Deposits jump boosts Metro Bank to profit surge ahead of new London branch openings for challenger

 
Jasper Jolly
Follow Jasper
A New High Street Bank Is Launched In Holborn
Metro Bank gained another 79,000 customers in the third quarter (Source: Getty)

Metro Bank announced a 10 per cent rise in deposits during the third quarter as 79,000 new customers joined the challenger, with the bank's leadership in a confident mood ahead of further expansions.

The bank will open five new stores by the end of the year, including branches in Liverpool Street and Clapham, before opening another 12 next year, chief executive Craig Donaldson told City A.M.

The three months to the end of September saw Metro Bank deliver its fifth quarter of underlying profitability, with profit before tax of £7.2m, a 77 per cent increase from last quarter, it revealed today. However, shares fell by 0.9 per cent at the time of writing, with investors already having priced in the profit pick-up.

Read more: Metro Bank's shares are flying after its £278m capital raise

Donaldson is confident the FTSE 250 listed lender can sustain its strong growth momentum. "I'll be very disappointed if we don't have similar growth" in coming quarters, he said.

Deposits rose by £955m to reach £10.8bn, with the cost of deposits falling from 0.53 to 0.5 percentage points. The bank now boasts 1.1m accounts. Donaldson added the bank is "on track" to lend £1bn to businesses during 2017.

Challenger banks are a crucial plank in the government's desire to shake up how lenders operate in the UK, with the hope that increased competition will force the bigger retail banks to up their game.

Metro Bank is putting together a bid for money from the "alternative remedies" package to be paid by Royal Bank of Scotland (RBS) to assuage competition concerns, after it failed to sell business lender Williams & Glyn.

Read more: Government strikes £835m deal with EU to settle RBS state aid issues

Donaldson said he does not want to "assume anything", but pledged that "every penny" of money received by Metro Bank from the RBS fund "will be used to create jobs and create a real challenger bank on the high street".

"I hope the Williams & Glyn money does go to genuine challengers," he added.

The lender also announced it has poached the chief financial officer of Sainsbury's Bank, David Arden, a former managing director of credit cards at RBS who worked with Donaldson.

Its current chief financial officer, Mike Brierley, will retire in 2018 after guiding Metro Bank from authorisation in 2009 towards its launch in 2010 as Donaldson's first hire. He will leave at the end of the first quarter after the bank announces its full-year results, likely unveiling its first annual profits.

Vernon Hill, Metro Bank chairman and founder, echoed Donaldson's confident tone, describing his firm as "the Revolution in British banking, offering real choice to consumers and businesses".

He added: "As we take the revolution to the high streets of Swindon, Canterbury and Peterborough, we are giving those urban communities and businesses a real alternative and a reason to love their bank at last."

Read more: Four lollipops for one account? Metro Bank hails its return on investment

Related articles