Shares in Metro Bank have surged after the bank announced its expectation to return to profitability in the final quarter of this year.
In the first half of 2024, the bank reported a pretax loss of £33.5m, a stark contrast to the profit of £15.4m recorded in the same period the previous year.
This downturn was largely attributed to a decrease in net interest margin, a key indicator of lending profitability, which fell to 1.64 per cent in the first half from 1.85 per cent in the second half of last year.
Despite these disappointing results, the bank confirmed its projection to return to profitability in the final three months of this year. Beyond 2024, it anticipates delivering a return on tangible equity, a crucial measure of profitability, in the mid-to-upper single digits in 2025, rising to double digits in 2026 and mid-teens thereafter.
The bank stated that this would be facilitated by "cost discipline, asset rotation and the mortgage portfolio sale", as reported by .
"Our upgraded guidance today reflects progress against our strategy, including the recent residential mortgage portfolio sale. We expect these actions to positively impact on our balance sheet in the fourth quarter of the current financial year, delivering a return to profitability," said CEO Dan Frumkin.
On Wednesday, shares in the bank saw a significant increase of 22 per cent.
After a challenging year, during which shares have fallen 66 per cent, Metro Bank is making efforts to reorient its book towards higher yielding commercial, corporate and SME loans.
Metro Bank has just last week confirmed the sale of part of its mortgage portfolio to NatWest, in a deal valued at up to £2.4 billion.
In alignment with its strategic initiatives, Metro Bank reported a 6% decrease in operating expenses compared to the full year, with the bank on track to achieve annualised savings of £80 million.
The bank highlighted having a "solid credit approved commercial pipeline" for the first half of the year, which equates to 116% of the total new lending registered last year.
These developments follow a particularly challenging period for Metro Bank, which faced the need to fortify its balance sheet after its request to use internal models to assess mortgage and asset risks was rejected by the Bank of England last September.
Colombian billionaire Jaime Gilinski Bacal played a pivotal role in stabilising Metro Bank through his leadership in a £925 million refinancing package, which received overwhelming approval from shareholders in November. As a result of the capital injection, Bacal secured a controlling interest, holding approximately 53% of Metro Bank.
