Metro Bk Hldgs Plc

Welcome to MetroBank's Half One 2025 results presentation. I'm Dan Frumkin, CEO of MetroBank. Half One 2025 shows the strategic pivot we started 18 months ago, refocusing on MetroBank's relationship banking ethos is working. The strong financial performance combined with the actions taken, positions Metrobank to deliver best-in-class returns over time. You're going to hear from me this morning a bit of an overview. Then we'll go into Mark, who will give you more detail on the financial performance. And then I'll talk a bit about the strategy driving the future through 2027 and beyond. And then we're always happy to take your questions. So let's start. Revenue was up 22% year on year. It's up 22% even though the Bank of England base rate is down 100 basis points. We also shrunk the balance sheet by 24%. So we managed to grow revenue while shrinking the balance sheet and living in a lower rate environment. We also managed to reduce costs to reduce costs by 8% year on year. That gave us a JAWS of 30%. It led to a 45 million pound underlying PBT. That is treble what we did in the second half of 2024. On the upper right, We did a billion pounds of commercial and corporate lending. That's twice what we did a year ago. We have an 800 million pound credit approved pipeline. The credit approved pipeline is more than all of the lending we did in 2023. You can see we expanded NIM in the bottom left by over 100 basis points in the year. The 295 exit NIM is very close to our year-end guidance. And we've created real capacity for growth through our capital actions in the first half of the year, both the unsecured personal loan sale and the 250 million pounds of AT1 we raised. And we believe and we expect to be reclassified a transfer bank under the new EMRA regime And when we're reclassified a transfer bank under the new regime, it means MREL capital is set equal to your minimum capital requirements. Therefore, Metro Bank has no intention of raising any more MREL debt. We told you that there were four key drivers for us to deliver 2027 guidance. The first was cost discipline. As I've mentioned, costs are down 8% year on year. Our costs are now better than they need to be to deliver 2027 guidance. Our exit cost of deposits was 102 basis points. That is the best of any high street bank in the UK. Our cost of deposits is now below what it needs to be to deliver the 2027 guidance. We talked about just the passage of time that our treasury portfolio, our natural hedge rolls off and we can reinvest the proceeds when those securities mature. We have a half a billion this year, a billion in 26 and another half a billion in 27. Just the roll off and reinvestment of those proceeds under the current yield curve, delivers a 660 basis point improvement and return on tangible equity by the end of 2027. And we said we need to rotate assets. Well, you saw, and I talked about earlier, we've done a billion pounds of commercial and corporate. We have an 800 million pound pipeline. We're launching new products. and our specialist residential mortgage base, and most importantly, we saw half a billion pounds of our prime resi mortgage book run off. One of the strengths of the business plan is that we free up about four billion pounds of liquidity and significant amounts of capital because we're running off the prime residential mortgage book. You've seen this slide before. I'm not going to spend a lot of time on the why we win drivers. I'll come back to those in the second half of the presentation. But I do want to spend a bit of time on the chart on the right. You've seen it before. This is our clear blue water chart. Metro Bank is in a universe of its own. We are uniquely positioned to generate outsized returns on a going forward basis. We have a funding model that delivers a cost of deposits that is better than the high street banks. And we have a lending platform that's delivering risk adjusted yields in line with the specialist lenders. That combination, driven by our relationship ethos, allows Metro Bank to win every day. And this is the guidance. Mark will come back to it. But again, as I've talked about, for the 27 guidance, the building blocks are in place now for a lot of the guidance that will be delivered in 27. And with that, I'll turn it over to Mark to go through the details of the financials. Thank you.

Thank you, Dan. Look, it's great to be able to talk about such a strong level of performance. And what I'd like to take you through today is a little bit more about the drivers and the actions we've taken and how we think they translate to forward momentum as we go forward from here. So look, firstly, let's look at the performance dashboard over a longer period of time. The first thing to notice is all of our trading metrics have improved. And let's go through those one by one. So firstly, as Dan mentioned, we have more than halved the cost of deposits from just over 2% to just over 1% versus the same period last year. That has helped increase our exit NIM along with the asset rotation strategy, which we'll come back to later, to an exit NIM of 295. That in turn has increased our revenue to $286 million, which is 22% up on the prior year on a smaller balance sheet and a lower rate environment. Combined with two things, combined with cost discipline, that improves our cost to income ratio from 95% at year end down to 82% and well on track to deliver all future guidance. From a credit risk perspective, strong underwriting disciplines in markets we already know has kept the cost of risk low, already low, and stable compared to half one, 2024. The combination of increasing revenue, lowering costs on low cost of risk means we've increased underlying profits to 45 million pounds in the period, which is more than treble the half two period in 2024. In addition to that, we are seeing convergence between our statutory profit and underlying profits with a statutory profit of 43 million pounds, which translates into a return on tangible equity of 7% in the period, which is right in line with our guidance, all at the same time as increasing our capital position. And we're going to come on to more of these drivers in depth as we go through the next section. So Dan mentioned there was four things that were important to the transformation in terms of our PPT. Let's go through them one by one. So firstly, how have we managed to reduce the cost of deposits by more than half? Well, on the left-hand side, this shows how our deposit mix has changed over time. And I'll draw your attention to the third column. And importantly, our cost Our mix of deposits, which are checking accounts or non-interest bearing, is 43% of our mix. Now that equates to a market average of 18%. So we have more than twice the amount of mix in low-cost deposits, which are born out of the relationship strategy we hold dear. In addition, we are starting from an extremely strong place in terms of liquidity, so an LCR ratio of 315% and a loan-to-deposit ratio of 65%. That means we can be very disciplined with the types of deposits we need, and as such, we have

and a price in advantage versus peers.