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Pandemic tips Metro Bank into $314 million loss, denting shares

Lawrence White and Muvija M
·2-min read
FILE PHOTO: People walk past a Metro Bank in London
FILE PHOTO: People walk past a Metro Bank in London

By Lawrence White and Muvija M

LONDON (Reuters) - Britain's Metro Bank <MTRO.L> swung to a 240 million pound ($314 million) first half loss on Wednesday after it took provisions to cover coronavirus crisis-related loan impairments.

Metro Bank's shares fell as much as 13.5%, compounding a more than 90% collapse in its stock price since it became mired in an accounting scandal in January last year.

The bank, which was founded to take on the established British lenders, said it had taken a 109 million pound hit from the pandemic, mainly as a result of higher expected loan losses as well as lower transaction fees.

The loss compared to a 3.4 million pound profit in the same January-June period a year ago, although the bank said its transformation plan remained on track and it had increased deposits by 14% in the last year.

"We remain committed to becoming the best community bank in the UK," Chief Executive Dan Frumkin told reporters on a call.

Analysts said the results were worse than expected, with impairments higher than forecast and its core capital level disappointing at 14.5%, down from 15.6% at the end of December.

Metro Bank's cost of risk, a measure of the cost of lending due to defaults, rose from 0.06% to 1.55% in the last year, and compared to a 1.51% margin the bank makes from lending and fees.

"Some will question should Metro Bank be writing new business at all given serious questions regarding line of sight on its ability to earn anything close to its cost of capital on marginal lending activity," analyst John Cronin at Dublin-based broker Goodbody said.

Metro Bank said it may have to raise up to 300 million pounds in debt capital in the first half of next year, and cautioned it might meanwhile temporarily fall below the threshold acceptable to regulators.

Frumkin said he could not comment on whether the Prudential Regulation Authority (PRA) had indicated it would grant a waiver in that case, but said he had discussed the issue.

"We have reviewed it in detail and walked through a 5 year forecast with them so they understand our capital plans going forward," he said.

(Reporting by Lawrence White in London and Muvija M in Bengaluru; Editing by Sinead Cruise and Alexander Smith)