Metro Bank profits halve and deposits fall in aftermath of £900m loans blunder
Metro Bank profits halved in the first quarter and deposits fell as it battled the aftermath of a £900m loans blunder.
The lender revealed it had lost of its largest customers due to "adverse sentiment" following the error, as deposits fell 3.6 per cent from the previous quarter.
The challenger bank also reaffirmed that its £350m rights issue – dramatically announced at the end of February as a result of the error – would be launched by the end of next month.
Read more: Metro Bank investors urged to block re-election of chairman Vernon Hill
The lender said pre-tax profits fell to £4.3m, a 50 per cent drop from £8.6m in the first quarter of 2018.
In a difficult start to the year, Metro Bank admitted at the end of January that a swathe of commercial loans had been incorrectly classified and should have been among its “risk-weighted assets.”
The error has sparked two regulatory investigations and shares have since fallen 65 per cent, as investor confidence has plunged.
The fallout from the mishap harmed the bank’s total deposits, which fell 3.6 per cent, it said in its results.
Read more: Metro Bank CEO's pay almost halves after loans blunder
The bank said a small number of large commercial and partnership customers made withdrawals due to “adverse sentiment” following the error.
Despite a fight to restore its reputation, the bank grew its customer accounts by 97,000 to reach 1.7 million in the three months to the end of March.
Under-fire chairman Vernon Hill said: "We have faced challenges this quarter, but we firmly believe that our model offers a superior banking experience for our customers."
Goodbody analyst John Cronin described the results as a "truly horrible set of numbers."
He said: "Deposits shrinkage of 3.6 per cent is very worrying, commercial customers have been spooked and pulling monies out in January and February, and while deposits growth stabilised in March and saw growth in April, today's news – very poor results with no rights issue agreed – will do nothing positive for depositor sentiment."
Earlier this week shareholder advisory group Glass Lewis urged investors to block Hill's re-election over payments to his wife's architecture firm.
The proxy adviser also criticised the wider governance and called for fresh faces on the board to avoid the risk of 'group-think' ahead of its AGM next month.
The bank's troubled were compounded during the quarter when it emerged that the error was discovered by the Prudential Regulation Authority (PRA), rather Metro Bank employees as the bank originally said.
Chief executive Craig Donaldson offered to resign but the board refused and backed him to continue.