HY 2019 INVESTOR PRESENTATION 24 July 2019
2019 is a year of transition, positioning for the future • RWA adjustment Implementing detailed remediation plan • Net outflows in February and May, returned to growth in June and July Intense speculation Challenging H1 impacted deposit flows • Managed lending volumes and deposit initiatives for Metro Bank • Profitability IFRS 16 and Tier 2 debt costs weighed on performance year-on-year • CET1 ratio up to 16.1% (FY18:13.1%) supported by £375m equity raise and sale of Robust capital position £521m non-strategic loan portfolio Actions taken to strengthen Highly liquid • Liquidity Coverage Ratio up to 163% (FY18:139%) balance sheet Strong asset quality • Cost of risk improved to 6bps (H1 18: 8bps) • Search for an independent Chairman to commence; new NED appointed Governance and leadership changes • Strengthened management team with new CIO and CTO Platform for • Momentum in core Grown to over 1.8m accounts, with current accounts up 21% y-o-y long-term franchise • Won 18% of business switchers in London and the South East (1) profitable growth • Increased cost savings identified at lower cost to achieve 1 Focus on strategic • Fees up 61% y-o-y and C&I will accelerate reach and offering to SMEs initiatives 2 • Rebalanced lending underway 3 (1) MarketVue Business Banking from Savanta (Survey Period: Q3 2018 - Q2 2019). Main bank for business banking - Switching Gains based upon 318 respondents of which 59 2 were in London/SE. Data is weighted by region and turnover to be representative of businesses in GB.
Stable performance of retail and SME deposit base despite intense speculation Net deposit flows £15.7b £15.1b Deposits have returned to growth with net inflows of £13.7b January trading £700m across June and July statement following the successful Intense speculation completion of the capital raise ahead of capital raise (1) Dec-18 Jan Feb Mar Mar-19 Apr May Jun Jun-19 Jul MTD Deposits by customer type £15.7b £15.1b Growth in retail deposits and £13.7b stable SME (2) deposit £5.1b £11.7b £4.7b performance, with headline £3.1b numbers impacted by £3.9b withdrawals primarily from a £8.0b £3.1b £3.2b £3.2b limited number of commercial £2.5b £2.3b £2.0b £2.2b £1.9b customers £1.5b £1.6b Q2 current accounts 31% of £1.0b £5.6b £5.2b £5.3b total deposits (Q1: 30%), with £3.9b £2.9b demand savings 40% (Q1: 44%) and fixed term savings accounts 2016 2017 2018 Q1 2019 Q2 2019 28% (Q1: 26%) 79 54 61 70 71 (2) Cost of deposits (bps) Retail (ex Retail Partnerships) Retail Partnerships SME Commercial (1) Month to date (2) SME defined as enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding € 50 million, and/or an annual balance 3 sheet total not exceeding € 43 million, and have aggregate deposits less than € 1 million.
With continued customer momentum underpinned by personal and business current account growth Total customer accounts (‘000) Current accounts (‘000) Balance 1.0 1.7 3.0 4.2 4.3 (£b) 1,810 996 1,418 814 143 1,045 634 120 477 88 780 348 62 853 545 694 41 546 415 307 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019 H1 H1 H1 H1 H1 2015 2016 2017 2018 2019 Personal Current Accounts Business Current Accounts CAGR (2015 – 2018) in BCA market share (1) Metro Bank 26% Winning Business Current Account switchers in Bank 1 18% London and the South East (2) Bank 2 9% Dec ‘18 Jun ‘19 Bank 3 3% Bank 4 2% 15% 18% Bank 5 1% Bank 6 1% Bank 7 0% Bank 8 -2% -4% Bank 9 (1) MarketVue Business Banking from Savanta (Survey Period: 2015-2018). The Compound Annual Growth Rate is the average annual increase in the Market Share percentage over 4 time, calculated using the Metro bank market share for year end 2015 and 2018. (2) MarketVue Business Banking from Savanta (Survey Period: Q3 2018 - Q2 2019). Main bank for business banking - Switching Gains based upon 318 respondents of which 59 were in London/SE. Data is weighted by region and turnover to be representative of businesses in GB.
Action taken to maintain a strong and resilient balance sheet Equity raise completed June 2019 issuance upsized from £350m to £375m to meet demand. Pro forma CET1 ratio of 16.1% (1) up from 13.1% Asset disposals LCR increased to 163% from 139% following £1.5bn sale of non-LCR eligible investment securities, primarily RMBS, corporate bonds, and covered bonds Executed £521m loan portfolio disposal, acquired 2017, delivering £181m RWA reduction and 30pbs uplift in CET1 (1) Managing lending volumes Repriced residential mortgages and retail BTL products Fulfilled committed pipeline and continued to support existing and new relationship customers Scaled back high RWA commercial lending e.g. real estate Continued focus on low risk lending Reflected in cost of risk at 6bps reduced from 8bps Deposit gathering initiatives Launched savings campaigns in-store, on website and social media Competitively priced fixed term savings accounts Loan to deposit ratio elevated to 109% at H1 Managing towards targeted loan to deposit range 85-90% over medium term Expecting c.100% by year-end 5 (1) Pro forma at 30 June 2019, loan portfolio disposal classified as held for sale at 30 June 2019
Successful equity raise provides CET1 headroom for controlled growth over the medium-term Strong CET1 ratio supported by £375 million equity capital raise 16.1% 0.3% 15.8% 3.8% 13.1% 0.5% 0.3% 0.7% 0.6% 0.3% 10.6% minimum Tier 1 requirement Dec-18 One-off IFRS Annual Lending growth Intangibles / Treasury 2019 equity Jun-19 Loan portfolio Pro forma 16 adoption operational risk Other portfolio raise disposal Jun-19 increment 6
Strong, liquid balance sheet Highly liquid, with Liquidity Coverage Ratio exceeding Unaudited Unaudited £’m H1 2019 H1 2018 Growth minimum requirements 163% Loans and advances to customers (1) 14,989 12,013 25% Treasury assets (2) 4,668 6,453 (28%) 141% 139% 136% 521 - Assets classified as held for sale - Other assets (3) 1,179 669 76% Minimum Total assets 21,357 19,135 12% requirement: 13,703 13,736 100% Deposits from customers - Deposits from central banks 3,801 3,801 - 249 249 - Debt securities 2016 2017 2018 H1 2019 Other liabilities 1,837 252 626% Total liabilities 19,590 18,038 9% Increase in other assets primarily reflects the recognition of the right of use asset under IFRS 16 Shareholders’ funds 1,767 1,097 61% Increase in other liabilities reflects an increase in Total equity and liabilities 21,357 19,135 12% repo funding and the adoption of IFRS 16 as outlined at 1Q19 Capital adequacy & liquidity coverage ratios: Quality of liquidity resources high, with 99% held as CET1 capital ratio (4) 16.1% 12.7% 340bps cash, government bonds and AAA-rated Total capital ratio (4) 18.8% 16.2% instruments (5) 260bps Regulatory leverage ratio (4) 7.2% 4.6% 260bps We will issue MREL eligible debt in H2 to satisfy our interim MREL requirement by 1 January 2020 Risk weighted assets (4) 9,372 6,944 35% Credit rating anticipated H2 2019 Loan to deposit ratio 109% 87% 22pp Liquidity coverage ratio 163% 141% 22pp (1) Excludes loan book disposal as it is held for sale (2) Investment securities, cash & balances with the Bank of England, and loans & advances to banks (3) Property, 7 plant & equipment, intangible assets and other assets (4) Pro forma for July 2019 mortgage book disposal (5) Remainder is all investment grade
Focus on low risk lending is unchanged, with continued strong asset quality and low cost of risk Low cost of risk Strong asset quality 2bp 8bps 0.17% NPL Ratio (1) 0.15% 6bps 6bps FY 2018 H1 2019 Non-performing loans £21m £28m H1 2018 H2 2018 H1 2019 Low risk lending portfolio (2) Conservative debt to value profile Retail: 71% of portfolio Commercial: 29% of portfolio 29% 28% Average retail mortgage DTV: 61% £0.3b £0.3b Average commercial term loan DTV: 60% £2.0b 20% 20% 18% 19% 18% 16% 12% 11% £10.7b £4.3b 3% 3% 2% 1% £8.4b £4.0b Less than 51-60% 61-70% 71-80% 81-90% 91-100% More than 50% 100% Residential mortgages Commercial loans FY 2018 H1 2019 Retail mortgages BTL Asset & Invoice finance Consumer lending 8 (1) Non-performing loan ratio (2) As at 30 June 2019
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