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Metro Bank shares tumble as first quarter profits halve after loans scandal

Chief executive Craig Donaldson said it had been a “challenging” quarter
Metro bank
Metro said it lost a small number of large customers after the loans fiasco

Metro Bank PLC (LON:MTRO) shares tanked after the lender said its profits halved in the first quarter following a £900mln loans error.

Pre-tax profit fell to £4.3mln in the quarter from £8.6mln a year ago.

Shares plunged 12.9% to 673.5p in morning trading.

READ: Metro Bank to raise £350mln in emergency cash call and CEO to waive bonus after accounting blunder

Metro said it lost a small number of large customers after admitting in January that many commercial loans had been incorrectly classified in an accounting error.

The discovery of the loans fiasco led to a sharp fall in Metro’s market value and forced it to reduce its long-term growth plans.  Shares are down 54% since the start of the year.

“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,” said chief executive Craig Donaldson.

Rights issue to go ahead

The lender also repeated plans to issue a £350mln rights issue by the end of June to prop up its capital levels.

Donaldson said it had been a “challenging” quarter as it was also hit by the industry-wide pressure of tough mortgage competition, which squeezed margins.

The net interest margin – the different between interest earned on loans and money paid for funds – fell to 1.64% from 1.76% last year.

Revenue gained 17% to £107.5mln.

Metro Bank 'resilient', says CEO

Loans grew by 38% to £4.2bn and deposits increased by 19% to £15.1bn.

Customer accounts rose by 97,000 to 1.7mln.

“The bank has remained resilient with a 6% increase in customer accounts on Q4 2018 and momentum in the rest of the business continuing,” Donaldson said.

 “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."

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