Metro Bank's Q3 Lending Surpasses Its Reserve Requirements led by BBLS Loans

Summary

• Metro Bank in its Q3 results has reported that its lending has risen by 2 per cent for this quarter
• Metro Bank stated that the increase in the number of loans availed was due to the government's Bounce Back Loan Scheme (BBLS)
• The number of customers deferring repayments fell sharply to 3.5 per cent of its retail mortgage portfolio.

There has been a marked increase in the loan offtake of Retail and commercial bank Metro Bank Plc in Q3 2020 owing to the Bounceback Loan Scheme (BBLS) of the government. Bank sources said that many small businesses have come forward to avail loans since its announcements.

However, the reason why Metro Bank and others have lent out more than they can is because the government is guaranteeing the BBLS loans, which make them highly secure assets for the banks. However, as the bank's reserve requirements are below than what the Bank of England has laid down, it might have to go in for a fresh round of capital raising to meet the compliance requirements.

The company though had reported a loss of £240 million in the first six months of the year on account of the lockdown and the ensuing slowdown in economic activities. In the H2, the situations are expected to improve.

Metro Bank Q3 performance

Metro Bank plc came out with its third-quarter results on 21 October. The total deposits with the bank as on 30 September were £15.622 billion, compared to deposits of £15.577 billion as on 30 June. For the corresponding third quarter period in 2019, the deposits with the bank stood at £14.231 billion, thus compared to the previous year, this year at the end of the Q3 deposits has increased by nearly 10 per cent.

The balance of loans given out by the bank as on 30 September stood at £15.085 billion, whereas as on 30 June, the balance of loans given out by the bank was £14.857 billion, registering a growth of 2 per cent in those three months. At the end of the corresponding Q3 period in 2019, the balance of loans in the books stood at £14.891 billion, this year Q3 balance of loan amount is 1 per cent ahead of that amount.

The assets of the bank as on 30 September stood at £22.140 billion, compared to assets of £22.134 billion as on 30 June. The Q3 assets of the bank are five per cent more than what the bank had on 30 September 2019, which was £21.002 billion. The loan-to-deposit ratio of the bank as on 30 September stood at 97 per cent, whereas on 30 June, it was 95 per cent. However, on 30 September 2019, the ratio was at a high of 105 per cent.

Also Read- Metro Bank Gives Wings To Its Unsecured Lending Ambition By Acquiring Ratesetter, The Move Could Strengthen Bank’s Footing In The Market

The BBLS loan scheme

The bank has been an active lender for the BBLS scheme and has so far lent out £1.3 billion to nearly 33,000 SMEs and other businesses in the country. This exhibits the bank's commitments to its customers, staff and communities, and how critical a role the bank plays in supporting them through a crisis.

On the other hand, the bank had also allowed several of its mortgage customers to defer their installment payments because of the lockdown at the request of the government. During the Q3 period, the number of such customers, who are still actively deferring their mortgage payments, has reduced to only 3.5 per cent of the bank's total retail mortgage portfolio at the end of the H1 period. This value stood at 16 per cent at the end of H1.

The business activity levels of the bank have also been improving steadily post lockdown. New account openings have now reached 90 per cent of the pre-pandemic levels. During the Q3 period, the bank also completed the acquisition of “RateSetter”, gathered significant pace on its new online business current account opening segment which was launched recently. The initiative was launched in association with Clear Books and Enterprise Nation.

Government support

Since the pandemic broke out in the United Kingdom and the lockdown was imposed, the government had rolled out two loan schemes to help businesses to cope with the crash in their activities. The first scheme was called the Coronavirus Business Interruption loan scheme (CBILS), under which companies could lend money to pay employee salaries and pay for essential expenses. The amounts they lent were guaranteed by the Bank of England.

The second loan scheme launched by the government was the Bounce Back Loan Scheme (BBLS) under which small businesses could directly apply for loans online under lucid terms and no interest payment obligation for a year. Metro Bank has been an active lender for both the schemes.

Below is the share price performance of Metro Bank plc on the LSE over the past six months

Metro Bank plc (LON:MTRO) is a United Kingdom domicile banking and financial services company. The bank has been adjudged as the best high street bank in terms of overall service quality, mobile banking services and in-store service in the United Kingdom by the Competition and Market Authority's Service Quality Survey conducted in August 2020.

(Source- Thomson Reuters)

As on 23 October 2020, the stock of Metro Bank plc has been trading at GBX 61.94 (09.55 AM GMT+1), up by 0.23 per cent over the previous day’s close.