Metro Bank assures over borrower resilience as it cheers returning to profit

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High street lender Metro Bank has revealed that it has returned profit in September and said it has not yet seen signs of struggling with repayments amid the crisis of cost of living of borrowers.

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The group set aside another £10 million for loans as the economic outlook is expected to deepen, but insisted there was no worsening of “early warning indicators” that borrowers are in trouble.

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Shares of the firm jumped 10% in early trade on Wednesday as Metro Bank said it returned gains in September on both underlying and statutory basis.

This was thanks to efforts to rein in costs, as well as a boost to its net interest margin following a sharp increase in interest rates, according to the group.

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It expects retail margins to improve further throughout 2023, in part fueled by expectations of higher rate hikes as the Bank of England deals with rising inflation.

This is putting pressure on borrowers, with rising energy costs and rising prices across the board sending inflation to a 40-year high.

Most major banks are yet to see borrowers lag behind in repayments, with their bigger rivals’ quarterly reports last week showing some signs of customer stress.

But UK’s largest lender Lloyds Banking Group revealed it had set aside £668 million to cover loan losses in the third quarter.

Metro Bank said: “There has been no decline in the early warning indicators and there is no sign of stress or increased crime on the customer base.

“The Bank continues to closely monitor all of its portfolio and remains alert to changes in economic conditions that could affect provisioning, such as the physical movement in unemployment from its current historically low point.”

Metro Bank’s third-quarter report showed that deposits fell 1% in the third quarter to £16.4 billion, but that loans rose 4% to £12.8 billion.

Daniel Frumkin, CEO of Metro Bank, said: “I am really pleased to see the business turn a profit in September on an underlying and statutory basis.

“This performance reflects our tight controls on both cost and risk, the close management of our deposit franchises and lending channels, and the supportive prevailing interest rate environment, all of which help to build a balance sheet that is sufficient to cover costs. Provides margin.

“While we remain vigilant to economic conditions and continue to monitor our credit metrics closely, our book remains in good health.”

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