Metro Bank Holdings (LON: MTRO) reported record underlying profit for the first half of the year on Tuesday, yet its shares retreated sharply as markets focused on a shrinking deposit base rather than the earnings beat.
The stock traded at 163.64p by late morning in London, down 8.9% from Monday’s close of 179.6p. It had fallen as far as 157p intraday, a session low roughly 11.6% below that close, and sits well below the 52-week high of 185.6p reached earlier in the year.
The bank’s half-year results, published before the London market opened, showed underlying profit before tax of £61m, up 34% from £45.1m a year earlier and its most profitable half on record. Statutory profit after tax rose 61% to £49.0m from £30.4m. Chief executive Daniel Frumkin said the first half had been “another period of strong momentum and strategic delivery for Metro Bank,” adding that the business was “executing with discipline across revenue growth, cost management and improving returns.” Management reaffirmed targets for return on tangible equity of at least 13% by the fourth quarter of this year, rising to at least 15% in 2027 and 18% by 2028.
Beneath those headline numbers, customer deposits fell to £13,216m, down 1% year-on-year and 2% since the second half of last year. Capital buffers also weakened: the CET1 ratio, a core measure of a bank’s ability to absorb losses, fell to 12.3% from 12.8% a year earlier, while the total capital ratio dropped to 17.9% from 18.9%. The liquidity coverage ratio, which measures how easily a bank could meet short-term outflows, fell to 270% from 315%. Lending to commercial, corporate and specialist mortgage customers grew 43% to £6.2bn, and the bank’s net interest margin, the gap between what it earns on loans and pays on deposits, rose 30 basis points to an exit rate of 3.25%.
The scale of the share-price fall, far steeper than the profit growth alone would suggest, appears to reflect markets weighing the deposit and capital declines more heavily than the earnings beat. Metro Bank has described the deposit reduction as a deliberate shift away from expensive fixed-term deposits to fund higher-margin lending, but Tuesday’s reaction suggests that trade-off has not yet been fully accepted.
Metro Bank’s full capital-return policy is expected to be addressed alongside its full-year results, leaving markets to judge in the meantime whether the balance-sheet shrinkage is a temporary cost of repositioning or a longer-running constraint on the recovery.