Metro Bank anticipates an additional £30 million in cost savings by the end of the year

Metro Bank Steps Towards Recovery with Cost-Cutting Measures and Strategic Moves

Metro Bank, the UK-based challenger bank, is making significant strides towards recovery, as evidenced by recent financial reports and strategic decisions.

In a positive turn of events, Metro Bank reported an underlying annual loss of £16.9 million for 2023, marking a significant reduction from the previous year's loss of £50.6 million. This improvement is a testament to the bank's ongoing efforts to streamline operations and cut costs.

CEO Daniel Frumkin, in a statement, acknowledged that 2023 was an eventful year for the bank but expressed confidence that Metro Bank is now a stronger business with stronger foundations.

To achieve this, the bank has embarked on a top-down cost-cutting exercise, with approximately 1,000 jobs already being cut, representing about 22% of its workforce. However, Frumkin clarified that not all cost savings would come from staff cuts.

Metro Bank also plans to save an additional £30 million by the end of 2024. To achieve this, the bank will close all branches on Sundays and reduce operating hours on weekdays and Saturdays.

The bank's cost-cutting measures have not only focused on personnel and operational costs but also on its executive team, risk, finance, and human resources teams, which have been reduced in size.

In a bid to boost its capital ratios, Metro Bank is considering the use of an internal model to calculate risk-weighted assets, a decision that has not yet been made.

Metro Bank's strategic moves extend beyond cost-cutting. The bank has approved 140% more business loans in the first 10 weeks of 2024 than it had in all of 2023, signalling a renewed focus on lending.

Moreover, the bank plans to open 11 new branches in northern England, demonstrating its commitment to expansion.

Deposits in the bank stand at £15.6 billion, a figure that does not include any withdrawals after the fall. This substantial deposit base, coupled with competitive savings rates, has allowed Metro Bank to offer instant-access savings rates as high as 5.22%, and a one-year fixed-term savings account with a rate of 5.91%.

In a major development, Colombian banker Jaime Gilinski Bacal acquired a 53% controlling stake in Metro Bank through a £925 million capital raise and debt refinancing rescue deal in 2023.

Benjamin Toms, an analyst at RBC Capital Markets, believes that this refinancing package has bought management time to reshape the bank, potentially leading to the bank's ROTE (Return on Tangible Equity) climbing from a low-single-digit figure in 2025 to the low-to-mid-teens by 2027.

Frumkin expressed optimism about the bank's future, stating that Metro Bank is now a stronger business with stronger foundations. As the bank continues to implement its cost-cutting measures and strategic expansion plans, it remains to be seen how these efforts will translate into long-term financial success.

Metro Bank anticipates an additional £30 million in cost savings by the end of the year