition
adjustments have been recognised. The Group has instead applied
predecessor accounting approach as this most faithfully represents
the substance of the facts and circumstances of the series of
transactions that comprise the insertion of Metro Bank Holdings
PLC. This is on the basis that those transactions are not designed
to deliver economic benefits, but represent a re-arrangement of the
organisation of business activities across legal entities in order
to be compliant with the relevant regulations.
In applying this approach, the Group has used the carrying
amounts in Metro Bank PLC's consolidated financial statements at
the date of transfer to determine the value of the assets and
liabilities transferred. These financial statements are therefore
prepared as if Metro Bank Holdings PLC had been the parent company
throughout the current and prior years, to treat the new structure
as if it has always been in place. Hedge accounting continues to be
applied to the transferred designated hedge relationships as if
they have originally been designated by the Group.
Further details on the insertion of Metro Bank Holdings PLC can
be found in note 12.
Going concern
The Directors have adopted the going concern basis in preparing
these condensed consolidated interim financial statements. This
assessment has been reached after assessing our principal risks,
which remain unchanged from those disclosed in the risk report of
the 2022 Annual Report and Accounts. As with the assessment
undertaken at the year end the Directors placed additional
consideration of the risk that we may have insufficient capital
given that we continue to utilise regulatory buffers.
In reaching their conclusion the Directors considered the
performance over the period against our Long-Term Plan as well as
the continued delivery of our strategy, an update on which is
provided within the Business Review section of this report. As part
of their assessment the Directors have considered a wide range of
information relating to present and future conditions, including
projected future profitability, and capital resources and
requirements as well as liquidity. The Directors have prepared a
'severe but plausible' downside scenario which involves a
significant deterioration in the economy and deposit outflows over
a period of 12 months from the date of this report. In this
scenario we fell below regulatory minima during the period at a
total regulatory capital plus MREL level, prior to any assumed
actions that could be taken. The Directors considered the actions
that could reasonably be deployed should such a scenario
materialise. This involved making reasonable adjustments to our
operating plans. While these mitigating actions did not in of
themselves constitute any additional risk, they would involve us
operating in our capital buffers for longer than envisaged. These
actions centred around cost reductions, reducing lending
origination as well as not seeking to raise any further regulatory
capital.
The Directors believe the Group to remain a going concern and
has sufficient resources to be able to continue to operate for a
period of at least 12 months from when the interim financial
statements are authorised for issue. They have also concluded that
there are no material uncertainties that could cast significant
doubt over this assessment.
Although outside the going concern period of assessment, the
Directors have also considered the refinancing of our GBP350
million senior non preferred note issuance which is MREL eligible
and which has a call date in October 2024. In order to continue to
meet its minimum capital requirements we will need to refinance
this debt. The Directors consider this refinancing to be achievable
at a satisfactory cost based on the Long-Term Plan and as such
concluded this does not pose an additional risk to going
concern.
Operating segments
We provide retail and commercial banking services. The Board
considers the results of the Group as a whole when assessing the
performance of the business and allocating resources. Accordingly,
we have only a single operating segment.
We operate solely in the UK and as such no geographical analysis
is required.
Accounting policies
The accounting policies applied in these condensed consolidated
interim financial statements are the same as those applied in the
Group's consolidated financial statements as at and for the year
ended 31 December 2022. 1.3 Future accounting developments
There are no known future accounting developments that are
likely to have a material impact on the Group. 1.4 Critical
accounting judgements
In our 2022 Annual Report and Accounts we identified the
following critical accounting judgements:
-- Measurement of the expected credit loss allowance -
significant increase in credit risk.
-- Measurement of the expected credit loss allowance - use of
post model overlays and adjustments.
No new critical accounting judgements have been identified
during the period.
Measurement of the expected credit loss allowance -significant
increase in credit risk
IFRS 9 'Financial Instruments' requires accounts to be allocated
into one of three stages. Stage 3 reflects accounts in default.
Stage 2 are the accounts which have shown a significant increase in
credit risk since origination (SICR), and Stage 1 is everything
else. IFRS 9 requires a higher level of ECL to be recognised for
underperforming loans. For loans in Stage 2 and Stage 3 a lifetime
ECL is recognised compared to a 12-month ECL for performing loans
(Stage 1).
Judgement is required to determine when a significant increase
in credit risk has occurred. An assessment of whether credit risk
has increased significantly since initial recognition is performed
at each reporting period by considering the change in the
probability of default (PD) over the remaining life of the
financial instrument.
The assessment for a retail financial instrument compares the PD
occurring at the reporting date to that at initial recognition,
considering reasonable and supportable information, including
information about past events, current conditions, and future
economic conditions.
The assessment for a commercial financial instrument is based on
quantitative and qualitative assessment, including current and
forecast financial performance, future economic conditions, and our
internal credit risk rating grade.
IFRS 9 requires a higher level of expected credit loss to be recognised for underperforming loans. This is considered
based on a staging approach:
Stage Description ECL recognised
12-month ECL
Financial assets that have had no significant
Total losses expected on defaults
increase in credit risk since initial recognition or which may occur
Stage 1
that have low credit risk (high-quality investment within the next 12 months. Losses are
adjusted for
securities only) at the reporting date.
probability-weighted macroeconomic
scenarios.
Financial assets that have had a significant increase
in credit risk since initial recognition but that do
not have objective evidence of impairment. Lifetime ECL
For Commercial counterparties, Early Warning List Losses expected on defaults which may
occur at
is used to inform qualitative triggers for SICR.
Stage 2 any point in a loan's lifetime.
The IFRS 9 standard also provides a rebuttable Losses are adjusted for
presumption which states that financial instruments probability-weighted macroeconomic
scenarios.
falling 30 days past due on contractually defined
payments are to be considered as having
deteriorated significantly since origination.
Lifetime ECL
Losses expected on defaults which may
Financial assets that are credit impaired at the reporting date. A occur at any point in a loan's
financial asset is credit impaired when it has met the definition lifetime. Losses are adjusted for
of default. We define default to have occurred when a loan is probability-weighted macroeconomic
Stage 3 greater than 90 days past due (non-performing loan) or where the scenarios.
borrower is considered unlikely to pay, this includes customers
who are categorised as Early Warning List 3.
Interest income is calculated on the
carrying amount of the loan net of
credit allowance.
Lifetime ECL
At initial recognition, POCI assets
do not carry an
Purchased or Financial assets that have been purchased and impairment allowance. Lifetime ECL is
originated incorporated
credit had objective evidence of being non-performing
impaired into the calculation of the asset's
(POCI) assets or credit impaired at the point of purchase effective interest
rate. Subsequent changes to the
estimate of lifetime
ECL is recognised as part of the ECL
expense.
In light of the above-described classification, our stage
allocation criteria must include:
-- A relative measure of creditworthiness deterioration since
origination.
-- An absolute measure of creditworthiness deterioration since
origination.
There are three main criteria driving the SICR assessment
identified as follows:
-- Quantitative criteria - where the numerically calculated
probability of default on a Retail financialinstrument has
increased significantly since initial recognition. This is
determined when the lifetime PD atobservation is greater than the
lifetime PD at origination by a portfolio specific threshold. Given
the differentnature of the products and the dissimilar level of
lifetime PDs at origination, different thresholds are used
bysub-products within each portfolio (term loans, revolving loan
facilities and mortgages). The assessment for aCommercial financial
instrument uses the internal credit risk rating grade. The
Commercial approach recognises thathistoric credit rating grades
are not available.
-- Qualitative criteria - Early Warning List is used to inform
allocation to Stage 2, regardless of theresults of the quantitative
analysis.
-- Backstop criteria - instruments that are 30 days past due or
more are allocated to Stage 2, regardless ofthe results of the
quantitative and qualitative analysis.
There are additional SICR rules utilised across portfolios.
These rules, as well as more granular detail of both quantitative
and qualitative criteria, are captured within the IFRS 9 model
methodology and are approved as part of the annual model review
process at Model Governance and Model Oversight Committees. The low
credit risk exemption allowed under IFRS 9 has not been applied
across the retail mortgage or consumer portfolios to identify
SICR.
Measurement of the expected credit loss allowance - use of post
model adjustments and post model overlays
We have applied Post Model Adjustments (PMAs) and Post Model
Overlays (PMOs) in the assessment of ECL. PMAs supplement the
models to account for where there are limitations in model
methodology or data inputs and PMOs accounts for downsides risks
which are not fully captured through the economic scenarios. The
appropriateness of PMAs and PMOs is subject to rigorous review and
challenge, including review by our Model Governance, Impairment
Committee and Audit Committee.
PMAs and PMOs are defined as follows: ? Post model adjustments
refer to increases/decreases in ECL to address known model
limitations, either in model methodology or model inputs. These
rely on analysis of model inputs and parameters to determine the
change required to improve model accuracy. These may be applied at
an aggregated level however, they will usually be applied at
account level. ? Post model overlays reflect management judgement.
These rely more heavily on expert judgement and will usually be
applied at an aggregated level. For example, where recent changes
in market and economic conditions have not yet been captured in the
macroeconomic factor inputs to models (e.g., industry specific
stress event).
Given the ongoing economic uncertainty we continue to maintain
conservative levels of PMOs. The level of PMAs and PMOs has reduced
during 2023 with the total percentage of ECL stock comprised of
PMAs and PMOs reducing to 12% as at 30 June 2023 (31 December 2022:
17%).
PMAs totalling (GBP2.0 million) were in place as at 30 June 2023
(31 December 2022: GBP0.4 million). These negative PMAs are held in
anticipation of IFRS 9 commercial models planned for implementation
in the second half of 2023:
-- IFRS 9 commercial unsecured LGD model (30 June 2023: (GBP0.9
million); 31 December 2022: GBPnil).
-- IFRS 9 commercial revolving EAD model (30 June 2023: (GBP1.1
million); 31 December 2022: GBPnil).
-- IFRS 9 retail mortgage secured LGD model (30 June 2023:
GBPnil; 31 December 2022: GBP0.1 million).
-- IFRS 9 commercial business loans lifetime PD model (30 June
2023: GBPnil; 31 December 2022: GBP0.3 million).
PMOs have been reassessed during the period to ensure an
appropriate level of ECL to account for the high level of
macroeconomic uncertainty, following the high inflation environment
and cost of living pressures, and anticipated property price falls
further exacerbated by the expected base rate increases.
PMOs made up GBP26.1 million of the ECL stock as at 30 June 2023
(31 December 2022: GBP30.5 million) and comprised:
-- High inflation environment and cost of living risks -
Management overlays were introduced in 2022 toreflect high
inflation and cost of living pressures, which are not fully
captured through the economic scenariosand IFRS 9 models (30 June
2023: GBP18.1 million; 31 December 2022: GBP22.5 million). The
reduction in 2023 is drivenby underlying credit risk profile
movements on some individual cases resulting in previously held
overlays nowbeing released. This reflects the associated risks
across retail mortgage, consumer, and commercial portfolios.
Forcommercial, the inflation PMO has been assessed based on
potential future individual customer migration of currentStage 1
lending migrating into Stage 2 and 3, based on an inflationary
stress scenario.
-- Significant increase in credit risk (SICR) adjustment overlay
- A negative overlay introduced in 2022 isbeing held as at 30 June
2023. The SICR model is resulting in a significant overstatement of
stage 2 assets andthe negative PMO is in place to account for this.
These overlays will be removed once the IFRS 9 PD Annual
ModelReviews for both portfolios are validated and implemented into
production, which is scheduled to happened in thesecond half of
2023 (30 June 2023: (GBP7.2 million); 31 December 2022: (GBP3.4
million)).
-- House price index and commercial real estate index adjustment
- An overlay raised in 2022 is still beingheld at 30 June 2023 to
reflect further downside risk in property price indices beyond the
latest scenarios for theretail mortgage and commercial property
portfolios (30 June 2023: GBP4.7 million; 31 December 2022: GBP6.1
million). Arelease has been observed for this overlay in the first
half of 2023 to offset the observed reduction in houseprice index
and commercial real estate index. However, management has continued
to maintain an overlay to reflectthe risk of further deterioration
in property price falls exacerbated by recent changes in
expectations for baserate increases.
-- Climate change impact - An expert judgement overlay raised in
2021 has been revised in the first half of 2023 and reflects the
impact of climate change on property values for the mortgage and
commercial portfolios (30June 2023: GBP3.4 million; 31 December
2022: GBP3.5 million). The slight reduction in the overlay since
December 2022is due to the updated balance movements for all
portfolios across the period.
-- An expert judgement overlay for the mortgage portfolio - A
management overlay has been introduced in thefirst half of 2023 to
reflect additional model and forecast risks as a result of economic
uncertainty, inparticular increases to mortgage rates (30 June
2023: GBP3.6 million; 31 December 2022: GBPnil).
-- Commercial model enhancements - An overlay is held in
anticipation of remaining model adjustments for thecommercial
portfolio (30 June 2023: GBP0.5 million; 31 December 2022: GBP1.2
million). The reduction in the overlayover the period is due to the
implementation of the new IFRS 9 commercial unsecured LGD model as
a PMA andtherefore this removes this figure from the PMO.
-- An expert judgement overlay for the commercial portfolio -
This overlay reflects additional downsiderisks as a result of
economic uncertainty (30 June 2023: GBP3.0 million; 31 December
2022: GBP0.6 million). 1.5 Critical accounting estimates
In our 2022 Annual Report and Accounts we identified the
following critical accounting estimate:
-- Measurement of the expected credit loss allowance - multiple
forward-looking macroeconomic scenarios
No new critical accounting estimates have been identified during
the period.
Measurement of the expected credit loss allowance - Multiple
forward-looking macroeconomic scenarios
The ECL recognised in the financial statements reflects the
effect on expected credit losses of a range of possible outcomes,
calculated on a probability-weighted basis, based on a number of
economic scenarios, and including management overlays where
required. These scenarios are representative of our view of
forecasted economic conditions, sufficient to calculate unbiased
ECL, and are designed to capture material 'non-linearities' (i.e.,
where the increase in credit losses if conditions deteriorate,
exceeds the decrease in credit losses if conditions improve).
In line with our approved IFRS 9 models, macroeconomic scenarios
provided by Moody's Analytics are used in the assessment of
provisions. The use of an independent supplier for the provision of
scenarios helps to ensure that the estimates are unbiased. The
macroeconomic scenarios are assessed and reviewed monthly to ensure
appropriateness and relevance to the ECL calculation. The selection
of scenarios and the appropriate weighting to apply are considered
and discussed internally and proposed recommendations for use in
the IFRS 9 models are made to the monthly Impairment Committee
(designated Executive Risk Committee for impairments) for formal
approval.
Our credit risk models are subject to internal model governance
including independent validation. We undertake annual model reviews
and have regular model performance monitoring in place. The
impairment provisions recognised during the year reflect our best
estimate of the level of provisions required for future credit
losses as calibrated under our conservative weighted economic
assumptions and following the application of expert credit risk
judgement overlays.
Scenarios and probability weights used as at 30 June 2023 are as
follows are as follows:
Half year to Half year to Half year to
Scenario weighting
30 Jun 2023 31 Dec 2022 30 Jun 2022
Baseline 50% 50% 40%
Upside 20% 20% 20%
Downside 25% 25% 30%
Severe Downside 5% 5% 10%
The macroeconomic scenarios reflect the current macroeconomic
environment as follows:
-- Baseline scenario (50% weight) - Reflects the projection of
the median, or "50%" scenario, meaning thatin the assessment there
is an equal probability that the economy might perform better or
worse than the baselineforecast.
-- Upside scenario (20% weight): This above-baseline scenario is
designed so there is a 10% probability theeconomy will perform
better than in this scenario, broadly speaking, and a 90%
probability it will perform worse.
-- Downside scenario (25% weight): In this recession scenario,
in which a deep downturn develops, there is a90% probability the
economy will perform better, broadly speaking, and a 10%
probability it will perform worse.
-- Severe Downside scenario (5% weight): In this recession
scenario, in which a deep downturn develops,there is a 96%
probability the economy will perform better, broadly speaking, and
a 4% probability it will performworse.
A wide range of potential economic variables have been
considered in our ECL models, representing drivers of credit losses
on our lending portfolios. Statistical methods are used to choose
the subset of drivers which have the greatest significance and
predictive fit to our data. This includes variables which impact
GDP, unemployment, interest rates, inflation, stock prices,
borrower income and the UK housing market.
30 Jun 2023
Macroeconomic variable Scenario 2024 2025 2026 2027
Baseline 5.6% 4.4% 4.3% 4.3%
Upside 6.0% 4.4% 4.3% 4.3%
Adjusted UK five years mortgage interest rates (%)
Downside 4.2% 3.0% 3.3% 3.4%
Severe Downside 4.2% 2.8% 3.0% 3.0%
Baseline 4.5% 4.5% 4.6% 4.6%
Upside 3.8% 3.7% 3.8% 4.1%
Unemployment (%)
Downside 7.2% 7.3% 7.1% 6.5%
Severe Downside 8.5% 8.2% 8.1% 7.6%
Baseline (3.1%) 4.7% 2.9% 0.8%
Upside 6.5% 4.6% (1.1%) (2.6%)
Adjusted house price index (YoY%)1
Downside (14.7%) (0.1%) 4.3% 4.3%
Severe Downside (21.5%) (0.9%) 4.0% 2.9%
Baseline 1.0% 1.3% 1.2% 1.4%
Upside 2.5% 1.3% 1.1% 1.5%
UK GDP (YoY%)
Downside (2.8%) 3.1% 1.7% 1.3%
Severe Downside (4.6%) 3.1% 3.3% 1.6%
Baseline (4.4%) 2.6% 0.1% (1.6%)
Upside 4.2% 2.3% (3.8%) (4.9%)
Adjusted commercial real estate index (YoY%)1
Downside (14.7%) 0.5% 2.7% 2.6%
Severe Downside (22.7%) 2.6% 2.9% 2.0%
31 Dec 2022
Macroeconomic variable Scenario 2023 2024 2025 2026
Baseline 5.5% 4.4% 4.0% 4.0%
Upside 5.3% 4.3% 4.0% 4.0%
UK five years mortgage interest rates (%)
Downside 5.5% 4.4% 3.6% 3.1%
Severe Downside 5.8% 4.0% 3.4% 3.0%
Baseline 4.3% 4.5% 4.5% 4.6%
Upside 3.9% 3.6% 3.7% 4.0%
Unemployment (%)
Downside 6.2% 7.2% 7.2% 6.8%
Severe Downside 7.4% 8.3% 8.2% 7.9%
Baseline (4.4%) 2.3% 4.8% 2.9%
Upside 9.0% 5.4% 2.1% (1.2%)
House price index (YoY%)
Downside (14.9%) (7.0%) 4.0% 5.7%
Severe Downside (20.7%) (10.9%) 4.4% 4.3%
Baseline (0.8%) 1.2% 1.4% 1.2%
Upside 1.9% 1.2% 1.1% 1.2%
UK GDP (YoY%)
Downside (6.9%) 1.3% 2.5% 1.2%
Severe Downside (8.3%) (0.3%) 3.5% 2.1%
Baseline (8.2%) (6.0%) 2.0% 1.4%
Upside 3.2% (3.6%) (0.3%) (2.2%)
Commercial real estate index (YoY%)
Downside (23.2%) (11.9%) 5.1% 4.2%
Severe Downside (30.5%) (14.8%) 6.9% 3.5%
30 Jun 2022
Macroeconomic variable Scenario 2023 2024 2025 2026
Baseline 3.6% 4.0% 4.1% 4.2%
Upside 3.9% 4.2% 4.3% 4.3%
UK five years mortgage interest rates (%)
Downside 2.3% 2.8% 3.0% 3.1%
Severe Downside 2.2% 2.8% 2.9% 3.0%
Baseline 4.4% 4.6% 4.7% 4.8%
Upside 3.7% 3.8% 4.0% 4.2%
Unemployment (%)
Downside 7.1% 7.4% 7.2% 6.6%
Severe Downside 8.4% 8.1% 8.2% 7.7%
Baseline 2.9% 4.8% 2.2% 0.9%
Upside 13.1% 4.6% (1.8%) (2.5%)
House price index (YoY%)
Downside (8.8%) 0.3% 3.7% 4.4%
Severe Downside (15.7%) (0.5%) 3.3% 3.0%
Baseline 1.6% 1.4% 1.2% 1.0%
Upside 2.7% 1.2% 1.0% 1.2%
UK GDP (YoY%)
Downside (2.2%) 2.9% 1.7% 0.9%
Severe Downside (4.0%) 2.6% 2.9% 1.3%
1. We have applied a further stress to the five year mortgage
rate, house price index and commercial real estate index on top of
the independent forecasts received to account for economic
uncertainty.
The base case macroeconomic outlook throughout 2023 reflects the
inflationary and cost of living pressures resulting in higher
interest rate and recessionary environment, which have been
exacerbated by the latest base rate increase. Monthly reductions in
property prices have begun to be observed, although the annual
growth rate is still positive, and the labour market remains tight
with low unemployment.
Key assumptions underpinning the baseline June 2023
scenarios:
-- The UK economy continues to struggle but avoids recession.
GDP grows at an unimpressive pace throughout2023 but starts to
slowly recover in 2024.
-- Inflation has peaked in the fourth quarter of 2022 but
remains above target for several quarters becauseof elevated wage
pressures and second-round effects.
-- Global oil prices remain around current levels until
mid-2023. Natural gas prices stay well below theirsummer peaks and
slightly above pre-pandemic levels. Thanks to liquefied natural gas
imports, warmer-than-averageweather, and conservation by businesses
and households, gas supplies are sufficient for next winter.
-- Supply-chain bottlenecks continue to normalise.
The following variables are the key drivers of ECL:
-- UK interest rate (five-year mortgage rate) (adjusted across
all scenarios to reflect market expectationsdue to expected base
rate increases not accounted for in the latest macroeconomic
scenarios).
-- UK unemployment rate.
-- UK house price index change, year-on-year (adjusted across
all scenarios to reflect further uncertaintyin residential property
values)
-- UK GDP change, year-on-year.
-- UK commercial real estate index change, year-on-year
(adjusted across all scenarios to reflect furtheruncertainty in
commercial property values).
We have also assessed the IFRS 9 ECL sensitivity impact at a
total portfolio level, by applying a 100% weighting to each of the
four chosen scenarios.
ECL
Scenario Variance to reported weighted ECL
GBP'million
30 Jun 23
Baseline 182 (8%)
Upside 166 (16%)
Downside 235 19%
Severe Downside 274 39%
Weighted 197 n/a
31 Dec 22
Baseline 172 (8%)
Upside 156 (17%)
Downside 233 25%
Severe Downside 279 49%
Weighted 187 n/a
30 Jun 22
Baseline 155 (9%)
Upside 144 (16%)
Downside 193 13%
Severe Downside 223 31%
Weighted 171 n/a
We note that the sensitivities disclosed above represent example
scenarios and may not represent actual scenarios which occur in the
future. If one of these scenarios did arise then at that time the
ECL would not equal the amount disclosed above, as the amounts
disclosed do not take account of the alternative possible scenarios
which would be considered at that time.
We also note that the sensitivities disclosed above do not
consider movements in impairment stage allocations that would
result under the different scenarios. 2. Net interest income
Interest income
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
Cash and balances held with the Bank of England 48.6 23.5 9.5
Loans and advances to customers 284.6 254.8 207.4
Investment securities held at amortised cost 54.8 41.0 21.9
Investment securities held at FVOCI 7.4 4.4 0.3
Interest expense calculated using the effective interest rate method 395.4 323.7 239.1
Derivatives in a hedging relationship 4.7 0.3 0.6
Total interest income 400.1 324.0 239.7
Interest expense
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
Deposits from customers 51.0 20.5 12.4
Deposits from central banks 78.0 42.4 13.1
Repurchase agreements 10.3 2.6 0.8
Debt securities 24.4 24.3 24.4
Lease liabilities 6.6 6.8 7.6
Interest expense calculated using the effective interest rate method 170.3 96.6 58.3
Derivatives in a hedging relationship 8.3 4.1 0.6
Total interest expense 178.6 100.7 58.9 3. General operating expenses
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
People costs 120.4 116.7 119.9
Information technology costs 29.9 32.3 29.9
Money transmission and banking related costs 24.0 24.2 24.5
Occupancy expenses 14.3 15.8 15.0
Professional fees 12.0 18.2 20.2
Printing, postage and stationery costs 3.3 3.1 3.1
Legal and regulatory fees 3.2 3.7 3.3
Marketing and advertising costs 2.9 1.5 3.5
Holding company related insertion costs 1.5 1.8 -
Capability & Innovation fund (C&I) costs 0.8 1.0 0.3
Travel costs 0.8 0.8 0.8
Transformation costs - 2.3 1.0
Remediation costs (0.8) 2.3 3.0
Other 9.1 10.7 8.7
Total general operating expenses 221.4 234.4 233.2 4. People costs
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
Wages and salaries 100.2 97.6 99.2
Social security costs 10.9 12.2 11.5
Pension costs 7.2 6.9 6.8
Equity-settled share-based payments 2.1 - 2.4
Total people costs 120.4 116.7 119.9 5. Taxation
Tax expense for the period
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
Current tax
Current tax (2.2) - -
Total current tax expense (2.2) - -
Deferred tax
Origination and reversal of temporary differences - (0.6) (0.9)
Effect of changes in tax rates (0.5) (0.1) (0.6)
Adjustment in respect of prior periods - 0.2 -
Total deferred tax expense (0.5) (0.5) (1.5)
Total tax expense (2.7) (0.5) (1.5)
Reconciliation of the total tax expense
Half Half Half
year to Effective year to Effective year to Effective
tax rate tax rate tax rate
30 Jun 31 Dec 30 Jun
2023 % 2022 % 2022 %
GBP'million GBP'million GBP'million
Profit/(loss) before tax 15.4 (10.5) (60.2)
Tax credit at statutory income tax rate of 23.5% (3.6) (23.5%) 2.0 19.0% 11.4 19.0%
(2022: 19%)
Tax effects of:
Non-deductible expenses - depreciation on (1.3) 8.2% (1.6) 15.2% (0.9) (1.5%)
non-qualifying fixed assets
Non-deductible expenses - investment property - - (0.1) 1.0% - -
impairment
Non-deductible expenses - other (0.1) 0.7% (1.0) 9.5% - -
Impact of intangible asset impairment on R&D - - 0.1 (1.0%) 0.2 0.3%
deferred tax liability
Share based payments (0.1) 0.5% 0.2 (1.9%) (0.1) (0.2%)
Adjustment in respect of prior years - - 0.2 (1.9%) - -
Current year losses to date for which no deferred - - (0.2) 1.9% (11.5) (19.1%)
tax asset has been recognised
Losses for the period for which no deferred tax 2.8 (18.1%) - - - -
asset has been recognised
Derecognition of tax losses arising in prior years 0.1 (0.4%) - - - -
Effect of changes in tax rates (0.5) 2.9% (0.1) 1.0% (0.6) (0.9%)
Tax expense reported in the consolidated income (2.7) 17.3% (0.5) 4.8% (1.5) (2.4%)
statement
Effective tax rate
The effective tax rate for the period is 17.3% (half year to 31
December 2022: (4.8%); half year to 30 June 2022 (2.4%)) This has
been calculated by applying the effective tax rate which is
expected to apply to the Group for the six months ended 30 June
2023 using rates substantively enacted by 30 June 2023 as required
by IAS 34 'Interim Financial Reporting'.
Effect of changes in tax rates
This relates to the remeasurement of deferred tax balances
following a change to the main UK corporation tax rate.
An increase in the UK corporation rate from 19% to 25% for
taxable profits over GBP250,000 (effective 1 April 2023) was
substantively enacted on 24 May 2021.
Losses for which no deferred tax asset has been recognised
The tax effected value of current year losses for which no
deferred tax asset has been recognised is GBPnil (31 December 2022:
GBP11.7 million; 30 June 2022: GBP11.5 million).
Deferred tax
A deferred tax asset must be regarded as recoverable and
therefore recognised only when, on the basis of all available
evidence, it can be regarded as more likely than not there will be
suitable tax profits from which the future of the underlying timing
differences can be deducted.
Investment
Unused tax losses securities & Property, plant & Intangible assets Total
impairments Share based equipment
GBP'million payments GBP'million GBP'million
GBP'million GBP'million
GBP'million
30 Jun 2023
Deferred tax 12 3 1 - - 16
assets
Deferred tax - 4 - (26) (6) (28)
liabilities
Deferred tax
liabilities 12 7 1 (26) (6) (12)
(net)
1 Jan 2023 12 7 1 (26) (6) (12)
Income - - - - - -
statement
At 30 Jun 12 7 1 (26) (6) (12)
2023
31 Dec 2022
Deferred tax 12 3 1 -
assets - 16
Deferred tax 4
liabilities - - (26) (6) (28)
Deferred tax
liabilities 12 7 1 (26) (6) (12)
(net)
At 1 Jul 2022 12 - (12)
7 (24) (7)
Income - 1
statement - (2) 1 -
Other
comprehensive - - - - - -
income
At 31 Dec 12 7 1 (12)
2022 (26) (6)
30 Jun 2022
Deferred tax 12 4 - - - 16
assets
Deferred tax - 3 - (24) (7) (28)
liabilities
Deferred tax
liabilities 12 7 - (24) (7) (12)
(net)
At 1 Jan 2022 13 5 - (23) (7) (12)
Income (1) - - (1) - (2)
statement
Other
comprehensive - 2 - - - 2
income
At 30 Jun 12 7 - (24) (7) (12)
2022
Unrecognised deferred tax assets
We have total unused tax losses of GBP896 million for which a
deferred tax asset of GBP212 million has not been recognised. The
impact of recognising the deferred tax asset in the future would be
material.
Although there is an expectation for profits in the near future,
the tax benefits would be spread over a number of years. In
addition, the 50% corporate loss restriction in place extends the
timeline over which we can offset losses against future profits.
This will be reassessed for the year ending 31 December 2023 in
light of actual performance against management forecasts and
prevailing market conditions. There is no time limit beyond which
these losses expire. 6. Loans and advances to customers
30 Jun 2023
Gross carrying amount ECL Net carrying amount
GBP'million allowance GBP'million GBP'million
Retail mortgages 7,591 (21) 7,570
Consumer lending 1,410 (93) 1,317
Commercial lending 3,768 (83) 3,685
Total loans and advances to customers 12,769 (197) 12,572
31 Dec 2022
Gross carrying amount ECL Net carrying amount
GBP'million allowance GBP'million GBP'million
Retail mortgages 7,649 (20) 7,629
Consumer lending 1,480 (75) 1,405
Commercial lending 4,160 (92) 4,068
Total loans and advances to customers 13,289 (187) 13,102
30 Jun 2022
Gross carrying amount ECL Net carrying amount
GBP'million allowance GBP'million GBP'million
Retail mortgages 6,785 (18) 6,767
Consumer lending 1,269 (56) 1,213
Commercial lending 4,481 (97) 4,384
Total loans and advances to customers 12,535 (171) 12,364
Loans and advances to customers by category
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
Residential owner occupied 5,501 5,507 4,977
Retail buy-to-let 2,090 2,142 1,808
Total retail mortgages 7,591 7,649 6,785
Overdrafts 45 60 70
Credit cards 23 19 16
Motor finance 5 - -
Term loans 1,337 1,401 1,183
Total consumer lending 1,410 1,480 1,269
Total retail lending 9,001 9,129 8,054
Professional buy-to-let 615 731 853
Bounce back loans 638 801 984
Coronavirus business interruption loans 106 127 145
Recovery loan scheme 365 385 357
Other term loans 1,450 1,578 1,638
Commercial term loans 3,174 3,622 3,977
Overdrafts and revolving credit facilities 155 122 110
Credit cards 4 4 4
Asset and invoice finance 435 412 390
Total commercial lending 3,768 4,160 4,481
Total gross loans to customers 12,769 13,289 12,535
Credit risk exposures
Retail mortgages
30 Jun 2023
Stage 1 Stage 2 Stage 3 POCI Total
GBP'million GBP'million GBP'million GBP'million GBP'million
Up to date 6,632 763 41 - 7,436
1 to 29 days past due 2 26 10 - 38
30 to 89 days past due - 29 19 - 48
90+ days past due - - 69 - 69
Gross carrying amount 6,634 818 139 - 7,591
31 Dec 2022
Stage 1 Stage 2 Stage 3 POCI Total
GBP'million GBP'million GBP'million GBP'million GBP'million
Up to date 6,194 1,289 33 - 7,516
1 to 29 days past due 1 21 7 - 29
30 to 89 days past due - 33 15 - 48
90+ days past due - - 56 - 56
Gross carrying amount 6,195 1,343 111 - 7,649
30 Jun 2022
Stage 1 Stage 2 Stage 3 POCI Total
GBP'million GBP'million GBP'million GBP'million GBP'million
Up to date 5,420 1,226 27 - 6,673
1 to 29 days past due 1 18 10 - 29
30 to 89 days past due - 19 14 - 33
90+ days past due - - 50 - 50
Gross carrying amount 5,421 1,263 101 - 6,785
Consumer lending
30 Jun 2023
Stage 1 Stage 2 Stage 3 POCI Total
GBP'million GBP'million GBP'million GBP'million GBP'million
Up to date 1,020 304 3 - 1,327
1 to 29 days past due 3 2 - - 5
30 to 89 days past due - 13 6 - 19
90+ days past due - - 59 - 59
Gross carrying amount 1,023 319 68 - 1,410
31 Dec 2022
Stage 1 Stage 2 Stage 3 POCI Total
GBP'million GBP'million GBP'million GBP'million GBP'million
Up to date 1,172 235 3 - 1,410
1 to 29 days past due 8 2 - - 10
30 to 89 days past due - 13 5 - 18
90+ days past due - - 42 - 48
Gross carrying amount 1,180 250 50 - 1,480
30 Jun 2022
Stage 1 Stage 2 Stage 3 POCI Total
GBP'million GBP'million GBP'million GBP'million GBP'million
Up to date 1,089 133 2 - 1,224
1 to 29 days past due 3 2 - - 5
30 to 89 days past due - 10 4 - 14
90+ days past due - - 26 - 26
Gross carrying amount 1,092 145 32 - 1,269
Commercial lending
30 Jun 2023
Stage 1 Stage 2 Stage 3 POCI Total
GBP'million GBP'million GBP'million GBP'million GBP'million
Up to date 3,078 417 70 - 3,565
1 to 29 days past due 44 30 6 - 80
30 to 89 days past due - 41 9 - 50
90+ days past due - - 73 - 73
Gross carrying amount 3,122 488 158 - 3,768
31 Dec 2022
Stage 1 Stage 2 Stage 3 POCI Total
GBP'million GBP'million GBP'million GBP'million GBP'million
Up to date 3,453 419 67 - 3,939
1 to 29 days past due 21 36 5 - 62
30 to 89 days past due - 40 20 - 60
90+ days past due - - 99 - 99
Gross carrying amount 3,474 495 191 - 4,160
30 Jun 2022
Stage 1 Stage 2 Stage 3 POCI Total
GBP'million GBP'million GBP'million GBP'million GBP'million
Up to date 3,646 510 89 - 4,245
1 to 29 days past due 8 46 17 - 71
30 to 89 days past due - 56 14 - 70
90+ days past due - 3 92 - 95
Gross carrying amount 3,654 615 212 - 4,481
Total lending
30 Jun 2023
Stage 1 Stage 2 Stage 3 POCI Total
GBP'million GBP'million GBP'million GBP'million GBP'million
Up to date 10,730 1,484 114 - 12,328
1 to 29 days past due 49 58 16 - 123
30 to 89 days past due - 83 34 - 117
90+ days past due - - 201 - 201
Gross carrying amount 10,779 1,625 365 - 12,769
31 Dec 2022
Stage 1 Stage 2 Stage 3 POCI Total
GBP'million GBP'million GBP'million GBP'million GBP'million
Up to date 10,819 1,943 103 - 12,865
1 to 29 days past due 30 59 12 - 101
30 to 89 days past due - 86 40 - 126
90+ days past due - - 197 - 197
Gross carrying amount 10,849 2,088 352 - 13,289
30 Jun 2022
Stage 1 Stage 2 Stage 3 POCI Total
GBP'million GBP'million GBP'million GBP'million GBP'million
Up to date 10,155 1,869 118 - 12,142
1 to 29 days past due 12 66 27 - 105
30 to 89 days past due - 85 32 - 117
90+ days past due - 3 168 - 171
Gross carrying amount 10,167 2,023 345 - 12,535
Loss allowance
Retail mortgages
Gross carrying amount Loss allowance Net carrying amount
GBP'million Stage Stage Stage POCI Total Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3 1 2 3
Balance at 1 Jan 2023 6,195 1,343 111 - 7,649 (6) (11) (3) - (20) 6,189 1,332 108 - 7,629
Transfers to/from stage 1 672 (670) (2) - - (5) 5 - - - 667 (665) (2) - -
Transfers to/from stage 2 (177) 177 - - - - - - - - (177) 177 - - -
Transfers to/from stage 3 (16) (24) 40 - - - - - - - (16) (24) 40 - -
Net remeasurement due to transfers - - - - - 3 (2) (1) - - 3 (2) (1) - -
New lending 425 58 - - 483 - (1) - - (1) 425 57 - - 482
Repayments, additional drawdowns and (95) (12) - - (107) - - - - - (95) (12) - - (107)
interest accrued
Derecognitions (370) (54) (10) - (434) - - - - - (370) (54) (10) - (434)
Changes to assumptions - - - - - - - - - - - - - - -
Balance at 30 Jun 2023 6,634 818 139 - 7,591 (8) (9) (4) - (21) 6,626 809 135 - 7,570
Gross carrying amount Loss allowance Net carrying amount
GBP'million Stage Stage Stage POCI Total Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3 1 2 3
Balance at 1 Jul 2022 5,421 1,263 101 - 6,785 (5) (10) (3) - (18) 5,416 1,253 98 - 6,767
Transfers to/from stage 1 94 (92) (2) - - (1) 2 (1) - - 93 (90) (3) - -
Transfers to/from stage 2 144 (141) (3) - - - - - - - 144 (141) (3) - -
Transfers to/from stage 3 (13) (12) 25 - - - 1 (1) - - (13) (11) 24 - -
Net remeasurement due to transfers - - - - - 2 - - - 2 2 - - - 2
New lending 1,155 402 1 - 1,558 - (5) - - (5) 1,155 397 1 - 1,553
Repayments, additional drawdowns and (73) (9) (4) - (86) - - - - - (73) (9) (4) - (86)
interest accrued
Derecognitions (533) (68) (7) - (608) (2) 2 2 - 2 (535) (66) (5) - (606)
Changes to assumptions - - - - - - (1) - - (1) - (1) - - (1)
Balance at 31 Dec 2022 6,195 1,343 111 - 7,649 (6) (11) (3) - (20) 6,189 1,332 108 - 7,629
Gross carrying amount Loss allowance Net carrying amount
GBP'million Stage Stage Stage POCI Total Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3 1 2 3
Balance at 1 Jan 2022 5,546 1,063 114 - 6723 (2) (12) (5) - (19) 5,544 1,051 109 - 6,704
Transfers to/from stage 1 199 (189) (10) - - (3) 2 1 - - 196 (187) (9) - -
Transfers to/from stage 2 (343) 346 (3) - - - - - - - (343) 346 (3) - -
Transfers to/from stage 3 (3) (10) 13 - - - - - - - (3) (10) 13 - -
Net remeasurement due to transfers - - - - - 2 (1) - - 1 2 (1) - - 1
New lending 511 147 - - 658 (3) (2) - - (5) 508 145 - - 653
Repayments, additional drawdowns and (57) (13) (1) - (71) - - - - - (57) (13) (1) - (71)
interest accrued
Derecognitions (432) (81) (12) - (525) 1 - 1 - 2 (431) (81) (11) - (523)
Changes to assumptions - - - - - - 3 - - 3 - 3 - - 3
Balance at 30 Jun 2022 5,421 1,263 101 - 6,785 (5) (10) (3) - (18) 5,416 1,253 98 - 6,767
Consumer lending
Gross carrying amount Loss allowance Net carrying amount
GBP'million Stage Stage Stage POCI Total Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3 1 2 3
Balance at 1 Jan 2023 1,180 250 50 - 1,480 (21) (12) (42) - (75) 1,159 238 8 - 1,405
Transfers to/from stage 1 29 (29) - - - (2) 2 - - - 27 (27) - - -
Transfers to/from stage 2 (180) 180 - - - 2 (2) - - - (178) 178 - - -
Transfers to/from stage 3 (17) (8) 25 - - 1 2 (3) - - (16) (6) 22 - -
Net remeasurement due to transfers - - - - - 1 (5) (16) - (20) 1 (5) (16) - (20)
New lending 240 7 1 - 248 (4) - (1) - (5) 236 7 - - 243
Repayments, additional drawdowns and (133) (62) (3) - (198) - - - - - (133) (62) (3) - (198)
interest accrued
Derecognitions (96) (19) (5) - (120) 2 1 4 - 7 (94) (18) (1) - (113)
Changes to assumptions - - - - - (2) 2 - - - (2) 2 - - -
Balance at 30 Jun 2023 1,023 319 68 - 1,410 (23) (12) (58) - (93) 1,000 307 10 - 1,317
Gross carrying amount Loss allowance Net carrying amount
GBP'million Stage Stage Stage POCI Total Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3 1 2 3
Balance at 1 Jul 2022 1,092 145 32 - 1,269 (20) (9) (27) - (56) 1,072 136 5 - 1,213
Transfers to/from stage 1 3 (3) - - - - - - - - 3 (3) - - -
Transfers to/from stage 2 12 (12) - - - - - - - - 12 (12) - - -
Transfers to/from stage 3 (12) (2) 14 - - 1 - (1) - - (11) (2) 13 - -
Net remeasurement due to transfers - - - - - 1 2 (6) - (3) 1 2 (6) - (3)
New lending 223 146 10 - 379 (5) (6) (8) - (19) 218 140 2 - 360
Repayments, additional drawdowns and (51) (15) (4) - (70) - - - - - (51) (15) (4) - (70)
interest accrued
Derecognitions (87) (9) (2) - (98) 1 - - - 1 (86) (9) (2) - (97)
Changes to assumptions - - - - - 1 1 - - 2 1 1 - - 2
Balance at 31 Dec 2022 1,180 250 50 - 1,480 (21) (12) (42) - (75) 1,159 238 8 - 1,405
Gross carrying amount Loss allowance Net carrying amount
GBP'million Stage Stage Stage POCI Total Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3 1 2 3
Balance at 1 Jan 2022 786 82 21 1 890 (18) (8) (16) - (42) 768 74 5 1 848
Transfers to/from stage 1 16 (16) - - - (2) 2 - - - 14 (14) - - -
Transfers to/from stage 2 (108) 108 - - - 1 (1) - - - (107) 107 - - -
Transfers to/from stage 3 (9) (4) 13 - - - 2 (2) - - (9) (2) 11 - -
Net remeasurement due to transfers - - - - - 1 (5) (9) - (13) 1 (5) (9) - (13)
New lending 583 10 2 - 595 (10) (1) (1) - (12) 573 9 1 - 583
Repayments, additional drawdowns and (93) (26) (2) (1) (122) - - - - - (93) (26) (2) (1) (122)
interest accrued
Derecognitions (83) (9) (2) - (94) 4 1 1 - 6 (79) (8) (1) - (88)
Changes to assumptions - - - - - 4 1 - - 5 4 1 - - 5
Balance at 30 Jun 2022 1,092 145 32 - 1,269 (20) (9) (27) - (56) 1,072 136 5 - 1,213
Commercial lending
Gross carrying amount Loss allowance Net carrying amount
GBP'million Stage Stage Stage POCI Total Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3 1 2 3
Balance at 1 Jan 2023 3,474 495 191 - 4,160 (39) (28) (25) - (92) 3,435 467 166 - 4,068
Transfers to/from stage 1 40 (39) (1) - - (2) 2 - - - 38 (37) (1) - -
Transfers to/from stage 2 (146) 148 (2) - - 2 (3) 1 - - (144) 145 (1) - -
Transfers to/from stage 3 (38) (34) 72 - - - 2 (2) - - (38) (32) 70 - -
Net remeasurement due to transfers - - - - - 2 (4) (3) - (5) 2 (4) (3) - (5)
New lending 253 5 4 - 262 (5) - - - (5) 248 5 4 - 257
Repayments, additional drawdowns and (191) (25) (9) - (225) - - - - - (191) (25) (9) - (225)
interest accrued
Derecognitions (270) (62) (97) - (429) 4 3 3 - 10 (266) (59) (94) - (419)
Changes to assumptions - - - - - 8 2 (1) - 9 8 2 (1) - 9
Balance at 30 Jun 2023 3,122 488 158 - 3,768 (30) (26) (27) - (83) 3,092 462 131 - 3,685
Gross carrying amount Loss allowance Net carrying amount
GBP'million Stage Stage Stage POCI Total Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3 1 2 3
Balance at 1 Jul 2022 3,654 615 212 - 4,481 (33) (33) (31) - (97) 3,621 582 181 - 4,384
Transfers to/from stage 1 41 (41) - - - (1) 1 - - - 40 (40) - - -
Transfers to/from stage 2 (21) 20 - - (1) - - - - - (21) 20 - - (1)
Transfers to/from stage 3 11 63 (74) - - - - - - - 11 63 (74) - -
Net remeasurement due to transfers - - - - - 1 (1) - - - 1 (1) - - -
New lending 258 (17) 16 - 257 (5) - (1) - (6) 253 (17) 15 - 251
Repayments, additional drawdowns and (150) (19) (10) - (179) - - - - - (150) (19) (10) - (179)
interest accrued
Derecognitions (319) (126) 47 - (398) 2 6 8 - 16 (317) (120) 55 - (382)
Changes to assumptions - - - - - (3) (1) (1) - (5) (3) (1) (1) - (5)
Balance at 31 Dec 2022 3,474 495 191 - 4,160 (39) (28) (25) - (92) 3,435 467 166 - 4,068
Gross carrying amount Loss allowance Net carrying amount
GBP'million Stage Stage Stage POCI Total Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3 1 2 3
Balance at 1 Jan 2022 3,739 780 327 - 4,846 (27) (29) (52) - (108) 3,712 751 275 - 4,738
Transfers to/from stage 1 164 (163) (1) - - (6) 6 - - - 158 (157) (1) - -
Transfers to/from stage 2 (135) 137 (1) - 1 1 (1) - - - (134) 136 (1) - 1
Transfers to/from stage 3 (98) (108) 206 - - - 4 (4) - - (98) (104) 202 - -
Net remeasurement due to transfers - - - - - 3 (4) - - (1) 3 (4) - - (1)
New lending 427 54 2 - 483 (7) (2) (1) - (10) 420 52 1 - 473
Repayments, additional drawdowns and (180) (25) (5) - (210) - - - - - (180) (25) (5) - (210)
interest accrued
Derecognitions (263) (60) (316) - (639) 1 1 22 - 24 (262) (59) (294) - (615)
Changes to assumptions - - - - - 2 (8) 4 - (2) 2 (8) 4 - (2)
Balance at 30 Jun 2022 3,654 615 212 - 4,481 (33) (33) (31) - (97) 3,621 582 181 - 4,384
Total lending
Gross carrying amount Loss allowance Net carrying amount
GBP'million Stage Stage Stage POCI Total Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3 1 2 3
Balance at 1 Jan 2023 10,849 2,088 352 - 13,289 (66) (51) (70) - (187) 10,783 2,037 282 - 13,102
Transfers to/from stage 1 741 (738) (3) - - (9) 9 - - - 732 (729) (3) - -
Transfers to/from stage 2 (503) 505 (2) - - 4 (5) 1 - - (499) 500 (1) - -
Transfers to/from stage 3 (71) (66) 137 - - 1 4 (5) - - (70) (62) 132 - -
Net remeasurement due to - - - - - 6 (11) (20) - (25) 6 (11) (20) - (25)
transfers
New lending 918 70 5 - 993 (9) (1) (1) - (11) 909 69 4 - 982
Repayments, additional
drawdowns and interest (419) (99) (12) - (530) - - - - - (419) (99) (12) - (530)
accrued
Derecognitions (736) (135) (112) - (983) 6 4 7 - 17 (730) (131) (105) - (966)
Changes to assumptions - - - - - 6 4 (1) - 9 6 4 (1) - 9
Balance at 30 Jun 2023 10,779 1,625 365 - 12,769 (61) (47) (89) - (197) 10,718 1,578 276 - 12,572
Gross carrying amount Loss allowance Net carrying amount
GBP'million Stage Stage Stage POCI Total Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3 1 2 3
Balance at 1 Jul 2022 10,167 2,023 345 - 12,535 (58) (52) (61) - (171) 10,109 1,971 284 - 12,364
Transfers to/from stage 1 138 (136) (2) - - (2) 3 (1) - - 136 (133) (3) - -
Transfers to/from stage 2 135 (133) (3) - (1) - - - - - 135 (133) (3) - (1)
Transfers to/from stage 3 (14) 49 (35) - - 1 1 (2) - - (13) 50 (37) - -
Net remeasurement due to - - - - - 4 1 (6) - (1) 4 1 (6) - (1)
transfers
New lending 1,636 531 27 - 2,194 (10) (11) (9) - (30) 1,626 520 18 - 2,164
Repayments, additional
drawdowns and interest (274) (43) (18) - (335) - - - - - (274) (43) (18) - (335)
accrued
Derecognitions (939) (203) 38 - (1,104) 1 8 10 - 19 (938) (195) 48 - (1,085)
Changes to assumptions - - - - - (2) (1) (1) - (4) (2) (1) (1) - (4)
Balance at 31 Dec 2022 10,849 2,088 352 - 13,289 (66) (51) (70) - (187) 10,783 2,037 282 - 13,102
Gross carrying amount Loss allowance Net carrying amount
GBP'million Stage Stage Stage POCI Total Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3 1 2 3
Balance at 1 Jan 2022 10,071 1,925 462 1 12,459 (47) (49) (73) - (169) 10,024 1,876 389 1 12,290
Transfers to/from stage 1 379 (368) (11) - - (11) 10 1 - - 368 (358) (10) - -
Transfers to/from stage 2 (586) 591 (4) - 1 2 (2) - - - (584) 589 (4) - 1
Transfers to/from stage 3 (110) (122) 232 - - - 6 (6) - - (110) (116) 226 - -
Net remeasurement due to - - - - - 6 (10) (9) - (13) 6 (10) (9) - (13)
transfers
New lending 1,521 211 4 - 1,736 (20) (5) (2) - (27) 1,501 206 2 - 1,709
Repayments, additional
drawdowns and interest (330) (64) (8) (1) (403) - - - - - (330) (64) (8) (1) (403)
accrued
Derecognitions (778) (150) (330) - (1,258) 6 2 24 - 32 (772) (148) (306) - (1,226)
Changes to assumptions - - - - - 6 (4) 4 - 6 6 (4) 4 - 6
Balance at 30 Jun 2022 10,167 2,023 345 - 12,535 (58) (52) (61) - (171) 10,109 1,971 284 - 12,364 7. Property, plant and equipment
Investment Leasehold Freehold land & Fixtures fittings & IT Right of use Total
property improvements buildings equipment hardware assets
GBP'million
GBP'million GBP'million GBP'million GBP'million GBP'million GBP'million
Cost
1 Jan 2023 12 261 372 22 8 283 958
Additions - - 5 - - - 5
Disposals - - - - - (4) (4)
Write offs (2) - - - - - (2)
Transfers - (5) 5 - - - -
30 Jun 2023 10 256 382 22 8 279 957
Accumulated
depreciation
1 Jan 2023 8 69 34 20 2 77 210
Charge for the - 6 3 1 1 6 17
period
Disposal - - - - - (1) (1)
Write offs (2) - - - - - (2)
Transfers - (2) 2 - - - -
30 Jun 2023 6 73 39 21 3 82 224
Net book value
as at 4 183 343 1 5 197 733
30 Jun 2023
Cost
1 Jul 2022 18 270 342 22 1 295 948
Additions - - 21 - 7 1 29
Disposals - - - - - (13) (13)
Transfers - (9) 9 - - - -
Moved to held (6) - - - - - (6)
for sale
31 Dec 2022 12 261 372 22 8 283 958
Accumulated
depreciation
1 Jul 2022 12 64 31 18 - 74 199
Charge for the - 6 2 2 2 6 18
period
Impairments 1 - - - - - 1
Disposals - - - - - (3) (3)
Moved to held (5) - - - - - (5)
for sale
Transfers - (1) 1 - - - -
31 Dec 2022 8 69 34 20 2 77 210
Net book value
as at 4 192 338 2 6 206 748
31 Dec 2022
Cost
1 Jan 2022 18 280 341 24 1 295 959
Additions - - 1 - - - 1
Write-offs - (10) - (2) - - (12)
30 Jun 2022 18 270 342 22 1 295 948
Accumulated
depreciation
1 January 2022 12 68 28 19 - 67 194
Charge for the - 6 3 1 - 7 17
period
Write-offs - (10) - (2) - - (12)
30 Jun 2022 12 64 31 18 - 74 199
Net book value
as at 6 206 311 4 1 221 749
30 Jun 2022 8. Intangible assets
Goodwill Brands Software Total
GBP'million GBP'million GBP'million GBP'million
Cost
1 Jan 2023 10 2 338 350
Additions - - 12 12
30 Jun 2023 10 2 350 362
Accumulated amortisation
1 Jan 2023 - - 134 134
Charge for the period - - 21 21
30 Jun 2023 - - 155 155
Net book value as at 30 Jun 2023 10 2 195 207
Cost
1 Jul 2022 10 2 332 344
Additions - - 12 12
Write-offs - - (6) (6)
31 Dec 2022 10 2 338 350
Accumulated amortisation
1 Jul 2022 - - 117 117
Charge for the period - - 22 22
Write-offs - - (5) (5)
31 Dec 2022 - - 134 134
Net book value as at 31 Dec 2022 10 2 204 216
Cost
1 January 2022 10 2 336 348
Additions - - 12 12
Write-offs - - (16) (16)
30 June 2022 10 2 332 344
Accumulated amortisation
1 January 2022 - - 105 105
Charge for the period - - 20 20
Write-offs - - (8) (8)
30 June 2022 - - 117 117
Net book value as at 30 June 2022 10 2 215 227 9. Deposits from Customers
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
Deposits from retail customers 7,557 7,851 8,138
Deposits from commercial customers 7,972 8,163 8,376
Total deposits from customers 15,529 16,014 16,514
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
Demand: current accounts 7,106 7,888 7,770
Demand: savings accounts 7,218 7,501 7,817
Fixed term: savings accounts 1,205 625 927
Deposits from customers 15,529 16,014 16,514 10. Debt securities
Name Issue Currency Amount issued Coupon Call date Maturity
date GBP'million rate date
Fixed Rate Reset Callable Subordinated 26/06/ GBP 250 9.139% n/a 26/06/2028
Notes 2018
Fixed Rate Reset Senior Non-Preferred 08/10/ GBP 350 9.500% 08/10/ 08/10/2025
Notes 2019 2024
During the first six months of the year we took the decision not
to call our Fixed Rate Reset Callable Subordinated Notes (the
'Notes') issued by Metro Bank PLC, which had a call date on 26 June
2023. As a result, the interest rate on the Notes reset from 5.500%
to 9.139%.
In December 2022 the Bank of England's Resolution Directorate
agreed to provide a temporary, time-limited, adjustment for the
Notes with respect to MREL eligibility until 26 June 2025. This
came into effect upon the implementation of our holding company on
19 May 2023. The adjustment permitted the Notes to remain eligible
to count towards our MREL requirement until 26 June 2025. On 28
July 2023 the Bank of England's Resolution Directorate agreed to a
further extension, permitting the Notes to remain eligible to count
towards our MREL requirement until their maturity date on 26 June
2028. The eligibility of the Notes for Tier 2 capital will amortise
over the final five years of their term to maturity. 11. Lease
liabilities
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
At beginning of the period 248 264 269
Additions and modifications (1) 1 -
Disposals (4) (11) -
Lease payments made (12) (12) (13)
Interest on lease liabilities 7 6 8
At the end of the period 238 248 264 12. Share capital
As at 30 June 2023 we had 172.6 million ordinary shares of
0.0001 pence (31 December 2022: 172.4 million, 30 June 2022: 172.4
million) in issue.
Called up ordinary share capital (issued and fully paid)
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
At beginning of the period - - -
Cancellation of Metro Bank PLC share capital1 - - -
Issuance of Metro Bank Holdings PLC share capital1 - - -
Bonus issue 965 - -
Capital reduction (965) - -
At end of the period - - - 1. The cancelled called up share capital of Metro Bank PLC and new share capital of Metro Bank Holdings PLCamount to GBP172 and as such have been rounded to GBPnil.
Share premium
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
At beginning of the period 1,964 1,964 1,964
Cancelation of Metro Bank PLC share premium (1,964) - -
At end of the period - 1,964 1,964
Redeemable preference shares
In addition to the share capital set out above Metro Bank
Holdings PLC has GBP50,000 of redeemable preference shares which
were issued to Robert Sharpe (Chair) and Daniel Frumkin (Chief
Executive Officer) upon the initial incorporation of the legal
entity on 29 September 2022. These shares are in the process of
being redeemed.
New holding company
As set out in note 1, on 19 May 2023, Metro Bank Holdings PLC
became the listed entity and new holding company of Metro Bank PLC.
As part of the insertion of Metro Bank Holdings PLC, the existing
listed share capital and share premium of Metro Bank PLC was
cancelled and the share capital and share premium amounts
transferred to retained earnings. Metro Bank PLC subsequently
issued the same number of new unlisted 0.0001p ordinary shares to
Metro Bank Holdings PLC. Each existing holder of Metro Bank PLC
share was issued with an equivalent number of new shares in Metro
Bank Holdings PLC, with the nominal value of 0.0001p, as part of a
share for share exchange.
The difference between the new nominal share capital in Metro
Bank Holdings PLC and the net assets of Metro Bank PLC was
recognised in a merger reserve. This merger reserve was capitalised
through the allotment of 964,505,616 million special shares of
0.0001p each, which were then subsequently reduced to provide the
Metro Bank Holdings PLC with distributable reserves.
As at 30 June 2023 all of Metro Bank Holdings PLC's retained
earnings are distributable other than GBP50,000 which it is
required to retain as a publicly listed company. 13. Earnings per
share
Basic earnings per share (EPS) is calculated by dividing the
profit/(loss) attributable to our ordinary equity holders by the
weighted average number of ordinary shares in issue during the
period.
Diluted EPS has been calculated by dividing the profit/(loss)
attributable to our ordinary equity holders by the weighted average
number of ordinary shares in issue during the year plus the
weighted average number of ordinary shares that would be issued on
the conversion to shares of options granted to colleagues. As we
were loss making during the six months periods to 31 December 2022
and 30 June 2022, the share options would be antidilutive, as they
would reduce the loss per share. Therefore, all the outstanding
options have been disregarded in the calculation of dilutive EPS
for these periods.
Half year to Half year to Half year to
30 Jun 2023 31 Dec 2022 30 Jun 2022
Profit/(loss) attributable to ordinary equity holders (GBP'million) 12.7 (11.0) (61.7)
Weighted average number of ordinary shares in issue (thousands)
Basic 172,583 172,464 172,421
Adjustment for share awards 6,790 - -
Diluted 179,373 172,464 172,421
Earnings per share (pence)
Basic 7.4 (6.4) (35.8)
Diluted 7.1 (6.4) (35.8) 14. Fair value of financial instruments
Quoted market Using observable With significant Total
Carrying price inputs unobservable inputs
value Level 1 Level 2 Level 3 fair
value
GBP'million GBP'million GBP'million GBP'million
GBP'million
30 Jun 2023
Assets
Loan and advances to customers 12,572 - - 11,782 11,782
Investment securities held at FVOCI 489 489 - - 489
Investment securities held at 4,826 3,174 1,295 33 4,502
amortised cost
Financial assets held at FVTPL 1 - - 1 1
Derivative financial assets 26 - 26 - 26
Liabilities
Deposits from customers 15,529 - - 15,517 15,517
Deposits from central banks 3,800 - - 3,800 3,800
Debt securities 573 - - 440 440
Derivative financial liabilities 25 - 25 - 25
Repurchase agreements 363 - - 363 363
31 Dec 2022
Assets
Loan and advances to customers 13,102 - - 12,321 12,321
Investment securities held at FVOCI 571 533 38 - 571
Investment securities held at amortised cost 5,343 3,834 1,135 40 5,009
Financial assets held at FVTPL 1 - - 1 1
Derivative financial assets 23 - 23 - 23
Liabilities
Deposits from customers 16,014 - - 16,004 16,004
Deposits from central banks 3,800 - - 3,800 3,800
Debt securities 571 423 - - 423
Derivative financial liabilities 26 - 26 - 26
Repurchase agreements 238 - - 238 238
30 Jun 2022
Assets
Loan and advances to customers 12,364 - - 12,498 12,498
Investment securities held at FVOCI 781 743 38 - 781
Investment securities held at amortised cost 5,393 3,685 1,482 53 5,220
Financial assets held at FVTPL 2 - - 2 2
Derivative financial assets 11 - 11 - 11
Liabilities
Deposits from customers 16,514 - - 16,377 16,377
Deposits from central banks 3,800 - - 3,800 3,800
Debt securities 577 447 - - 447
Derivative financial liabilities 19 - 19 - 19
Repurchase agreements 166 - - 166 166
Cash and balances with the Bank of England, trade and other
receivables, trade and other payables, assets classified as held
for sale and other assets and liabilities which meet the definition
of financial instruments are not included in the tables. Their
carrying amount is a reasonable approximation of fair value.
An inverse relationship exists between interest rates and fair
value and therefore as base rates have continued to rise this has
seen the fair value of our fixed-rate financial instruments
continue to remain below their carrying amount. As these financial
instruments approach maturity their fair value will pull back to
their carrying value.
The significant majority of our investment securities held at
amortised cost are Bank of England eligible so are available for
entering into repurchase agreements, should we need additional
liquidity. The remainder of our investment securities are held at
fair value and therefore market movements on these assets are
already reflected in our reserves and capital ratios.
Information on how fair values are calculated is explained
below.
Loans and advances to customers
Fair value is calculated based on the present value of future
principal and interest cash flows, discounted at the market rate of
interest at the balance sheet date, adjusted for future credit
losses and prepayments, if considered material.
Investment securities
The fair value of investment securities is based on either
observed market prices for those securities that have an active
trading market (Level 1 assets), or using observable inputs (in the
case of Level 2 assets).
Financial assets held at fair value through profit and loss
The financial assets at fair value through profit and loss
relate to the loans and advances previously assumed by the
RateSetter provision fund.
Deposits from customers
Fair values are estimated using discounted cash flows, applying
current rates offered for deposits of similar remaining maturities.
The fair value of a deposit repayable on demand is approximated by
its carrying value.
Debt securities
Fair values are determined using the quoted market price at the
balance sheet date. Whilst previously classified as a Level 1
instrument, as at 30 June 2023 this was reclassified as a Level 3
instrument due to low trading volumes on these instruments.
Deposits from central banks/repurchase agreements
Fair values approximate carrying amounts as their balances are
generally short-dated.
Derivative financial assets and liabilities The fair values of
derivatives are obtained from discounted cash flow models as
appropriate. 15. Legal proceedings and regulatory matters
As part of the normal course of business we are subject to legal
and regulatory matters. The matters outlined below represent
contingent liabilities and as such at the reporting date no
provision has been made for any of these cases within the financial
statements. This is because, based on the facts currently known, it
is not practicable to predict the outcome, if any, of these matters
or reliably estimate any financial impact. Their inclusion does not
constitute any admission of wrongdoing or legal liability.
Financial Crime
The FCA is currently undertaking enquiries regarding our
financial crime systems and controls. We continue to engage and
co-operate fully with the FCA in relation to these matters.
Magic Money Machine litigation
In 2022 Arkeyo LLC, a software company based in the United
States, filed a civil suit with a stated value of over GBP24
million against us in the English High Court alleging, among other
matters, that we infringed their copyright and misappropriated
their trade secrets relating to money counting machines (i.e. our
Magic Money Machines). We believe Arkeyo LLC's claims are without
merit and are vigorously defending the claim. 16. Post balance
sheet events
Tier 2 MREL eligibility
As set out in Note 10, on 28 July 2023 the Bank of England's
Resolution Directorate agreed to a further extension to the
pre-existing adjustment with respect to our GBP250 million 9.139%
Tier 2 Notes regarding their MREL eligibility.
The adjustment permits the Tier 2 Notes to remain eligible to
count towards our MREL requirement until their maturity date of 26
June 2028. Their eligibility as Tier 2 regulatory capital will
continue to amortise from the call date (26 June 2023) over their
remaining life.
Early repayment of TFSME
On 28 and ?31 July we made early repayments totalling GBP550
million to the Bank of England in respect of amounts we had drawn
down under TFSME. The repayment was financed using long-dated
repurchase agreements. Following these repayments, the amount
remaining due under the scheme total GBP3,250 million. These will
mature in 2025 and 2027 in the amounts of GBP1,860 million and
GBP1,390 million respectively.
There have been no other material post balance sheet events.
OF the condensed consolidated interim financial statements
ALTERNATIVE PERFORMANCE MEASURES (UNAUDITED)
In the reporting of financial information, we use certain
measures that are not required under IFRS, the Generally Accepted
Accounting Principles under which we report. These measures are
consistent with those used by management to assess underlying
performance. These alternative performance measures have been
defined below, where a measure relates to a half year any financial
statement lines marked with an * have been annualised in the
calculation.
Cost of deposits
Interest expense on customer deposits divided by the average
deposits from customers for the period.
Half year to Half year to Half year to Full year to
30 Jun 2023 31 Dec 2022 30 Jun 2022 31 Dec 2022
GBP'million GBP'million GBP'million GBP'million
Interest on customer deposits* 51.0 20.5 12.4 32.9
Average deposits from customer 15,580 16,509 16,444 16,351
Cost of deposits (annualised) 0.66% 0.25% 0.14% 0.20%
Cost of risk
Expected credit loss expense divided by average gross loans.
Half year to Half year to Half year to Full year to
30 Jun 2023 31 Dec 2022 30 Jun 2022 31 Dec 2022
GBP'million GBP'million GBP'million GBP'million
Expected credit loss expense* 11.3 22.0 17.9 39.9
Average gross lending 12,934 12,871 12,346 12,611
Cost of risk (annualised) 0.18% 0.33% 0.29% 0.32%
Coverage ratio
Expected credit losses as a percentage of gross loans.
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
Expected credit losses 197 187 171
Gross loans and advances to customers 12,769 13,289 12,535
Coverage ratio 1.54% 1.41% 1.36%
Loan-to-deposit ratio
Net loans and advances to customers expressed as a percentage of
total deposits as at the period end.
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
Net loans and advances to customers 12,572 13,102 12,364
Deposits from customer 15,529 16,014 16,514
Loan-to-deposit ratio 81% 82% 75%
Net-interest margin
Net interest income as a percentage of average interest-earning
assets.
Half year to Half year to Half year to Full year to
30 Jun 2023 31 Dec 2022 30 Jun 2022 31 Dec 2022
GBP'million GBP'million GBP'million GBP'million
Net interest income* 221.5 223.3 180.8 404.1
Average interest-earning assets 20,900 20,973 21,085 21,029
Net interest margin (annualised) 2.14% 2.11% 1.73% 1.92%
Non-performing loan ratio
Gross balance of loans in stage 3 (non-performing loans) as a
percentage of gross loans as at period end.
30 Jun 2023 31 Dec 2022 30 Jun 2022
GBP'million GBP'million GBP'million
Stage 3 loans 365 352 345
Loans and advances to customers 12,769 13,289 12,535
Non-performing loan ratio 2.86% 2.65% 2.75%
Statutory cost:income ratio
Statutory total operating expenses as a percentage of statutory
total income.
Half year to Half year to Half year to Full year to
30 Jun 2023 31 Dec 2022 30 Jun 2022 31 Dec 2022
GBP'million GBP'million GBP'million GBP'million
Operating expenses 259.7 275.5 278.8 554.3
Total income 286.4 287.0 236.5 523.5
Statutory cost:income ratio 91% 96% 118% 106%
Underlying cost:income ratio
Underlying total operating expenses as a percentage of
underlying total income.
Half year to Half year to Half year to Full year to
30 Jun 2023 31 Dec 2022 30 Jun 2022 31 Dec 2022
GBP'million GBP'million GBP'million GBP'million
Underlying operating expenses 258.2 266.5 266.3 532.8
Total underlying income 285.6 285.9 236.2 522.1
Underlying cost:income ratio 90% 93% 113% 102%
Underlying profit/(loss)
Underlying profit/(loss) represents an adjusted measure,
excluding the effect of certain items that are considered to
distort period-on-period comparisons, in order to provide readers
with a better and more relevant understanding of the underlying
trends in the business.
Non-underlying item Description Reason for exclusion
Impairment and The impairments and write-offs relating to property,
write-offs of The costs associated with non-current plant, equipment and intangible assets are removed as
property, plant, assets that are either no longer being used they distort comparison between periods. This is on
equipment and by or are no longer generating future the basis that the write-offs and impairments relate
intangible assets economic benefit for the business. to specific events and triggers which are not
consistent between periods.
The commitments under the Capability and Innovation
These costs and income relate to the Fund continue through to 2025. The costs associated
delivering the commitments associated with with fulfilling the commitments and associated income
Net C&I costs the Capability and Innovation Fund (awarded are felt to distort period-on-period comparison.
by BCR). Given the offsetting nature of the income and
expenditure, there is no net impact on our
profitability from this adjustment.
The remediation costs are felt to be time limited and
Remediation costs consists of money spent will disappear once the investigations have
in relation to the RWA adjustment including concluded. As such are removed to allow greater
Remediation costs the associated investigations by the PRA comparability between periods. Following the
and FCA as well as work undertaken in conclusion of the investigations by the PRA, FCA and
relation to financial crime. OFAC in 2022, remediation costs primarily relate to
the ongoing regulatory matters regarding financial
crime.
Transformation costs primarily consist of The transformation costs are seen as a nonrecurring
the costs associated with redundancy cost stream aimed at addressing the challenges the
Transformation costs programmes during the year as part of our business faces. These are therefore removed in order
approach to right-sizing teams as well as to prevent period-on-period distortion. Following the
the costs of work undertaken to establish conclusion of our transformation plan in 2022 no
our cost reduction programme. transformation costs have been recognised in 2023.
Costs associated with the establishment and In 2022 we started work on implementing our new
Holding company insertion of a holding company (Metro Bank holding company which was successfully implemented in
insertion costs Holdings PLC) above the current operating May 2023. As such they have been excluded from our
company (Metro Bank PLC) to meet regulatory underlying results to avoid distortion between
requirements. periods.
Impairment and Holding
Statutory write offs of PPE Net C&I Transformation Remediation company Underlying
Half year to 30 Jun 2023 basis and intangible costs costs costs insertion basis
assets GBP'million costs
GBP'million GBP'million GBP'million GBP'million
GBP'million GBP'million
Net interest income 221.5 - - - - - 221.5
Net fee and commission 42.2 - - - - - 42.2
income
Net gains on sale of assets 0.8 - - - - - 0.8
Other income 21.9 - (0.8) - - - 21.1
Total income 286.4 - (0.8) - - - 285.6
General operating expenses (221.4) - 0.8 - (0.8) 1.5 (219.9)
Depreciation and (38.3) - - - - - (38.3)
amortisation
Impairment and write offs of
property, plant, equipment - - - - - - -
and intangible assets
Total operating expenses (259.7) - 0.8 - (0.8) 1.5 (258.2)
Expected credit loss expense (11.3) - - - - - (11.3)
Profit before tax 15.4 - - - (0.8) 1.5 16.1
Half year to 31 Dec 2022
Net interest income 223.3 - - - - - 223.3
Net fee and commission 42.3 - - - - - 42.3
income
Net gains on sale of assets - - - - - - -
Other income 21.4 - (1.1) - - - 20.3
Total income 287.0 - (1.1) - - - 285.9
General operating expenses (234.4) - 1.1 2.3 2.3 1.8 (226.9)
Depreciation and (39.6) - - - - - (39.6)
amortisation
Impairment and write offs of
property, plant, equipment (1.5) 1.5 - - - - -
and intangible assets
Total operating expenses (275.5) 1.5 1.1 2.3 2.3 1.8 (266.5)
Expected credit loss expense (22.0) - - - - - (22.0)
Loss before tax (10.5) 1.5 - 2.3 2.3 1.8 (2.6)
Half year to 30 Jun 2022
Net interest income 180.8 - 0.1 - - - 180.9
Net fee and commission 39.5 - - - - - 39.5
income
Net gains on sale of assets - - - - - - -
Other income 16.2 - (0.4) - - - 15.8
Total income 236.5 - (0.3) - - - 236.2
General operating expenses (233.2) - 0.3 1.0 3.0 - (228.9)
Depreciation and (37.4) - - - - - (37.4)
amortisation
Impairment and write offs of
property, plant, equipment (8.2) 8.2 - - - - -
and intangible assets
Total operating expenses (278.8) 8.2 0.3 1.0 3.0 - (266.3)
Expected credit loss expense (17.9) - - - - - (17.9)
Loss before tax (60.2) 8.2 - 1.0 3.0 - (48.0)
Metro Bank Holdings PLC
Registered number
14387040 (England and Wales)
Registered office
One Southampton Row
London
WC1B 5HA
metrobankonline.co.uk
-----------------------------------------------------------------------------------------------------------------------
Dissemination of a Regulatory Announcement, transmitted by EQS
Group. The issuer is solely responsible for the content of this
announcement.
-----------------------------------------------------------------------------------------------------------------------
ISIN: GB00BMX3W479
Category Code: IR
TIDM: MTRO
LEI Code: 984500CDDEAD6C2EDQ64
OAM Categories: 1.2. Half yearly financial reports and audit reports/limited reviews
Sequence No.: 261360
EQS News ID: 1692473
End of Announcement EQS News Service
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