Metro Bank’s costs in focus as lender embarks on major restructuring

Investors will be looking for more clues on Metro Bank’s revamped strategy next week as the lender prepares to draw a line under a year that saw it rescued from potential collapse.

The lender’s full-year results, due next Wednesday, are expected to show pressure on its net interest margin – reflecting the difference between what a bank charges on loans and pays to savers – amid intense competition for mortgages and deposits as the Bank of England holds interest rates.

The bank also expects to take a one-off restructuring charge of between £10m and £15m in 2023.

In the first half of last year, Metro Bank swung to its first profit before tax in four years. Its net interest margin climbed 0.41 percentage points to 2.14 per cent as it reaped the benefits of interest rate hikes.

The market has been watching Metro Bank carefully since the beginning of 2019 after the lender revealed it did not have enough capital to meet regulatory requirements, shortly after telling investors it had made an error in how it accounted for risk on its balance sheet.

Its stock price collapsed and has not recovered since, currently down more than 98 per cent over the last five years.

The central bank last September denied Metro Bank’s request to use its own models to assess risks on its mortgages and assets, forcing it to make urgent moves to bolster its balance sheet, including exploring a sale of a £3bn mortgage portfolio.

Then in swooped Jaime Gilinski Bacal, a Colombian billionaire with a reputation for turning around struggling banks and selling them for profit.

His firm, Spaldy Investments, took a controlling stake of around 53 per cent in Metro Bank after it led a £925m refinancing package overwhelmingly backed by shareholders last November.

Metro Bank subsequently shelved plans to sell its mortgage book. Bacal appointed himself to Metro Bank’s board in January, joining his daughter Dorita.

The bank is now planning to deliver up to £50m in cost savings. It announced last November that it would cut staff by 20 per cent, around 800 employees, by the end of March and look at reducing branch opening hours.

Despite experiencing the perils of a costly branch-based business model, the bank has said it wants to open 11 new “stores” in the north of England by 2025.

Metro Bank’s current network of around 80 branches is a far cry from the 200 branches by 2020 that it planned in 2013.