Metro Bk Hldgs Plc

Hello, everyone, and thank you for joining the Metrobank Holdings PLC Full Year Results 2025. My name is Gabrielle, and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two on your telephone keypad. I will now hand over to your host, Daniel Frumkin, CEO of Metrobank. Please go ahead.

Thank you, Gabrielle. Good morning. I'm Dan Frumkin, CEO of Metro Bank, and thank you so much for joining us today as we reveal our fiscal year 2025 results. Before I get into the numbers, I just wanted to take a moment to talk about how pleased I am with how well we're delivering the strategy that we outlined two years ago. The results you're going to see today are testament to all of the hard work from all of the colleagues across Metro, and I can't thank them enough for their efforts. So let's get stuck in. In terms of the agenda, I'll do a few slides as an overview, then Mark Page, the CFO, will join us to walk through the financial performance in more detail. And then I'll come back on to talk about a few slides about how the existing strategy continues to drive the future. And then obviously, we're happy to take your questions. So let's start with what is a really strong performance. We generated a 98 million pound underlying profit for 2025. That is the highest in the history of Metro Bank. And not only did we generate the highest profit in the history of Metro Bank, we also generated the most revenue, the most NII, and the highest NIM in the history of Metro Bank. You can see our exit NIM was 317. That is in line towards the upper end of the guidance we provided. We generated a RODI of 6.4%, again, in line with guidance, and we reduced costs by 7%. That is ahead of the guidance we provided. And by growing revenue and reducing costs, we widened our jaws that brought down the cost-income ratio, as you can see in the bottom left. That revenue growth of 16% was really driven by a 22% increase in net interest income as we brought down the cost of deposits and continued to increase lending yield in spite of the fact the Bank of England reducing the Bank of England base rate by 100 basis points during 2025. That 22% growth in NII and the 16% growth in revenue were the highest of any UK bank that has reported to date. On the upper right, we saw a strong commercial and corporate loan growth. We did £2 billion of new loans. That's almost triple what we did just two years ago. And even after all that lending, we still have an £800 million pipeline as we start 2026. And we're not done. We have tremendous capacity for growth. We have a loan-to-deposit ratio at 66%. We have a liquidity cover ratio over 300%. And we've been reclassified as a transfer firm under the MREL regime, which means we have to issue no new MREL and have the optionality around the existing MREL, which has a call date in April 2028. a really strong set of results. So let's talk about the future. So all of that has created the foundation for where we are. It's gotten us to the 6.4% RODI. Let's just take a minute on this chart. The darker gray boxes that you see are broadly mechanical. They are either the roll-off of our Treasury portfolio, which creates a 3% uplift in RODI in 2026, and a further 1.4% roadie uplift in 2027, or the larger gray box above the chart for 27-28, MREL, when we call it in April of 2028, creates a 4% uplift in roadie in and of itself. So those mechanical uplifts are over 8% of a roadie uplift over the next couple of years. So what does that mean? It means that we will more than double return on tangible equity in the next seven months. By quarter four, 2026, we will be generating a 13% return on tangible equity. We further grow that into 2027 to 15%. And then we are now guiding greater than 18% return on tangible equity for 2028. That means we will treble, almost treble, return on tangible equity from where we are today in 2028. That level of roadie growth is exceptional and driven by the strong performance of the underlying strategy. We don't have to do anything new to deliver that. We don't have to change who we are to do that. We deliver that by being Metro and delivering the strategy as we've already outlined. Let's talk about guidance. So again, we provide three levels of guidance. NIMS, cost income, and RODI. Yeah? The NIM guidance has been widened slightly to 340 to 4 and 375 to 450. We dropped the bottom end of that guidance by about 20, 25 basis points, given the rate uncertainty that's occurred in the market. However, we've held the cost-income ratio as previously guided. So if revenues affected by lower net interest margins, we will make up for it, through cost activity to ensure we deliver the cost-to-income ratio as previously guided. In addition, we've enhanced our guidance for quarter four for return on standard equity during 2026 to a quarter four measure. We did that because we thought it was important to show that we are more than doubling return on tangible equity in the next seven months and will generate a 13% return on tangible equity this year. That does not mean we're still not confident about delivering double-digit return on tangible equity during 2026 because we are. We are just not guiding that because we think it's more important for the market to understand how quickly Metro Bank gets to a 13% return on tangible equity. And as I've said, we've introduced the greater than 18% return on tangible equity for 2028. And again, there's a clear path to getting there. So this slide is a slide we use quite a bit. Again, our model gives us a competitive advantage. Our localness, our relationship-led model allows us to generate low-cost deposits We have the lowest funding costs of any high street bank. Our exit cost of deposits was 94 basis points. That gives us real power to generate strong returns. We use that liquidity to fund high-yield specialist lending and corporate and commercial lending, which gives us yields in line with the specialist lenders. So we fund ourselves more cheaply than any high street bank. And we lend and generate lending yields in line with the specialist lenders. And we do that efficiently. We were the only bank in the UK, the only bank in the UK, to reduce costs during 2025. And we brought them down by 7%. Which gives you the chart on the right. We operate in clear blue water. The ability to build a fundamental relationship-based model allows us to operate in clear blue water. And with that, I'll turn it over to Mark, who will walk you through the financials. Thank you.

Thank you, Dan. Good morning. Dan has already talked about the highlights of the year. What I'd like to do is take you through the building blocks and how we think about those building blocks into the future. So on this chart, you can see that our trading momentum continues across all aspects of our business lines. Dan's already mentioned about our cost of deposits being a funding advantage. And what you can see over the past two years is that we have reduced our cost of deposits and our exit by more than 100 basis points to a market-leading position of 0.94%. Combined with our asset rotation strategy, whereby we have increased lending yields in a falling rate environment, has come together to increase our exit NIM to a high of 317, which is the highest Metro Bank has delivered. The combination of improving NIM has increased revenue by more than 81 million pounds a year on year to a high of 585 million. And by having strong cost discipline, as well as maintaining low cost of risks, we have improved our underlying PBT to a high of 98 million pounds, which is 112 million pounds momentum on the previous year. The combination of that has delivered a positive royalty of 6.4%. And at the same time, we've strengthened our capital position. And as you can see on the right hand side, we now have a TCR of 18.4%, which is important as we go through our transfer approach. So we have delivered all market guidance, and we've outperformed on costs, and I'm now going to take you through how those building blocks play out over time to deliver an increased royalty of 18% or above in 2028. So the four components of the building blocks. Firstly, costs. So we have delivered a year-on-year absolute cost reduction of 7% to more than offset inflation. Also, pleasingly, if you look at all lines on the cost structure, so be that people, non-people, or our other costs, which includes depreciation, amortization, and fraud, all of our cost lines have improved. And it's that level of discipline which gives us the confidence to be able to increase our cost guidance this year, that we will maintain costs in 2026 flat relative to 2025. It's this business model transformation and focus on costs and the partnership with Infosys which gives us the ability to optimize our model as we go forward. The combination of increasing revenue has led to a 20 points reduction in the cost to income ratio and sets us up well for the future guidance in terms of improving this metric over the next couple of years. Moving on to the second part. So our relationship strategy delivers us a strategic funding advantage. You can see that I've already talked about our exit cost of deposits reducing from 206 to 94 basis points over the past couple of years, and that's been delivered in two ways. Firstly, we have excess liquidity, which we have allowed to run off, and that has reduced its mix from 15% down to just 7% of expensive fixed-term deposits. If you look at the second part of that, however, is we are growing our current account franchise. We have increased our new current accounts by more than 100,000 in 2025 across both business and personal customers. And as a result, our current account nibbles balances now accounts for 44% of our total deposit base. That is more than twice the average of the market peers and provides us a strong platform to be able to recycle that into lending and asset growth into the future. On the right-hand side, we also show you where those deposits have come from. And pleasingly, if you look at commercial and SME, that is growing as a proportion of our mix as we target relationship growth in those segments. We have a funding advantage with a low loan-to-deposit ratio of 66% and a high liquidity coverage ratio, which sets us up well for growth in the future. The third component, turning to growth, we've already looked at the highlights on the right through Dan's section. We have more than trebled our origination capability within commercial and SME over the past two years, so to a high of $2 billion. How that actually plays out is it's high margin at over 350 basis points above base rate. And we have a strong credit approved pipeline to help us deliver the 2026 lending plan growth. But if you zoom out and look at this, when we talk about asset rotation, if you look at the balance sheet on the left-hand side, you can see how our balance sheet has changed over time. The first thing to notice is year on year, broadly our asset balance sheet is level. So 9 billion plays 9.2 billion in the previous year. But if you look at the mix of those balances, it is changing. We have run off nearly 2.1 billion of non-core segments and recycled that cash into our focus areas, which is commercial and SME lending and specialist mortgages. Our core business lines are up 56% year on year. So we have recycled the cash from lower yielding returning segments into higher yielding risk-adjusted returning segments and at the same time maintained a strong focus on asset quality. You can see asset quality and protection in terms of collateral on the following slides. So if you look at on the left-hand side, this looks at our non-performing ratio loans as a percentage which are low for both retail mortgages and commercial. And the graph clearly illustrates stability through this lending period. On the right-hand side, we give you a bit more color about the levels of protection and collateral as we lend into our target segments. So over 87% of our loans are either collateral-backed with either property or government guarantees. And where they're property-based, so 83% of loans, the average DTV is just 62%, which provide us with a prudent level of coverage for the lending that we take. Moving on to the fourth part. The fourth part of our transformation is a level we previously discussed. We have treasury maturities of roughly one and a half billion maturing over the next two years. So that will be about a billion in 2026 and half a billion in 2027. Now, the maturity profile is not even through the year, so you can notice on both the chart on the left-hand side, the maturities are H2 weighted, and in the table on the right-hand side, you can see in 2027, they're all H2 weighted. Now, what does that mean for us? What it means is when those balances mature, they will come off rates of circa less than 1%, and they will mature onto a rate of circa the prevailing base rate as a minimum. That is income additive, NII and NIM additive. The cumulative effect of all the 2026 maturities is a £26 million PBT uplift. And by the time 2027 maturities have ever risen, the cumulative effect is 38 million pounds of increased revenue. Now, that is a 4.4% royalty uplift from where we stand today. Now, it won't be evenly spread across the years, as you can see from the maturity profile, but actually the benefit and leading us towards that upper greater than 18% royalty is an important part of our endurance strategy. So, how have we guided today? Dan mentioned at the top of the call, interest rates have fallen by 100 basis points in 2025. If we look at the guidance we provided today, we are expecting a further 50 basis points reduction to a base rate of 325 by the summer of this year. That is lower than where we set the plan a year ago and we updated you. But we have taken actions to offset that lower interest rate environment. Those actions include we've outperformed on cost guidance. We've actually delivered a higher deposit beta than forecast to offset. We've made asset disposals, which have improved our royalty. And we've also established structural hedging programs to reduce interest rate sensitivity. In addition, the change to our resolution strategy is additive from a performance perspective in both the short term and the longer term as those rates mature in 2028. Now, how do rates play out? Illustratively, on the right hand side, you can see in H2, So we had a base rate reduction in December. We're expecting another one imminently. That would reduce our interest income. That interest income reduction is offset by the momentum in our underlying business that we've previously just shown you. In H2 then, where interest rates settle, you can see the momentum continues to grow and more than offset to be able to deliver the greater than 13% royalty by Q4, in Q4 of this year. In addition to provide some colour, we have given you an illustrative interest rate sensitivity in the table below. what this does it takes as of today a 50 basis points parallel shock to interest rates but so by the time it gets to the summer of this year they'll be at 2.75 percent and that would give an interest rate sensitivity of 23 million pounds or annualized to 41 million pounds for 2027. now there's two points to note about this firstly It doesn't take account of any of the management actions that we would take as delivered on the left-hand side of this page. And secondly, it's a full FAT guidance, which also assumes that all of the lending we do from today, both in commercial and mortgages, and all of the maturities would also have this interest rate shock applied to them. Now, clearly, interest rates are uncertain, and as of live today, The curve is higher than what you see on the left-hand side, but clearly we'll watch this very closely and take actions as needed. So bringing it all together. So we've had an incredible year with a significant increase in profitability to 98 million pounds and a royalty of 6.4%. The reason we talk about the four building blocks is because they're enduring. We've improved our cost base, we've improved our deposit optimization, the asset rotation is working, and we're set up with a healthy pipeline to continue growth over the next few years. And our treasury maturities will happen and it will go on to a prevailing rate which adds royalty and earnings. At the same time, I already said we've increased our capital position and improved it, providing the capital for growth over the coming years. As the MREL debt matures in April 2028, that will lead to a royalty uplift, if applied mechanically, 4% on full maturity. So turning back to guidance. So why are we confident in delivering a pathway to deliver more than 18% royalty? So firstly, the exit NIMS show continued momentum as our asset rotation strategy continues to work in practice. We hold our cost-to-income ratio in line with previous guidance, and we are enhancing the cost guidance in 2026 to maintain costs broadly flat to 2025. The combination of asset rotation, cost discipline with credit underwriting leads to an improved royalty of more than 13% by the end of this year, increasing to more than 15% and more than 18% respectively by 2028. So we have a clear pathway, a clear strategy. It's working. And with that, I'm going to hand back to Dan.