Metro Bank H2 Earnings Call Highlights

Core Insights - Metro Bank reported its strongest performance in fiscal year 2025, achieving record profitability, revenue, net interest income, and net interest margin, alongside cost reductions and improved capital ratios [4] Funding Position - Metro Bank has the lowest funding costs among high street banks, with an exit cost of deposits at 94 basis points, and deposit costs have decreased by over 100 basis points in the last two years due to a shift from expensive fixed-term deposits to current accounts [2][4] Deposit Growth and Composition - Current accounts grew by 3% in the second half of 2025, with over 110,000 new accounts opened, and non-interest-bearing balances in current accounts now represent 44% of total deposits, more than double the average of market peers [1][4] Revenue and Profitability - The bank's return on tangible equity (RoTE) was 6.4% for 2025, with a revenue growth of 16%, the highest among UK banks reported so far, and total revenue increased by over £81 million year-on-year to £585 million [3][4] Loan Growth and Asset Management - Metro Bank completed £2 billion in new commercial and corporate loans in 2025, nearly tripling the level from two years ago, and entered 2026 with an £800 million pipeline [5][6] Asset Quality - Non-performing ratios for retail mortgages and commercial lending remain low, with over 87% of loans collateral-backed by property or government guarantees, and the average loan-to-value ratio for property-backed loans is 62% [7][8] Capital and Liquidity - The bank maintains significant liquidity and capital headroom, with a loan-to-deposit ratio of 66% and a liquidity coverage ratio exceeding 300%, allowing for flexibility regarding existing MREL [9] Future RoTE Expectations - Metro Bank expects to more than double its RoTE within the next seven months, guiding to 13% by Q4 2026, 15% in 2027, and over 18% in 2028, driven by treasury portfolio roll-off and MREL dynamics [10] Interest Rate Sensitivity - The bank anticipates a further 50 basis point reduction in the base rate to 3.25% by summer 2026, with potential impacts on revenue and margins [12][13] Hedging Strategy - Metro Bank has up to £2 billion of hedges in place and plans to add more hedging positions as it shifts towards floating-rate corporate and commercial assets [14]