Metro Bank share price: where next as profits plunge?

The UK challenger bank saw its share price take a tumble after unveiling a major slump in profits in its half-year results last week, as the health of the high street lender is called into question by investors.

Metro Bank saw its share price tumble more than 20% last week after the lender reported an 84% decline in profits during its first six months of trading.

In its half-year results, the lender reported a statuary pre-tax profit of £3.4 million, down from £20.8 million over the same period last year.

The news also hit the bank’s deposits, with customers collectively withdrawing around £2 billion out of their accounts. The lender said that it anticipates deposits to stabilise by the end of the year, hitting levels of around £15.7 billion.

However, despite its forecasts, the bank’s load to deposit ratio sits at 109%, up from 87% last year. The lender is hoping to return that ratio to 100% by the end of 2019.

‘This has been a challenging first half for the bank, with deposit outflows following intense speculation at the time of our capital raise in May,’ Metro Bank CEO Craig Donaldson said.

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Commercial customers concerned about Metro Bank’s future

The primary driver of the outflows of cash from bank was its commercial customers who were reacting to ‘intense speculation’ over the health of the high street lender after it disclosed a major accounting error at the start of the year.

The accoutring error weakened the bank’s balance sheet, forcing it to raise £375 million from shareholders in May.

Another consequence of the account error was the bank’s founder Vernon Hill will step down as chairman while remaining a member of the board.

Metro Bank’s share price continues to slide

Metro Bank has seen its share price lose more than 77% of its value since January, with it trading at 401p a share as of 14:45 on Monday, down from £17.18 a share at the beginning of the year.

The UK challenger bank was unable to reassure investors that the situation would stabilise anytime soon, however.

In its results the high street lender warned to shareholders that the next six months of trading will reflect significant ‘income pressure’ caused by the sale of treasury assets, the offloading of its mortgage portfolio and deposit gathering schemes during the first half of the year.

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