Metro Bank’s 2018 profit misses estimates as growth slows, shares dive
(Reuters) – Shares in Metro Bank slumped 25 percent on Wednesday after it revealed a sharp drop in key capital ratios and said profits would be hit by slowing growth, adding to fears that the British lender could be forced to raise fresh capital.
Metro, set up to challenge the dominance of Britain’s big lenders after the financial crisis, said full-year underlying pretax profit more than doubled to 50 million pounds. However, that represented a 9 million pound miss against analyst forecasts for the year, Jefferies analysts said.
In addition, the bank reported a hefty adjustment in its risk-weighted assets following an internal review of commercial property exposures and specialist buy-to-let loans.
It said RWAs had risen by around 900 million pounds, ramping up pressure on its core capital ratio — a widely-tracked measure of bank strength — which now stands at 15.8 percent, down from 19.1 percent in the third quarter.
Chief Executive Officer Craig Donaldson declined to comment on whether the bank would need a cash call to reinforce its capital buffers, but told analysts the company “will look at all options to maximize shareholder return”.
Metro Bank saw a squeeze on margins and competitive pressures in the mortgage market in the third quarter, which took the shine off the rise in profit in that period.
Lenders in Britain also expect demand for mortgages and credit card lending to fall by the greatest extent in several years, a Bank of England survey showed, adding to signs of an economic slowdown before Brexit.
Metro Bank raised 303 million pounds last year to replenish funds as it aims to more than double its loan book within three years. Metro has said it may need to raise more cash by 2020.
Metro Bank said customer loans rose 48 percent to 14.2 billion in 2018. Total capital ratio is expected to be about 15.8 percent as at Dec. 31, it added.
Deposits came in at 15.7 billion versus a 16.3 billion pounds forecast, with growth slowing to 6 percent quarter-on-quarter, compared with 7.8 percent at the third quarter stage, analysts at Goodbody said in a note.
(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Keith Weir)