Metro Bank reported a sharp decline in profits during the first half of 2019 – while confirming plans for its chairman Vernon Hill to step down.
Pre-tax profits for the first six months of the year fell to £3.4m, compared to £20.8m a year earlier, as commercial customers withdrew £2bn in deposits in the wake of a much-publicised accounting error that spooked investors and caused its share value to nosedive.
Mr Hill, Metro’s American billionaire founder and chairman, will be replaced once a successor has been found, following his decision that “the bank has now reached a size and scale where it is appropriate to appoint an independent chair”.
He will instead take on a non-executive director role within the company and act as its president.
Vernon Hill leaves post as Metro Bank chairman following ‘challenging’ start to the year
Earlier this year, the risk level of some of the bank’s commercial loans were shown to have been misreported, requiring it to raise a further £375m in capital in May to absorb the adjustments and stem the tide of plummeting share prices.
CEO Craig Donaldson said: “This has been a challenging first half for the bank, with deposit outflows following intense speculation at the time of our capital raise in May.
“Despite this, we have delivered a resilient performance with both personal and business current accounts growing alongside increased revenues and fee income, with deposit growth returning to normal in June and July.
“We described 2019 as a year of transition for Metro Bank and management has continued its focus on our strategic initiatives, upgrading our cost savings guidance to the upper end of our original range, investing in additional fee service offerings and rebalancing our lending mix.”
Vernon Hill founded Metro Bank to cause a splash in UK retail banking
Very much designed in the image of its founder, Metro Bank was set up in the UK in 2010 with an emphasis on expanding a network of physical branches and providing a high standard of in-person, American-style customer service.
At a time when most other traditional UK banks are reducing the size of their branch footprints and more services are going online, it has been an unusual policy to pursue, but one the bank has stuck to.
In February, Metro topped a customer satisfaction league table – mandated by Competition and Markets Authority (CMA) and Financial Conduct Authority (FCA) – for personal banking, and ranked second among business customers.
Metro Bank senior independent director sir Michael Snyder said: “Vernon is the inspiration behind Metro Bank, the first high street bank to open in the UK in more than 100 years.
“It is thanks to his vision and leadership that we have grown to 67 stores around the country, serving more than 1.8 million customer accounts, and have recently been ranked as the number one bank for overall quality of service for personal banking.
“The board shares Vernon’s view that Metro Bank has now reached a point where an independent chair is appropriate to oversee the next stage of our journey, and that process will start immediately.”
Metro Bank’s H1 2019 highlights
The withdrawal of £2bn in deposits by primarily commercial customers in the wake of the accounting error led to Metro’s total deposits for the first six months of the year falling to £13.7bn.
The bank said that during the past eight weeks, deposits have returned to net growth with more than £700m flowing into the business.
It also recorded loan growth of £3bn for the period, thanks to the disposal of a £521m loan portfolio acquired in 2017.
In February this year, Metro was awarded a £120m grant from the capability and innovation fund to improve its SME banking propositions, something which the bank now intends to focus on.
