(Reuters) – Metro Bank may need to boost extra capital later this yr, its CEO stated, because the British challenger financial institution appears to greater than double its mortgage ebook inside three years.
Metro Bank, which was based in 2010 to assist break up the dominance of the UK’s greatest banks, posted its first annual revenue on Wednesday, however its shares tumbled as the expansion in its mortgage ebook got here at a value to its revenue margins and liquidity.
Metro additionally set out extra aggressive progress targets for 2020.
It forecasts a loan-to-deposit ratio rising to between 85 and 90 p.c by 2020, forward of a earlier goal. This implies a mortgage ebook of between 23.37 billion kilos and 24.75 billion kilos in contrast with 9.6 billion kilos as at Dec. 31.
Metro’s greater progress targets renewed hypothesis amongst analysts that the group shall be pressured to return to the market to hunt recent capital and CEO Craig Donaldson confirmed on Wednesday that might occur as early as this yr.
“We are definitely going to have to raise capital in 2019, but we may choose to go in late 2018,” he stated through e mail.
Metro, which at the moment has 55 branches and goals for about 100 by 2020, had in July raised about 280 million kilos by promoting new shares with none low cost to traders.
RBC analysts, who have a “sector perform” ranking and 40 kilos goal worth on the stock, stated Metro might elevate about 300 million kilos via one other share difficulty.
The financial institution’s shares have been the third greatest FTSE midcap loser, having fallen 6 p.c to 33.88 kilos by 1140 GMT. Its market worth stood at about three billion kilos ($four.2 billion).
Metro reported an underlying pretax revenue of 20.eight million kilos for 2017, in contrast with a year-ago loss of 11.7 million kilos. Its loan-to-deposit ratio elevated to 82 p.c from 74 p.c.
However, analysts flagged a 7 foundation factors quarter-on-quarter fall in internet curiosity margin (NIM) – the distinction between the curiosity it receives and the quantity paid out – to 1.87 p.c within the fourth quarter ended December 31.
“We believe that rapid growth delivery will come at the expense of margins and, potentially, credit quality,” Goodbody analyst John Cronin stated, including that Metro’s CET1 capital ratio of 15.three p.c at Dec. 31 missed his estimate of 15.9 p.c.
Metro’s NIM was hit by drawdowns taken towards a UK scheme that enables banks to borrow low-cost credit score, however Donaldson forecast that NIM would enhance in 2018.
“We aren’t taking any more from (the scheme) and therefore… as we grow, NIM will grow,” he informed Reuters.
Metro additionally stated it was getting ready its bid for RBS’s cures package deal, designed to encourage competitors by offering smaller banks with funds totalling about 835 million kilos.
Reporting by Noor Zainab Hussain and Esha Vaish in Bengaluru; Editing by Amrutha Gayathri and Elaine Hardcastle