Metro Bank swings to a £240m loss as the troubled challenger bank is battered by the economic fallout from the pandemic
- Decade-old Metro Bank said Covid-19 had cost it around £109million
- The amount of cash deposited with the bank grew by 14 per cent to £15.6billion
- The challenger bank’s shares fell 14 per cent on Wednesday morning
Metro Bank swung to a heavy loss in the first half of the financial year as it took a multimillion-pound hit from the effects of the coronavirus pandemic.
The decade-old business said Covid-19 had cost it around £109million as it reported a pre-tax loss of £240.6million in the first six months of the year.
The figures mark a sharp reversal from Metro’s £3.4million profit in the same period last year.
Time to slow down: Metro Bank will start slowing down its branch openings across the country
The news pushed the challenger bank’s shares down by around 14 per cent on Wednesday morning.
The amount of cash deposited with the bank grew by 14 per cent to £15.6billion when compared with the same period in 2019.
Chief executive Daniel Frumkin said: ‘These have been testing times but I’m very proud of the way Metro Bank has demonstrated the benefits of its community banking model, with our colleagues stepping up to support our customers and the local communities we serve.’
‘We saw an increase in digital activity – less than double-digits though,’ Frumkin added.
Metro becomes the latest in a string of high street banks to post a loss after taking a major hit from the pandemic and the resulting economic strains.
The bank was at the start of a four-year turnaround plan when the novel coronavirus struck, after a major accounting error and the departure of its chief executive and chairman.
In May Metro raised £375million to bolster its finances after it discovered the error in its books.
It has shelved plans to pour millions of pounds into new branches, but on a call with reporters on Wednesday, Frumkin talked up the company’s existing network.
‘Our stores are 75 per cent as busy as they were pre-Covid, so we see nothing to indicate that the store estate doesn’t make perfect sense over the medium term for the organisation,’ he said.
He also said that the existing 77 stores need to get bigger, as the business only opens two new branches in the next 24 months.
Unlike many of its older rivals, Metro’s branches were all opened within the last 10 years, which means their locations are more suited to today’s footfall than some other high street lenders.
Many of the company’s staff will continue to work from home for at least three days a week, and Metro will wait until after the winter to make any decisions on when and if it will bring everyone back to the office.
Last week Metro Bank celebrated the 10th anniversary of its first branch opening.
The bank confirmed it expects to complete the recently agreed £12m RateSetter acquisition in the second half of this year.
In January, Metro revealed it had underestimated the risk of some loans
Adam Vettese, an analyst at eToro, commented: ‘Metro Bank’s experience of Covid-19 is exactly the same as its rivals, with increased loan provisions for bad debts taking a huge chunk out of its profits.’
‘The difference with Metro Bank is that it was already on the ropes financially and just a few months into its four-year turnaround plan.’
‘Unfortunately, coronavirus hit just as Metro looked like it was making its way back from the major accounting error that forced founder Vernon Hill to quit the bank last year.’
‘Metro claims its turnaround plan is on track, but there’s no doubt that such a big half-year loss is a major setback.’