UK's Metro Bank sees defaults spiking as COVID-19 support moves ease
Reuters
Published Feb 24, 2021 07:19
Updated Feb 24, 2021 11:25
By Muvija M
(Reuters) - Britain's Metro Bank expects defaults to rise during 2021 in line with its provisions as government support offering during the COVID-19 crisis are wound down, it said after posting a deeper annual loss.
Shares tumbled 7% to 139 pence by 0946 GMT on Wednesday.
"The pandemic has clearly impacted performance, leading to significant expected credit losses, but our transformation strategy is firmly on track and we have accelerated initiatives to shift our asset mix," Chief Executive Daniel Frumkin said.
Metro, one of the several so-called challenger banks set up to take on bigger established lenders in Britain, estimated the pandemic would cost the bank 124 million pounds in credit loss expenses and lower transaction fee income.
Its provisions for loan losses rose to 126.7 million pounds at the end of 2020 from 11.7 million pounds a year earlier, driving up its underlying pretax loss to 271.8 million pounds ($385.6 million) from 11.7 million pounds.
Metro said the rise in expected credit losses was driven by the deteriorating economic picture, with cost of risk climbing to 0.86% from 0.08%, which measures of the cost of lending due to defaults.
The lender joined bigger British banks Lloyds (LON:LLOY) and HSBC in laying out plans to reduce office space as lockdowns have upended working habits.
Frumklin told a media call Metro's office square footage would be 30%-40% lower in central London as employees prefered a 'hybrid' model involving splitting work days between the home and office.
Metro, which had to scale back its growth plans last year after a major accounting scandal forced out its top bosses, said future expansion was subject to review with no new branches planned in the next two years.
It relieved some pressure on its capital levels in December when it agreed to sell its portfolio of owner-occupied residential mortgages to NatWest for up to 3.13 billion pounds.
Total net loans tumbled 18% to 12.09 billion pounds after the portfolio sale, while net interest margin fell to 1.22% from 1.51% in a low interest rate environment.
($1 = 0.7049 pounds)
Get The App
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.