Metro Bank, a challenger to the UK’s banking giants since its inception in 2010, reported a reduced annual loss and outlined further cost-reduction strategies to recover from a tumultuous period that led to significant deposit withdrawals and necessitated a substantial financial infusion.
Metro Bank’s Loss Narrows As It Plans More Cost-Cutting Measures
Following a period of unstable trading conditions, the bank secured a financial lifeline through a £925 million ($1.18 billion) bailout in October. In response to these challenges, Metro Bank embarked on a series of austerity measures, including workforce reductions and eliminating several customer benefits, such as its seven-day-a-week banking service.
The bank’s efforts appear to be bearing fruit, as evidenced by its latest financial report, which reveals an underlying pre-tax loss of £16.9 million ($22 million), a marked improvement from the previous year’s £50.6 million loss. Metro Bank achieved a reported profit of £30.5 million, marking its first profitable year in four.
The bank’s stock increased modestly by 1% to 34.75 pence following CEO Daniel Frumkin’s announcement of an additional £30 million in cost savings targeted for the end of the current year.
While Frumkin clarified that these savings would not result in branch closures, he acknowledged that the cuts would likely affect contractual agreements and operational expenses and potentially lead to further job reductions.
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Frumkin expressed confidence in the bank’s strengthened position and foundation despite the past year’s challenges. He highlighted a 1% increase in deposits to £15.62 billion by the end of 2023, a positive sign following efforts to regain customer trust and deposits after concerns about the bank’s financial stability.
Looking ahead to 2024, Metro Bank anticipates a slight decrease in deposits and net interest margin (NIM), attributing this to the rising cost of deposits. The cautious outlook is further influenced by macroeconomic uncertainties and intensified competition within the banking sector.
To prepare for potential credit losses, the bank has allocated £199 million for 2023, an increase from £187 million the previous year.
Analysts at RBC recognise Metro Bank’s challenges ahead. While the refinancing agreement provides management with breathing room, the bank’s success will heavily depend on its execution strategy in the coming years.
