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Metro Bank shares drop as fall in net interest margin overshadows swing to pretax profit

Last updated: 00:50 22 Feb 2018 AEDT, First published: 00:10 22 Feb 2018 AEDT

Metro Bank branch exterior
Metro Bank swung to a pre-tax profit of £18.7mln,against a loss of £17.2mln a year earlier

Metro Bank PLC (LON:MTRO) shares retreated on Wednesday after increased operating expenses and a reduction in the net interest margin overshadowed a swing to profit and an increase in net interest income for 2017.

The challenger bank was one of the worst performers on the FTSE 250 index, with its shares shedding 5% to 3,430p in early afternoon trading.

READ: Deutsche Bank and Citi warn of margin pressures facing UK challenger banks

Results for full-year 2017, saw Metro Bank's net interest margin slip slightly to 1.93%, down from 1.97% the year before, with its operating expenses rising to £231.4mln, up from £179.9mln in 2016.

The bank's common equity tier 1 (CET1) ratio also fell, down to 15.3% last year from 18.1% in 2016.

However, Metro’s net interest income rose to £241mln in the period, up from £154.2mln previously, helping the lender swing to a pre-tax profit of £18.7mln,against a loss of £17.2mln a year earlier, its first statutory annual pre-tax profit.

The bank saw deposits from customers increase to £11.7bln in 2017, up from £8bln the year before, while loans offered a similar picture, rising to £9.6bln from £5.9bln in 2016.

Metro Bank said it plans to open 12 stores in 2018, expanding its network further west towards Bristol and Cardiff and north to Birmingham and the Midlands, creating 900 jobs.

Big targets for 2023

The company also said it is preparing a bid for Royal Bank of Scotland Group PLC's (LON:RBS) 'alternative remedies' package of branches it needs to sell, which it added presents a “huge opportunity” to deliver choice for small and medium-sized businesses.

In its 2023 targets, Metro said it is aiming to see £50bln-£55bln in deposits and between 140 and 160 stores, a big increase on its 55 stores in 2017.

Craig Donaldson, Metro Bank's chief executive, said: "For SMEs, the backbone of the British economy, Metro Bank is the real competition to the big incumbents.  In our current heartland of London and the South East we are winning 17% of SME business current account switchers.”

He added: “As we enter new markets across the country, we will continue to create more jobs and bring real competition and choice for personal and business banking customers.”

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