2019 RESULTS PRESENTATION 26 February 2020
Agenda 1 Introduction Dan Frumkin (CEO) 2 2019 Financial results David Arden (CFO) Strategy update Dan Frumkin (CEO) 3 4 Q&A Agenda 1
Introduction Dan Frumkin (CEO)
Comprehensive business evaluation What works? What do we need to address? External Internal Customer-centric culture • • Lower for longer rate Negative operating jaws environment presents Differentiated customer proposition • Existing stores have consumed capital income challenges and are driver of fixed costs • Retail and SME deposit balances up Improve in-store processes • Ring-fencing implications year on year • for mortgage market Meet more customer needs through competition products and services 2 million accounts and growing • More automated decisioning and risk- based pricing • Robust balance sheet More investment in people, processes and platforms Strategy 1 2 3 4 5 Balance sheet Internal and external Costs Revenue Infrastructure optimisation comms Becoming the UK’s best community bank Introduction 3
Core foundations continue to deliver Customer service Customer service Customer accounts proposition validation growth Open 362 days a year, 7 days a week, early ‘till late Service in stores (3) +385k 2.0m At the heart of our local communities 2019 total – hosted more than 1,500 Money customer accounts customer accounts Zones, teaching 45,000 children c.90 % c.90 % (000s) 1,077 916 NPS (1) brand awareness (2) 150 723 133 548 102 415 Colleagues deliver superior service 74 927 782 50 and are at the heart of our people- 621 475 364 people banking Online and mobile banking services (3) 2015 2016 2017 2018 2019 80% of store managers and 75% Personal current accounts Business current accounts of assistant store managers have been promoted 92% 3.5k 33 % 30 % of colleagues believe colleagues Metro Bank is a great retail deposit total deposit CAGR place to work (2015 – 2019) 2019 growth Money Zone, Magic Money Machines, lollies, dog-friendly (1) 2019 new personal account opening net promoter score. (2) YouGov plc, brand awareness survey. Total sample size in London was 1,014 adults. Fieldwork was undertaken between 27-29 Introduction 4 January 2020. The figures have been weighted and are representative of all London adults (aged 18+). (3) CMA Service Quality Surveys published 17 February 2020
Straightforward strategy – execution is key 1 2 3 4 5 Balance sheet Internal and Costs Revenue Infrastructure optimisation external comms Tight cost control through back office Meeting more Investment in Enhanced focus on efficiencies, Improve our customer needs and integrated channels risk-adjusted returns organisational approach to development of new and core and growing tangible simplification and communication capabilities infrastructure book value disciplined property footprint Becoming the UK’s best community bank Delivering >8.5% RoTE by 2024 Introduction 5
2019 Financial results David Arden (CFO)
2019 key performance indicators Net fee and Liquidity Customer Total capital other income coverage ratio + MREL ratio accounts (2018: £63.3m) (2018: 139%) +25% (2018: 1.6m) +58pp (2018: 15.9%) +6.2pp +43% 2.0m £90.4m 197% 22.1% Customer Net interest Underlying Statutory deposits margin loss before tax loss before tax (30bps) (123%) (422%) (8%) (2018: £15.7b) (2018: 1.81%) (2018: £50m profit) (2018: £41m profit) £14.5b 1.51% (£11.7m) (£130.8m) 2019 Financial results 7
Statutory loss primarily driven by one-off write-down of intangibles and derecognition of deferred tax asset Impairment Intangibles DTA Net BCR Listing share £m Underlying derecognition Remediation Transformation and write- Statutory write-down costs awards down of PPE Net interest income 308.1 - - - - - - - 308.1 Fee and other income 90.4 - - - 15.5 - - - 105.9 Net gains on sale of 1.6 - - - - - - - 1.6 assets Total revenue 400.1 - - - 15.5 - - - 415.6 Operating costs (400.1) (68.4) - (26.8) (18.1) (11.5) (9.3) (0.6) (534.7) Impairments (11.7) - - - - - - (11.7) Loss before tax (11.7) (68.4) - (26.8) (2.6) (11.5) (9.3) (0.6) (130.8) Tax (4.3) 1.8 (52.7) 0.7 0.5 2.2 - - (51.8) Loss after tax (16.0) (66.6) (52.7) (26.1) (2.1) (9.3) (9.3) (0.6) (182.6) No impact on regulatory capital Intangibles write-down: includes to the discontinuation of certain work-in- progress or older projects that do not form part of the Bank’s revised strategy Deferred tax asset derecognition: derecognition for unused tax losses, reflecting the impact on the Bank’s short -term profit of its long term investment in cost, revenue and infrastructure transformation 2019 Financial results 8
Capital above requirements Capital position in 2019 supported by the equity capital raise and MREL issuance, optimisation of the treasury portfolio, a loan portfolio disposal and lower lending volumes Total capital + MREL ratio bridge 22.1% 3.8% 18.3% 3.9% (1) 15.9% 1.0% (0.5%) (0.3%) (0.4%) (0.7%) (0.6%) Total capital IFRS16 Annual Organic Profit & loss Investment Asset 2019 Total capital 2019 MREL Total capital (2) Dec 2018 adoption operational lending account in disposals equity raise Dec 2019 debt raise + MREL Dec risk growth intangibles 2019 increment and other (1) RWA adjustment included in Dec 2018 position. (2) Includes loan portfolio disposal and treasury portfolio sale 2019 Financial results 9
Resilient deposit base and strong current account growth Deposit flow challenges experienced in H1 2019 stabilised in H2 2019 and provide a solid foundation for 2020 Deposits by customer type Cost of deposits (£b) 2019 2018 32% 15.7 26% 29% 30% 14.5 13.8 Fixed term: Demand: Fixed term: Demand: 2.5 5.1 3.1 savings current savings current 1.8 accounts accounts accounts 21% growth accounts 2.0 2.2 61bps 78bps 3.3 in retail and 3.1 3.2 SME core 70% deposits 53% 6.9 5.6 5.2 44% Demand: 39% Demand: FY 2018 HY 2019 FY 2019 savings accounts savings accounts Retail (ex Retail Partnerships) SME Retail Partnerships Commercial Current accounts 1,077 (000s) 916 150 723 133 548 102 415 74 927 782 50 621 475 364 2015 2016 2017 2018 2019 Personal current accounts Business current accounts 2019 Financial results 10
High quality and liquid balance sheet Treasury assets Funding split £0.3b £0.6b £1.1b £2.7b Cash Retail deposits £8.7b £3.8b LCR eligible RMBS Business and commercial deposits £0.5b 80% LCR £5.5b TFS funding £19.1b Government bonds eligible (1) Debt securities Covered Bonds £0.3b Repo Non-LCR eligible £5.7b assets £0.9b Liquidity coverage ratio Loan to deposit ratio 109% 197% 101% 163% 91% 139% Minimum requirement: 100% FY 2018 HY 2019 FY 2019 FY 2018 HY 2019 FY 2019 (1) Liquidity coverage ratio 2019 Financial results 11
Conservative underwriting and strong asset quality We continue to have a low risk, simple product offering, supported by our prudent approach to credit underwriting and lending Low risk lending portfolio Conservative debt to value profile Retail: 72% of portfolio £0.2b • Average retail mortgage DTV (4) : 59% Commercial: 28% of portfolio Residential • Average commercial term loan DTV (4) : 60% £1.9b mortgages 31% £0.3b 29% Commercial loans Retail 20% mortgages 20% 19% 19% 19% £10.7b Asset & 16% BTL Invoice 11% 9% finance £4.0b Consumer (1) lending 3% 3% 1% 1% Less than 51-60% 61-70% 71-80% 81-90% 91-100% More than £8.5b 50% 100% £3.7b 2018 2019 Strong asset quality Low cost of risk NPL ratio (2) 8bps 7bps 0.53% 0.15% 2018 2019 2018 2019 Collateral coverage 159% 195% ratio (3) (1) Buy-to-let. (2) Non-performing loan ratio. (3) 77% of NPLs are collateralised. Of NPLs that are not collateralised, 56% relate to retail consumer lending. Collateral coverage ratio calculated 2019 Financial results 12 as gross collateral value divided by total outstanding loan balance. (4) Debt to value
Pressure on interest income mitigated by significant growth in non-interest income NIM reduction reflects actions taken to protect the balance sheet, offset through strong growth in fee income NIM bridge Net fee and other income (£m) Growth of +385k customer as a % of 16% 23% accounts 181bps total revenue Addressing fee 90.4 ( 7 ) 151bps leakage ( 8 ) 13 ( 5 ) opportunities ( 12 ) 29.4 ( 11 ) 63.3 Repriced safety deposit boxes 16.3 25.7 Trade finance and 13.3 3.3 FX enhancements 11.1 31.4 23.2 Implemented dynamic currency Dec-18 IFRS 16 assets (incl. Lending yield deposits Debt cost deposit ratio Dec-19 conversion Cost of 2018 2019 Treasury disposal) and other Loan to FX gains and other ATM and interchange Safe deposit boxes Service charges • NIM reduced to 151bps following sustained mortgage market • Strong growth in other income and fees driven by growth in customer competition, a reduction in treasury assets, rising deposit costs accounts, optimisation of fee structures and development of new and interest expense on MREL eligible debt resulting in Q4 2019 services NIM of 130bps 2019 Financial results 13
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