Metro Bank - Upgrading guidance for FY25 and FY26

Metro Bank (Metro) reported a loss before tax of £26.8m in H124 mainly due to a weaker net interest margin (NIM), partly offset by lower impairments. The significant repositioning of the business model towards higher-return commercial and specialist mortgage lending is well under way, however. The £80m cost reduction plan is on track and the recently announced sale of £2.5bn of mortgages to NatWest Group accelerates the lending mix shift. Management expects profitability during Q424 and has upgraded its guidance for FY25 to a 'mid-to-upper single digit' return on tangible equity (RoTE) from a 'low- to mid-single digit' RoTE. Double-digit returns are projected in FY26 and mid-to-upper teens thereafter. The shares trade at 0.38x tangible book value per share (TBVPS) of 137p at the end of June 2024.

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