Metro Bank deposit outflows return to ‘more normal ranges’

  • The troubled lender revealed deposits totalled £15.6bn at the end of September
  • Customers withdrew their money from Metro in high volumes early last month 
  • However, the company revealed it achieved a ‘modest’ profit in the third quarter 

Metro Bank saw deposits fall by 5 per cent in the third quarter, but it has told investors outflows have normalised after October’s emergency rescue deal.

The troubled lender revealed deposits totalled £15.6billion at the end of September, compared to £16.4billion at the equivalent time last year.

However, the company revealed a ‘modest’ profit in the third quarter as daily deposit flows rebounded to ‘more normal ranges’.

Cash withdrawals: Metro Bank revealed deposits totalled £15.6billion at the end of September, compared to £16.4billion at the equivalent time last year

Customers withdrew their cash from Metro in significant volumes early last month following reports the challenger bank was looking to raise hundreds of millions of pounds to bolster its finances.

Although Metro had posted three straight quarters of profit, the firm’s capital levels were only just above the minimum regulatory threshold and posed a threat to its lending ability.

In mid-September, the group was refused permission by the Bank of England’s Prudential Regulatory Authority to evaluate mortgage risks using its own internal models, which large banks can use to enhance profitability.

Coupled with this, Metro has struggled to reduce costs due to its reliance on a 76-strong physical branch network. Its current £30million savings programme equates to around 5 to 6 per cent of its underlying cost base.

On 8 October, the firm revealed it had raised £325million of capital, consisting of £150million from investors and £175million from bondholders, and secured £600million of debt refinancing.

Spaldy Investments – run by Colombian billionaire Jaime Gilinski Bacal – became the majority shareholder of Metro, with a 53 per cent stake, after investing just over £100million.

Metro also said it was looking to sell up to £3billion of mortgages, which would help reduce its risk-weighted assets by about £1billion and be ‘earnings accretive’ next year.

Founded in 2010 by American entrepreneur Vernon Hill, the London-based group was Britain’s first new high street bank for more than 150 years.

Following many years of rapid expansion, major trouble erupted in January 2019 when the firm admitted to miscalculating the riskiness weighting on a large commercial loan portfolio.

The scandal led to £15million in regulatory fines, the departure of Hill and former chief executive Craig Donaldson and a slump in the firm’s share price.

Today, the company’s market capitalisation totals just £72.2million, having been worth £1.6billion when it floated in 2016 and £3.5billion at its peak two years later.

Metro Bank shares were 1.3 per cent lower at 42p on Tuesday morning, meaning they have lost over two-thirds of their value since the year began and 98 per cent in the past five years.