Q2 2016 Results Long Live the Revolution 27 th July 2016 1
our disruptive model goes from strength to strength Our culture and model QoQ% YoY% On Q2 2016 Q1 2016 Increase Increase Target continue to differentiate us • 80% brand recognition* Customer deposits £6.6B £5.9B +12% +74% • Awarded Most Trusted Net average deposits £5.7M £6.6M -13% +44% Financial Provider in the UK by per store month Moneywise • 77% Net Promoter Score for £4.6B £4.1B +12% +110% Net customer loans 1H 2016 • 87% of colleagues recommend 70% 69% +1pp +12pp Loan to deposit ratio Metro Bank as an employer Improved Improved £4.1M £7.9M Underlying loss after tax 48% 45% Outperform On target Underperform * Source: YouGov July 2016. 2
we continue to grow with low cost, sticky deposits Customer deposits (m) • Annual deposit growth of 74% £6,599 H1 Cost of deposits • Retail 82% growth • Commercial 68% growth £3,791 74% £1,956 • Deposit mix: commercial 52% 94% £870 125% and retail 48% 0.96% 0.82% 0.87% 1.36% • H1 2016 deposit per store per month Jun 2013 Jun 2014 Jun 2015 Jun 2016 average of £6.2M is c.£74M per year (c.$98M+ per year) • Current accounts represent Average deposit growth per store per month (£’m) 27% (28% H2 2015) of total H1 6.2 deposits. Fixed represents 30% 5.9 H2 5.5 (25% in H1 2015) 4.6 4.2 • Action taken to reduce cost of 3.7 3.0 deposits following change in mix 2013 2014 2015 2016 3
enabling us to grow our our lending at low risk High growth, low risk driving our LTD towards 80% • Non-performing loans (90 days+ in arrears) 0.12% of loan balances at end Net customer loans (m) £4,629 H1; an improvement from H2 2015 due to Loan to deposit ratio lower commercial arrears 110% • The loan loss reserve represents 146% £2,206 70% of non-performing loans 91% £1,153 58% • Cost of risk is 0.12% at end H1; 216% £365 59% 42% compared to 0.29% for 2015 Jun 2013 Jun 2014 Jun 2015 Jun 2016 • Average debt to value on residential mortgage lending is 60% Portfolio • Average debt to value on commercial Retail: 65% of portfolio Commercial: 35% of portfolio lending is 58% £0.2bn £0.1bn • Buy-to-Let is c.25% of total lending with an average debt to value of 59% £0.7bn £0.4bn £3.0B £1.6B • No commercial property development loans and only £2M of residential £2.1bn £1.1bn property development lending Commercial loans Residential Mortgages Professional BTL Residential mortgages BTL Consumer lending Asset & Invoice Finance 4
delivering a strong and simple highly liquid deposit funded balance sheet • With a 70% loan to deposit ratio, Quarter £’m Q2 2016 Q1 2016 Growth the balance sheet is intrinsically liquid Cash and equivalents 498 489 +2% Investments 2,853 2,417 +18% • 86% of the liquidity and investment Customer lending 4,629 4,129 +12% portfolio is cash, AAA, UK gilts and Fixed, intangible and other T bills 371 353 +5% assets • No reliance on wholesale funding Total Assets 8,351 7,388 +13% 6,599 5,898 Customer deposits +12% • Investment portfolio grew 70% year 862 593 Repo funding +45% on year due to capital raise, deposit 96 98 Other liabilities -2% growth and additional FLS drawings Total Liabilities 7,557 6,589 +15% • FLS drawings increased to Shareholders’ funds 794 799 -1% £1B from £0.5B at 31 Dec 2015 Total equity and liabilities 8,351 7,388 +13% • LCR ratio at 30 June of 110% • Move towards advanced risk based Capital adequacy ratios: (AIRB) approach in the medium CET1 ratio 21% 25% - term represents opportunity to Total capital ratio 21% 25% - achieve greater capital efficiency Regulatory leverage ratio 8% 9% - 5
with income growth continuing to to outpace outpace cost growth Quarter Annual • 48% reduction in quarterly £’m Q2 2016 Q1 2016 Growth Growth losses (Q1 £7.9M, Q2 £4.1M) Net interest income 36.2 30.5 +19% +82% • Positive income (+63%) and Fees and other income 8.6 7.2 +19% +37% operating expense (+30%) jaws Net gains on sale of securities 1.6 0.0 nm -30% - Q2 2015 to Q2 2016 Total revenue 46.3 37.8 +23% +63% • Net interest income growth Operating expenses -43.2 -41.4 +4% +30% driven by higher lending balance Depreciation and amortisation -5.3 -4.9 +8% +18% and favourable LTD ratio Impairment charges -1.3 -1.1 +16% +78% • Annual operating costs per £1M - 3.4 - 9.6 - 64% - 64% Underlying loss before tax of deposits down by 27% (H1 2015 £39K, H1 2016 £29k) as Underlying taxation -0.7 1.7 - - economies of scale impact Underlying loss after tax - 4.1 - 7.9 - 48% - 45% • Tax impacted by one-off changes to R&D and AFS Gains Ratios: tax regime and Share Option Average asset yield 2.76% 2.84% - - true-up. Average cost of deposits 0.87% 0.88% - - • Cost of deposits reducing as Net interest margin 1.93% 1.96% - - front & back book repriced CoR 0.12% 0.12% - - 6
as store contribution and perform rmance increases Store contribution increases for new and existing stores £29.2M Positive contribution 41 Stores • All stores open 18 months or Negative contribution more in positive contribution £21.2M 40 Stores £30.1M 33 stores £13.0M • Stores open with more 36 Stores £22.5M deposits and grow faster as 28 stores each annual cohort benefits £15.4M £5.4M 23 Stores from increased network effect 27 Stores and organisational learnings £7.0M 17 Stores -£2.4M -£1.6M -£1.5M -£0.9M 13 Stores 12 Stores 10 Stores 8 Stores • Safe deposit boxes cover Q2 2014 Q2 2015 Q1 2016 Q2 2016 81% of rent in stores open 12 months+ As annual cohorts start and grow faster (1) Customer Deposits £’m (1) 2010 excludes Holborn • 66% comp store growth in deposits for stores open 12 months+ Months open 1 6 11 16 21 26 31 36 41 46 51 56 61 66 2010 2011 2012 2013 2014 2015 7
and we continue to expand our our store network 42 stores open 8 stores opening in 2016 Chelsea April Bexleyheath July Wimbledon In construction Clapham In construction Chelmsford In construction Eastbourne In construction Colchester In construction Basingstoke In construction with a strong pipeline Bath Liverpool St. Bristol Luton Canterbury Northampton Peterborough Oxford Enfield Putney Greenwich Swindon Ilford Leicester *Scheduled to open by December 2018. 8
and invest in & accelerate our our digital offerings • New online Commercial Live banking platform • New public website with Q3 2016 new geo user interface • New mobile app for Personal Q4 2016 and Small Business Customers • Online application suite build H1 2017 out – including new to franchise current accounts and unsecured lending • H1 2017 Click & Collect 9
whilst still delivering a continued reduction in quart rterly losses Underlying loss after tax Q3 2015 Q4 2015 Q1 2016 Q2 2016 £4.1M (48)% £7.9M (22)% £10.2M (5)% £10.7M 10
so we reiterate our current and 2020 guidance UK Deposit Market in 2020: c.£2.3trn (1) Metro Bank Deposits: c.£27.5B, c.1.2% (2) 2020 T 2020 Tar argets gets: Month-on-month profitability c.110 stores, by the end of 2016 c.£5.25M deposits per month Loan to Deposit: c.80% Full year profitability for 2017 NIM + Fees: c.3% Cost : Income: c.60% Cost of Risk (3) : c.0.20% Leverage ratio: >4.0% ROE: c.18% (1) UK Deposit market based on Bank of England Data for (2) UK Deposit market based on Bank of (3) Calculated based on 2015, assumed to grow in line with UK GDP forecasts England Data for Illustrative scenario, average gross loan of the World Bank until 2017, held flat from 2017E assuming deposits grow from 2015-2020 balances. onwards at 2.5% annual growth. at a CAGR of c.40%. 11
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