1st May 2019 17:57
LONDON (Alliance News) - Metro Bank PLC on Wednesday said its pretax profit halved in the first quarter of 2019 due to a new accounting method and interest expense.
The bank also said it is planning an approximately GBP350 million equity raise in the second quarter to support growth. The lender currently has a standby underwrite in place with RBC Capital Markets, Jefferies and KBW.
The bank posted a pretax profit of GBP4.3 million for the three months to March 31, halving its GBP8.6 million profit in the same quarter of 2018. Pretax profit in the final quarter of 2018 totaled GBP6.1 million.
The profit drop was partly attributed to a GBP2.0 million hit from the adoption of IFRS 16 in January, an accounting standard that "recognises an interest charge on the lease liability which is partly offset by a reduction in lease expenses".
Another factor in the profit reduction was a GBP3.5 million interest expense on Metro Bank's tier 2 debt, issued in June 2018, as well as higher operating expenses.
First quarter adjusted pretax profit fell 31% year-on-year to GBP6.9 million from GBP10.0 million. In the fourth quarter of 2018, adjusted pretax profit stood at GBP11.2 million.
Total revenue was GBP107.5 million, up 17% from GBP91.8 million, including GBP83.8 million of net interest income versus GBP75.0 million the year before.
As at March 31, deposits stood at GBP15.10 billion, up 19% year-on-year from GBP12.70 billion in 2018.
However, a disappointing trading update in January meant total deposits were down 3.6% quarter-on-quarter, causing net deposits per store per month to drop 38% to GBP2.9 million from GBP4.7 million growth in the fourth quarter of 2018.
Metro bank Chief Executive Craig Donaldson said: "Adverse sentiment following January's update impacted deposit growth in the quarter, with a small number of large commercial and partnership customers making withdrawals, but we are pleased to see a return to net inflows in April. The bank has remained resilient with a 6% increase in customer accounts on Q4 2018 and momentum in the rest of the business continuing. 2019 is a year of transition as we implement our evolved strategy, with the aim of optimising the balance of growth, profitability and capital efficiency."
Total net loans as of 31 March were GBP15.17 billion, up 38% from GBP10.97 billion in the prior year. Total net loans increased by GBP932 million quarter-on-quarter. Loan to deposit ratio increased to 100% from 91% at the end of fourth quarter of 2018.
Metro Bank's risk-weighted assets at March 31 were GBP9.61 billion, versus GBP8.94 billion at December 31, 2018, principally due to lending growth and the adoption of IFRS 16.
Shares in Metro Bank closed up 3.2% at 774.00 pence on Wednesday.
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