TIDMMTRO

RNS Number : 5407C

Metro Bank PLC

23 February 2022

Metro Bank PLC

Full year results

Trading Update 2021

23 February 2022

Metro Bank PLC (LSE: MTRO LN)

Results for Year ended 31 December 2021

Highlights

 
  --        Turnaround plan successfully delivering momentum and sustainable 
             growth, underpinning the path to profitability 
 
              *    Improving lending mix and maximising risk-adjusted 
                   returns on capital 
 
 
              *    Margin expansion, NII growth and fee recovery driving 
                   revenue growth 
 
 
              *    Enabling sustainable growth through strong cost 
                   control and improving operating jaws 
 
 
              *    Targeted infrastructure development to improve 
                   resilience and protect the Bank 
 
 
              *    Management remains focused on execution with clear 
                   steps to breakeven 
  --   Continued focus on customers, communities and colleagues, 
        voted #1 high street bank for overall service, supported 
        local communities with government-backed loans and successfully 
        transitioned colleagues to a hybrid working model whilst 
        maintaining the Bank's strong culture 
  --   Underlying revenue increased by 17% to GBP397.9 million 
        reflecting the shift towards higher yielding assets, lower 
        cost of deposits and a recovery in customer activity. 
  --   Underlying costs of GBP546.8 million reflect management 
        actions to control cost, deliver positive operating jaws 
        and leverage the fixed cost base, underlying operating costs 
        reduced 1% in the second half 
  --   Underlying loss before tax reduced by 37% to GBP171.3 million, 
        a second half underlying loss of GBP61.3 million is down 
        44% on the first half, highlighting the momentum towards 
        profitability 
  --   Statutory loss before tax of GBP245.1 million following 
        settlement of the PRA investigation, provisioning for the 
        FCA investigation, sanctions related remediation and non-recurring 
        expense items that underpin the path to profitability such 
        as restructuring and legacy fixed asset impairment 
 

Daniel Frumkin, Chief Executive Officer at Metro Bank, said:

"Two years into the turnaround, our strategy is delivering meaningful results as we move towards profitability. In a changing macro-economic environment, we have accelerated the shift of our balance sheet, with improved yields and lower cost of deposits. This has had a material impact on underlying revenue, which improved 42% (1) when adjusting for the mortgage portfolio disposal. Encouragingly, the second half of the year delivered even stronger revenue and exit-NIM performances, providing ongoing momentum into 2022. There is still more to do, but our focus on delivering higher margins through unsecured and specialist mortgage lending, as well as tight cost control, is enabling transformational change. We remain committed to delivering on the strategy we set out, including supporting the communities in which we operate."

1. Adjusts total underlying revenue by excluding loan income from the mortgage portfolio disposal announced in December 2020.

Outlook and Guidance

 
 --   The return to profitability gathered momentum in the year 
       despite continued volatility in the macro-economic environment, 
       with 4Q21 rates reflecting the Bank's improved lending 
       and deposit mix: 
 
 
                     2021 Average   4Q21 Average 
 
 Cost of Deposits       0.24%          0.15% 
 Lending Yield          3.07%          3.19% 
 Net Interest 
  Margin                1.40%          1.56% 
 
 
 --   Given the economic uncertainty resulting from the pandemic 
       it is too early to provide medium term guidance. However, 
       the Bank remains focused on execution and guides directionally 
       for the next 12 months as follows. 
 
       Balance sheet: Higher growth than 2021 with continued 
       focus on mix improvement. 
 
       Margin: A strong exit-NIM holds us in good stead for 2022 
       with continued focus on lending mix and improved yields 
       as a result of the base rate rises, potentially tempered 
       by higher cost of deposits. 
 
       Fees: Transaction-driven revenue streams influenced by 
       the pace of recovery. 
 
       Costs: Low single digit % reduction in total underlying 
       operating expenses. Non-underlying items are expected to 
       be less than 20% of 2021 as remediation costs fall away. 
 
       Capital: Will operate in buffers but remain above regulatory 
       minima. The Bank's AIRB application is progressing. 
 

A presentation for investors and analysts will be held at 8.30AM (UK time) on 23 February 2022.

The presentation will be webcast on:

https://onlinexperiences.com/Launch/QReg/ShowUUID=B1193A94-7E98-424E-B793-627EE9765A05

For those wishing to dial-in:

From the UK dial: 0800 358 9473

From the US dial: +1 855 85 70686

Participant Pin: 89517228#

URL for other international dial in numbers:

https://events-ftp.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf

Key Financials:

 
                             31       31 December    Change        30        Change 
   GBP in millions         December       2020         from        June        from 
                             2021                    FY 2020       2021      H1 2021 
 
 Assets                   GBP22,587    GBP22,579       0%       GBP23,013     (2%) 
 Loans                    GBP12,290    GBP12,090       2%       GBP12,325      0% 
 Deposits                 GBP16,448    GBP16,072       2%       GBP16,620     (1%) 
 Loan to deposit ratio       75%         75 %         0 pps        74%        1 pps 
 
 CET1 capital ratio         12.6%       15.0 %      (2.4 pps)    13.9 %     (1.3 pps) 
 Total capital ratio 
  (TCR)                     15.9%        18.1%      (2.2 pps)     17.2%     (1.3 pps) 
 MREL ratio                 20.5%       22.4 %      (1.9 pps)    21.7 %     (1.2 pps) 
 Liquidity coverage 
  ratio                     281%         187 %       94 pps       309 %     (28 pps) 
                         ----------  ------------  ----------  ----------  ---------- 
 
 
                                    FY           FY        Change        H2           H1        Change 
                                                            from                                 from 
  GBP in millions                  2021         2020       FY 2020      2021         2021       H1 2021 
 
 Total underlying revenue(2)     GBP397.9     GBP340.9      17%       GBP218.1     GBP179.8      21% 
 Underlying loss before 
  tax(3)                        (GBP171.3)   (GBP271.8)    (37%)     (GBP61.3)    (GBP110.0)    (44%) 
 Statutory loss before 
  tax                           (GBP245.1)   (GBP311.4)    (21%)     (GBP106.2)   (GBP138.9)    (24%) 
 Net interest margin              1.40%        1.22%       18bps       1.51%        1.28%       23bps 
                                 (144.0p 
 Underlying EPS                      )        (151.7p)      (5%)      (78.9p)      (65.1p)      (21%) 
                               -----------  -----------  ---------  -----------  -----------  --------- 
 

2. Underlying revenue excludes income recognised relating to the Capability & Innovation fund and the mortgage portfolio sale.

3. Underlying loss before tax excludes the Listing Share Awards, impairment and write-off of property, plant & equipment (PPE) and intangible assets, net BCR costs, transformation costs, remediation costs, business acquisition and integration costs and mortgage portfolio sale. Statutory loss after tax is included in the Profit and Loss Account.

Progress on strategic plan

 
 Metro Bank continues to successfully deliver transformational 
  change against all five pillars of the strategic plan set out 
  in February 2020. 
  --   Balance sheet optimisation: Improving mix, maximising risk-adjusted 
        returns on capital. Decisive action taken in response to 
        the changing environment. The mortgage disposal and RateSetter 
        back book acquisition accelerated the shift to higher yielding 
        assets followed by strong organic growth in consumer unsecured 
        and specialist mortgages. 
  --   Revenue: Margin expansion, NII growth and fee recovery. 
        More products launched in store including RateSetter loans 
        and insurance offerings. Government-backed lending through 
        the Bounce Back Loan Scheme (BBLS) top-up and the Recovery 
        Loan Scheme (RLS) to support communities. Investment in 
        digital capability improves the multi-channel presence. 
  --    Cost: Enabling sustainable growth. Investment in automation, 
         IT platforms and the customer service proposition supports 
         cost efficient growth. Agreed the acquisition of three further 
         store freeholds at attractive yields and selectively closing 
         three stores. Reduced central London office space and the 
         hybrid working model utilises office space around stores. 
  --   Infrastructure : Protecting the Bank. The enhancements 
        to IT, regulatory reporting, financial crime, cyber security 
        and digital channels all improve the Bank's resilience and 
        customer journeys. 
  --   Internal and external communications: Delivering clear 
        messages. Continued support for customers, colleagues and 
        communities through the pandemic with a range of bank wide 
        and hyper local brand and PR campaigns, as well as launching 
        an SME marketing campaign showcasing the Bank's FANS. 
 

Financial performance for the year ended 31 December 2021

Deposits

 
 GBP in millions                 31       31 December     Change       30        Change 
                              December        2020         from        June       from 
                                2021                      FY 2020      2021      H1 2021 
 
 Demand: current accounts     GBP7,318      GBP6,218       18%      GBP6,749       8% 
 Demand: savings accounts     GBP7,684      GBP6,430       20%      GBP7,402       4% 
 Fixed term: savings 
  accounts                    GBP1,446      GBP3,424      (58%)     GBP2,469     (41%) 
                            -----------  -------------  ---------  ----------  --------- 
 Deposits from customers     GBP16,448     GBP16,072        2%      GBP16,620     (1%) 
                            -----------  -------------  ---------  ----------  --------- 
 
 
 Retail customers (excl. 
  retail partnerships)        GBP6,713      GBP7,364       (9%)     GBP6,964      (4%) 
 SMEs                         GBP4,764      GBP4,420        8%      GBP4,605       3% 
                            -----------  -------------  ---------  ----------  --------- 
  GBP11,477                   GBP11,784                    (3%)     GBP11,569     (1%) 
 -----------  ----------------------------------------  ---------  ----------  --------- 
 Retail partnerships          GBP1,814      GBP1,596       14%      GBP1,697       7% 
 Commercial customers 
  (excluding SMEs(4) 
  )                           GBP3,157      GBP2,692       17%      GBP3,354      (6%) 
   GBP4,971                   GBP4,288                     16%      GBP5,051      (2%) 
 -----------  ----------------------------------------  ---------  ----------  --------- 
 
      4. SME defined as enterprises which employ fewer than 250 persons 
       and which have an annual turnover not exceeding EUR50 million, 
       and/or an annual balance sheet total not exceeding EUR43 million, 
       and have aggregate deposits less than EUR1 million. 
 
 
  --   Total deposits grew by over GBP370 million in the year 
        to GBP16,448 million as at 31 December 2021 (31 December 
        2020: GBP16,072 million ). Continued growth in current and 
        savings accounts was offset by a GBP2.0 billion reduction 
        in fixed term deposit (FTD) accounts following action taken 
        to reduce prices. FTD accounts now make up 9% of total deposits 
        (2020: 21%). Growth largely resulted from an increase in 
        commercial deposits, reflecting customers' continued preference 
        for increased liquidity. 
  --   Cost of deposits was 24bps for the year, a decrease of 
        41bps compared to 65bps in 2020, reflecting the managed 
        roll-off of higher cost FTD accounts with a corresponding 
        mix improvement in favour of non-interest-bearing current 
        accounts and demand savings accounts, the Q4 2021 cost of 
        deposits was 0.15%. 
  --   Customer account growth of 0.3 million in the year to 2.5 
        million (2020: 2.2 million) reflects continued organic growth, 
        with account growth from the RateSetter back book acquisition 
        offsetting the managed reduction in fixed term deposits. 
 

Loans

 
 GBP in millions                     31       31 December     Change       30        Change 
                                  December        2020         from        June       from 
                                    2021                      FY 2020      2021      H1 2021 
 
 Gross Loans and advances 
  to customers                   GBP12,459     GBP12,244        2%      GBP12,491      0% 
 Less: allowance for                            (GBP 154 
  impairment                      (GBP169)          )          10%      (GBP 166)      2% 
                                -----------  -------------  ---------  ----------  --------- 
 Net Loans and advances 
  to customers                   GBP12,290     GBP12,090        2%      GBP12,325      0% 
                                -----------  -------------  ---------  ----------  --------- 
 
 Gross loans and advances 
  to customers consists 
  of: 
                                -----------  -------------  ---------  ----------  --------- 
 Commercial lending(5)            GBP3,220      GBP3,681      (13%)     GBP3,416      (6%) 
 Government-backed lending(6)     GBP1,626      GBP1,467       11%      GBP1,556       4% 
 Retail mortgages                 GBP6,723      GBP6,892       (2%)     GBP6,815      (1%) 
 Consumer lending                  GBP890        GBP204        336%      GBP704       26% 
                                -----------  -------------  ---------  ----------  --------- 
 
       5. Includes CLBILS. 
        6. BBLS, CBILS and RLS. 
 
 
  --   Total net loans as at 31 December 2021 were GBP12,290 million, 
        up 2% from GBP12,090 million as at 31 December 2020 reflecting 
        growth in government-backed lending and the strong organic 
        growth in consumer lending supported by the integration 
        of the RateSetter platform, which offset the attrition of 
        lower-yielding residential mortgages and commercial term 
        loans. 
  --   Commercial loans (excluding BBLS and CBILS) decreased by 
        13% during the year to GBP3,220 million as at 31 December 
        2021 (31 December 2020: GBP3,681 million), as large transactional 
        lending rolled off. 
  --   Government-backed lending increased by more than GBP150 
        million in the year to GBP1,626 million as at 31 December 
        2021 (31 December 2020: GBP1,467 million) . Growth was primarily 
        driven by BBLS top-up applications and Recovery Loan Scheme 
        (RLS) lending . 
  --   Retail mortgages remained the largest component of the 
        lending book at 54% (31 December 2020: 56%), with mortgage 
        applicants benefitting from enhancements to the existing 
        mortgage offering and the launch of further specialist mortgage 
        products during the year. 
  --   Consumer lending increased to 7% of the of the total loan 
        book from 2% as at 31 December 2020 , resulting from the 
        RateSetter back book acquisition and strong increase in 
        organic lending as the RateSetter platform was rolled-out 
        across all of Metro Bank's channels. Consumer originations 
        continue to average more than GBP50 million per month compared 
        to less than GBP2 million per month a year earlier. 
  --   Loan to deposit ratio held at 75% (31 December 2020: 75%) 
        reflecting the impact of the mortgage portfolio disposal 
        in December 2020 and capital constraints on lending. 
  --   Cost of risk was 18bps for the year, a decrease of 68bps 
        compared to 86bps in 2020, reflecting the more favourable 
        macro-economic outlook. Non-performing loans increased to 
        3.71% (31 December 2020: 2.10%) driven by BBLS and a limited 
        number of single name commercial exposures. The loan portfolio 
        remains highly collateralised with average debt to value 
        (DTV) of the residential mortgage book at 55% (31 December 
        2020: 56%), while DTV in the commercial book was 57% (31 
        December 2020: 56%). 
 

Profit and Loss Account

 
 --   Net interest margin (NIM) of 1.40% is an increase of 18bps 
       in the year (2020: 1.28%) and reflects an improved lending 
       mix and lower cost of deposits, the Q4 2021 NIM was 1.56%. 
 --   Underlying net interest income increased by 18% to GBP295.7 
       million (2020: GBP250.3 million), despite the mortgage portfolio 
       disposal in H2 2020. 
 --   Underlying net fee and other income increased 18% to GBP101.5 
       million (2020: GBP86.3 million). The lifting of COVID-19 
       lockdowns and other social restrictions in H2 led to growth 
       in transaction-driven revenue streams. 
 --   Total underlying operating costs increased 13% to GBP546.8 
       million (2020: GBP486.0 million) despite reducing 1% in 
       the second half, reflecting a full year of RateSetter costs. 
       'Change the Bank' spend has now passed its peak, reducing 
       15% in the second half. The closure of three selected stores 
       in Windsor, Milton Keynes and Earl's Court also reduce cost 
       run-rate into 2022, offset by the opening of a new store 
       in Leicester in Q1 2022. 
 --   Underlying loss before tax was GBP171.3 million, a 37% reduction 
       from the GBP271.8 million loss in 2020. 
 --   Statutory loss before tax of GBP245.1 million in 2021 (2020: 
       loss of GBP311.4 million) includes remediation costs of 
       (GBP45.9 million), and impairment of RateSetter peer-to-peer 
       technology and the exit of three stores (GBP24.7 million), 
       partially offset by the residual gain on sale in respect 
       of the mortgage portfolio (GBP8.1 million). The remediation 
       costs include (GBP5.4 million) relating to settlement of 
       the PRA investigation and a (GBP5.3 million) provision for 
       the FCA investigation. 
 --   Statutory loss after tax of GBP248.2 million in 2021 (2020: 
       loss of GBP301.7 million) after a GBP 3.1 million corporation 
       tax charge. 
 

Capital, Funding and Liquidity

 
 --   Strong liquidity and funding position maintained , supported 
       by the settlement of the mortgage portfolio disposal in 
       February. As a result, the Bank's Liquidity Coverage Ratio 
       (LCR) remained elevated at 281% as of 31 December 2021 (31 
       December 2020: 187%). Whilst NIM dilutive, this excess liquidity 
       is earnings neutral and in a rising rate environment has 
       the potential to be earnings accretive. 
 
       In 2021, GBP3,250 million of Term Funding Scheme (TFS) drawings 
       were refinanced into Term Funding Scheme with additional 
       incentives for SMEs (TFSME), equating to total TFSME drawings 
       of GBP3.8bn, maturing in 2024/2025. 
 --   Common Equity Tier 1 (CET1) ratio of 12.6% (31 December 
       2020: 15.0%) compares to a minimum CET1 requirement of 7.6% 
       (7) and minimum Tier 1 requirement of 9.3%(7) . 
 --   Total Capital ratio of 15.9% (31 December 2020: 18.1%) 
       compares to a minimum requirement of 11.6%(7) . 
 --   Total Capital plus MREL ratio of 20.5% (31 December 2020: 
       22.4%) compares to a minimum interim requirement of 20.5%(7) 
       . 
 --        As expected, the PRA have announced that from 1 January 
            2022 the following capital benefits will be reversed, as 
            such the Bank's capital ratios will reduce on 1 January 
            2022 to reflect these adjustments: 
             *    Reversal of GBP64 million of relief provided through 
                  the EBA's treatment of software assets, equivalent to 
                  0.8% of CET1 and 0.7% of MREL. 
 
 
             *    Amortisation of the IFRS9 Transitional Relief, 
                  equivalent to 0.3% of CET1 and MREL. 
 --   Total RWA as at 31 December 2021 was GBP7,454 million (31 
       December 2020: GBP7,957 million). The reduction reflects 
       changes to the lending mix and settlement of a receivable 
       related to the mortgage portfolio sale (9) . The result 
       is a loan risk weight density of 48% as at 31 December 2021 
       (31 December 2020: 47%). 
 --   Regulatory leverage ratio was 4.4%. 
 --   Extension of HoldCo implementation deadline to June 2023 
       agreed with BoE. 
 

7. Based on current capital requirements plus buffers, including P2A requirement of 1.11% (of which 0.8% must be met with Tier 1) , excluding any confidential PRA buffer, if applicable.

Metro Bank PLC

Summary Balance Sheet and Profit & Loss Account

(Unaudited)

 
 Balance Sheet                       YoY         31-Dec        30-Jun        31-Dec 
                                    change         2021          2021          2020 
                                               GBP'million   GBP'million   GBP'million 
 Assets 
 Loans and advances to customers     2%         GBP12,290     GBP12,325     GBP12,090 
 Treasury assets(8)                             GBP9,142      GBP9,474      GBP6,406 
 Assets classified as held                          -             -          GBP295 
  for sale 
 Other assets(9)                                GBP1,155      GBP1,214      GBP3,788 
                                              ------------  ------------  ------------ 
 Total assets                        0%         GBP22,587     GBP23,013     GBP22,579 
                                              ------------  ------------  ------------ 
 
 Liabilities 
 Deposits from customers             2%         GBP16,448     GBP16,620     GBP16,072 
 Deposits from central banks                    GBP3,800      GBP3,800      GBP3,808 
 Debt securities                                 GBP588        GBP596        GBP600 
 Other liabilities                               GBP716        GBP850        GBP810 
                                              ------------  ------------  ------------ 
 Total liabilities                   1%         GBP21,552     GBP21,866     GBP21,290 
                                              ------------  ------------  ------------ 
 Total shareholder's equity                     GBP1,035      GBP1,147      GBP1,289 
                                              ------------  ------------  ------------ 
 Total equity and liabilities                   GBP22,587     GBP23,013     GBP22,579 
                                              ------------  ------------  ------------ 
 
   8.         Comprises investment securities and cash & balances with the Bank of England. 

9. Comprises property, plant & equipment, intangible assets and other assets. Other assets at 31 December 2020 include GBP2.6 billion receivable from NatWest. This was received post year-end upon the completion of the transaction.

 
                                                           Year ended 
 Profit & Loss Account                      YoY       31-Dec        31-Dec 
                                           change       2021          2020 
                                                    GBP'million   GBP'million 
 
 Underlying net interest income             18%      GBP295.7      GBP250.3 
 Underlying net fee and other               18%      GBP101.5       GBP86.3 
  income 
 Underlying net gains/(losses)                        GBP0.7        GBP4.3 
  on sale of assets 
                                                   ------------  ------------ 
 Total underlying revenue                   17%      GBP397.9      GBP340.9 
                                                   ------------  ------------ 
 
 'Run the Bank' costs                       12%     (GBP435.5)    (GBP390.4) 
 'Change the Bank' costs(10)                        (GBP111.3)     (GBP95.6) 
                                                   ------------  ------------ 
 Total underlying costs                     13%     (GBP546.8)    (GBP486.0) 
                                                   ------------  ------------ 
 
 Expected credit loss expense                        (GBP22.4)    (GBP126.7) 
 
 Underlying loss before tax                (37%)    (GBP171.3)    (GBP271.8) 
                                                   ------------  ------------ 
 
 Listing Share Awards                                    -          GBP0.2 
 Impairment and write-off of                         (GBP24.9)     (GBP40.6) 
  property plant & equipment 
  and intangible assets 
 Transformation costs                                (GBP8.9)      (GBP16.7) 
 Remediation costs                                   (GBP45.9)     (GBP40.8) 
 Business acquisition and integration                (GBP2.4)      (GBP5.4) 
  costs 
 Gain on mortgage portfolio                           GBP8.3        GBP63.7 
  sale (net of costs) 
 
 Statutory loss before tax                 (21%)    (GBP245.1)    (GBP311.4) 
                                                   ------------  ------------ 
 
 Statutory taxation                                  (GBP3.1)       GBP9.7 
 
 Statutory loss after tax                  (18%)    (GBP248.2)       (GBP 
                                                                     301.7 
                                                                       ) 
                                                   ------------  ------------ 
 
 
                                          Year ended 
 Key metrics                           31-Dec     31-Dec 
                                        2021       2020 
 
 Underlying earnings per share - 
  basic and diluted                   (144.0p)   (151.7p) 
 Number of shares                      172.4m     172.4m 
 Net interest margin (NIM)             1.40%      1.22% 
 Cost of deposits                      0.24%      0.65% 
 Cost of risk                          0.18%      0.86% 
 Underlying cost:income ratio           137%       143% 
 
 
 
                                        HoH change               Half year ended 
 Profit & Loss Account                                 31-Dec        30-Jun        31-Dec 
                                                         2021          2021          2020 
                                                     GBP'million   GBP'million   GBP'million 
 
 Underlying net interest income            21%        GBP162.1      GBP133.6      GBP134.1 
 Underlying net fee and other                          GBP54.8       GBP46.7       GBP50.2 
  income 
 Underlying net gains/(losses)                         GBP1.2       (GBP0.5)       GBP3.3 
  on sale of assets 
                                                    ------------  ------------  ------------ 
 Total underlying revenue                  21%        GBP218.1      GBP179.8      GBP187.6 
                                                    ------------  ------------  ------------ 
 
 'Run the Bank' costs                                (GBP220.6)    (GBP214.9)    (GBP206.3) 
 'Change the Bank' costs(10)                          (GBP51.6)     (GBP60.3)     (GBP55.0) 
                                                    ------------  ------------  ------------ 
 Total underlying costs                    (1%)      (GBP271.6)    (GBP275.2)    (GBP261.3) 
 
 Expected credit loss expense                         (GBP7.8)      (GBP14.6)     (GBP14.7) 
 
 Underlying loss before tax               (44%)       (GBP61.3)    (GBP110.0)     (GBP88.4) 
                                                    ------------  ------------  ------------ 
 
 Listing Share Awards                                     -             -          GBP0.4 
 Impairment and write-off of                          (GBP17.4)     (GBP7.5)      (GBP14.0) 
  property plant & equipment 
  and intangible assets 
 Net BCR costs                                         GBP0.3       (GBP0.3)          - 
 Transformation costs                                 (GBP7.1)      (GBP1.8)      (GBP4.3) 
 Remediation costs                                    (GBP20.5)     (GBP25.4)     (GBP23.0) 
 Business acquisition and integration                 (GBP0.1)      (GBP2.3)      (GBP5.4) 
  costs 
 Gain on mortgage portfolio                           (GBP0.1)       GBP8.4        GBP63.7 
  sale (net of costs) 
 
 Statutory loss before tax                (24%)      (GBP106.2)    (GBP138.9)     (GBP71.0) 
                                                    ------------  ------------  ------------ 
 
 Statutory taxation                                   (GBP0.9)      (GBP2.2)       GBP8.6 
 
 Statutory loss after tax                 (24%)      (GBP107.1)    (GBP141.1)     (GBP 62.4 
                                                                                      ) 
                                                    ------------  ------------  ------------ 
 
 
                                           Half year ended 
 Key metrics                         31-Dec    30-Jun    31-Dec 
                                       2021      2021      2020 
 
 Underlying earnings per share - 
  basic and diluted                  (36.0p)   (65.1p)   (42.9p) 
 Number of shares                    172.4m    172.4m    172.4m 
 Net interest margin (NIM)            1.51%     1.28%     1.28% 
 Cost of deposits                     0.17%     0.31%     0.49% 
 Cost of risk                        0.20 %    0.24 %    0.20 % 
 Underlying cost:income ratio         125 %     153 %     139% 
 
 
   10.       Change the Bank costs consists of investment spend, including amortisation 

Enquiries

For more information, please contact:

Metro Bank PLC Investor Relations

Jo Roberts

+44 (0) 20 3402 8900

IR@metrobank.plc.uk

Metro Bank PLC Media Relations

Tina Coates / Mona Patel

+44 (0) 7811 246016 / +44 (0) 7815 506845

pressoffice@metrobank.plc.uk

Teneo

Charles Armitstead / Haya Herbert Burns

+44 (0)7703 330269 / +44 (0) 7342 031051

metrobank@teneo.com

S

About Metro Bank

Metro Bank services more than two million customer accounts and is celebrated for its exceptional customer experience. It is the highest rated high street bank for overall service quality and best bank for service in-store for personal and business customers, in the Competition and Market Authority's Service Quality Survey in February 2022. It was recognised as 'Bank of the Year' at the 2020 MoneyAge Awards and 'Banking Brand of The Year' at the Moneynet Personal Finance Awards 2021, received Gold Award in the Armed Forces Covenant's Employer Recognition Scheme 2021 and won Best Open Banking Partnership - Commercial at the inaugural Open Banking Expo Awards 2021.

The community bank offers retail, business, commercial and private banking services, and prides itself on giving customers the choice to bank however, whenever and wherever they choose, and supporting the customers and communities it serves. Whether that's through its network of 78 stores open seven days a week, 362 days a year; on the phone through its UK-based 24/7 contact centres; or online through its internet banking or award-winning mobile app: the Bank offers customers real choice.

Metro Bank PLC. Registered in England and Wales. Company number: 6419578. Registered office: One Southampton Row, London, WC1B 5HA. 'Metrobank' is the registered trademark of Metro Bank PLC.

It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Most relevant deposits are protected by the Financial Services Compensation Scheme. For further information about the Scheme refer to the FSCS website www.fscs.org.uk. All Metro Bank products are subject to status and approval.

Metro Bank PLC is an independent UK bank - it is not affiliated with any other bank or organisation (including the METRO newspaper or its publishers) anywhere in the world. Please refer to Metro Bank using the full name.

Chief executive officer's statement

2021 saw the Bank complete the second year of its turnaround plan and despite the external headwinds it was a year of significant progress. I'm pleased to report the Bank ends the year in a significantly stronger position than when I took over the reins as CEO in 2020.

Our commitment to being the UK's best community bank continues to set us apart from our banking peers and our model continues to resonate with our FANS. Our personal and business customers have depended on Metro Bank to help them navigate what for many has been another difficult 12 months. They have also relied on the Bank to be their partner in the local communities they live. Whether that is through supporting local community activities, donating colleagues' time and expertise, fundraising for good causes, providing space in our stores, or helping young people learn about money, Metro Bank has been there every step of the way, hand in hand.

We are proud to remain the UK's highest rated high street bank for customer service for the eighth time running. When you combine this relentless focus on exceptional customer service with our desire to continually surprise and delight to create FANS, it's easy to see why we are the Bank of choice for 2.5 million customer accounts.

Our strategy

In early 2020, we identified the five strategic pillars that formed our turnaround strategy, designed to deliver improved shareholder returns and sustainable profitable growth. These comprise:

   --      Revenue 
   --      Cost 
   --      Infrastructure 
   --      Balance sheet optimisation 
   --      Communication 

Our strategy is driven by an unwavering focus on customer service which we believe enables us to build deeper, more meaningful relationships with our customers. We achieve this with well-informed colleagues in our stores, our market leading digital services, an easily accessible store footprint in the major cities and towns of England and Wales and offering a wide range of products to meet customers' banking needs.

Progress

Revenue

We've made great progress in filling our shelves by adding new products that meet more of our customers' needs. Most notably, we strengthened our consumer lending operation with customers now able to take a loan through the RateSetter platform in-store, online and via our mobile app, as well as under the RateSetter brand on the main aggregator sites, as well as its own website. We have also reinvigorated our credit card offer via our stores.

Also, in the lending space, we supported small businesses by offering the UK Government-funded BBLS top-ups and later in the year the Recovery Loan Scheme. In Specialist Mortgages we have introduced new products. We also entered the insurance market, providing SME business insurance and pet insurance.

Cost initiatives

While the Bank continues to operate with a high fixed cost base in the form of its store footprint, we have worked hard to contain business as usual ('Run the Bank') costs which grew 3% on a like for like basis in the year. Costs to transform the Bank ('Change the Bank') have fallen by 15% in the second half of the year as this transformation programme has now passed its peak. The bank continues to optimise its property footprint and has adopted a hybrid way of working for office-based colleagues, utilising space above and alongside our existing store network. We have purchased the freehold of seven stores since 2020, lowering our occupancy costs and consolidated our call centre operations into three main sites in Bristol, Slough and Ilford.

We have also made the difficult decision to close three of our stores - Earl's Court, Milton Keynes Midsummer and Windsor. Our stores are fundamental to our customer and community proposition, culture and brand, but like any good retailer we regularly review how our stores are doing. While we are happy with our store estate overall, these three stores have certain unique challenges: Earl's Court was a fantastic billboard when Metro Bank first opened, but it's in a low footfall area; Windsor has high footfall, but much of this is driven by tourists rather than residents; and we have two stores in Milton Keynes - one with a lease break coming up, and we're confident we can meet our customers' needs with one store. While our colleagues have done a great job of trying to make these three stores successful, this is the right decision for the Bank and we're pleased to be able to make these closures without any colleague redundancies.

Furthermore, we have worked hard to simplify complex processes and systems and to work more efficiently. We have also transformed the way we deliver our change agenda by introducing Agile methodology, which centres around value streams, to help IT, Change, and Product teams design and deliver new products and solutions more quickly.

Infrastructure

Throughout the year we invested in the Bank's IT resilience and delivered upgrades and improvements that have reduced vulnerability. The bank has focused on its regulatory requirements and introduced Secure Customer Authentication and card migration to meet PSD2 requirements. There has also been progress on our financial crime improvement, GDPR and cyber programmes, which have all delivered a range of improvements further protecting the Bank.

During the year we recruited colleagues to ensure that customers in financial difficulties received the support they needed; we launched a service to support the new Debt Respite Scheme (Breathing Space) guidance to alleviate pressure from customers with financial or mental health difficulties; and we delivered Pay-as-You-Grow functionality in line with BBLS requirements to support businesses beyond the pandemic.

All of these initiatives have helped make the Bank safer, more resilient and fit for the future.

Balance Sheet Optimisation

During the year we have made meaningful strides in reshaping the Bank's balance sheet. We acquired the RateSetter back book, significantly increased the volume of consumer lending and ramped up specialist mortgages. In tandem we actively managed down high-cost fixed term deposits and increased the proportion of current accounts and low-cost instant access savings accounts. These activities have resulted in increased yield and a lower cost of deposits. At the end of the period, RateSetter has established itself as a leading provider of consumer credit in the open market.

Culture and Communication

We've done lots of work to showcase what makes Metro Bank stand out from the crowd, from our small business banking campaign to our refreshed RateSetter website. Our colleagues in-store have embraced being Champions of our Community through educating children with our Money Zone Programme, our in-store events, and the work we have done with local charities. This year saw us increase our spend on digital and performance marketing. We have also invested in hyper-local marketing to drive footfall into stores across England and Wales and highlight our community credentials.

Results

The bank has shown year on year, half on half and quarter on quarter improvements throughout the year. The financial performance is in line with our expectations and demonstrates promising momentum in the business.

The bank reported a loss before tax of GBP245.1 million, an improvement on last year's loss (2020: loss of GBP311.4 million). Underlying loss before tax reduced by 37% to GBP171.3 million, and second half underlying loss of GBP61.3 million is down 44% on the first half, highlighting the momentum towards profitability. While good progress is being made to return to sustainable profitability, I fully understand that these losses need to be minimised swiftly and I am confident our strategy will achieve that.

The future

The bank's strategic pillars, transformation plan and relentless focus on the provision of superior customer service will continue into 2022. We were once again rated the top high street bank for overall service for personal and business customers in the latest Competition and Markets Authority Service Quality rankings and number one for store service for the eighth time running. This is welcome external validation of the continued efforts of our colleagues across the business.

2021 saw the Bank complete much of the heavy lifting required to transform the Bank from loss-making towards sustainable profitability. Metro Bank is a business to be proud of, with colleagues who are dedicated to meeting the needs of their customers and communities.

As I come to the end of my second year in role, after another challenging year, I am proud of the achievements of 2021, the progress we have made in the Bank's turnaround and most of all the support we have provided to our local communities. There is still much to do in the coming months, but we start 2022 with real momentum.

Finally

Metro Bank's success is directly attributable to my fantastic colleagues who I am blessed to lead. Their brilliance, dedication, customer focus, caring natures and focus on others inspires me every day. While it doesn't seem like enough, all I can do is say a huge thank you.

Finance review

Our financial performance in 2021 reflects where we are in our strategic turnaround, it shows strong momentum within the business and positive signs that our approach is working. When adjusting for the sale of the GBP3.1 billion mortgage portfolio disposal in December 2020, the underlying momentum in the business is even clearer.

 
                                       2021          2020 
                                GBP'million   GBP'million  Change 
-----------------------------  ------------  ------------  ------ 
Net interest income                   295.7         250.3     18% 
-----------------------------  ------------  ------------  ------ 
Fee and other income                  101.5          86.3     18% 
-----------------------------  ------------  ------------  ------ 
Net gains on sale of assets             0.7           4.3   (84%) 
-----------------------------  ------------  ------------  ------ 
Total underlying revenue              397.9         340.9     17% 
-----------------------------  ------------  ------------  ------ 
Operating costs                     (546.8)       (486.0)     13% 
-----------------------------  ------------  ------------  ------ 
Expected credit loss expense         (22.4)       (126.7)   (82%) 
-----------------------------  ------------  ------------  ------ 
Underlying loss before tax          (171.3)       (271.8)   (37%) 
-----------------------------  ------------  ------------  ------ 
Non-underlying items                 (73.8)        (39.6)     86% 
-----------------------------  ------------  ------------  ------ 
Statutory loss before tax           (245.1)       (311.4)   (21%) 
-----------------------------  ------------  ------------  ------ 
 

We recognised a statutory loss before tax for the period of GBP245.1 million, down from the GBP311.4 million loss recognised in 2020, with the decrease primarily due to the GBP104.3 million lower charge for expected credit losses.

We entered 2021 well positioned for the prevailing economic climate, with the recently signed GBP3.1 billion mortgage portfolio divestment providing both regulatory capital headroom and liquidity at a time of uncertainty with the country in lockdown. The disposal supported our strategic goal of maximising risk adjusted returns on capital, as we reinvested GBP377 million of the proceeds to acquire the RateSetter back book of consumer loans with an average total gross yield of c.8%; that compared to the divested mortgage portfolio which had a weighted average rate of 2.1%.

The bank has continued to make strong progress against the turnaround plan, delivering considerable improvement in balance sheet mix at an accelerated pace that can now clearly be seen in improved net interest income.

On an underlying basis, the loss for the period of GBP171.3 million was down 37% compared to the prior year (2020: GBP271.8 million), driven by lower expected credit losses and positive operating jaws. Operating expenses increased 13% year-on-year and income increased 17%, despite GBP63 million of lost income as a result of the mortgage portfolio sale.

2021 has seen us continue to focus on shifting our deposit mix, which has led to the cost of deposits falling from 0.65% in 2020 to 0.24% in the current period. Alongside this we have delivered an increasing lending yield and our approach of optimising the balance sheet is now seeing us generate a greater level of interest income as a proportion of risk weighted assets.

We ended the year with a CET1 capital ratio of 12.6% and a Total Capital plus MREL ratio of 20.5%. These compare to the regulatory minima of 5.1% and 18.0% respectively, or 9.3% and 20.5% respectively including buffers (excluding any confidential buffer, if applicable). We continue to take a proactive, measured approach to capital management and are focused on building a greater risk adjusted return on regulatory capital.

Our primary focus remains the transformation of the Bank and in doing so we are taking a prudent approach in our assessment of the pace of economic recovery. We recognised an expected credit loss expense of GBP22.4 million for the period which is a significant improvement on the prior year (2020: GBP126.7 million).

 
                                                        2021 
                                                  GBPmillion 
-----------------------------------------------  ----------- 
Underlying loss before tax                           (171.3) 
-----------------------------------------------  ----------- 
Impairment and write-off of PPE and intangible 
 assets                                               (24.9) 
-----------------------------------------------  ----------- 
Remediation costs                                     (45.9) 
-----------------------------------------------  ----------- 
Transformation costs                                   (8.9) 
-----------------------------------------------  ----------- 
Business acquisition costs                             (2.4) 
-----------------------------------------------  ----------- 
Portfolio sale                                           8.3 
-----------------------------------------------  ----------- 
Statutory loss before tax                            (245.1) 
-----------------------------------------------  ----------- 
 

Income

Underlying net interest income increased 18% year-on-year to GBP295.7 million (2020: GBP250.3 million), reflecting increased front book yields, including our meaningful entry into the personal lending market, combined with actions we have taken to reduce cost of deposits.

NIM at 1.40% is 18 bps above 2020 (1.22%) reflecting the higher yielding asset mix and lower cost of deposits. The average lending yield increased to 3.07% from 2.68% a year earlier benefitting from high consumer lending yields and an improvement in the blended mortgage lending yield reflecting our focus on specialist mortgage products. Meanwhile our emphasis on current accounts and instant access deposits combined with the roll-off of higher-rate fixed term accounts reduced the cost of deposits meaningfully to 0.24% compared to 0.65% a year earlier.

A strong Q4 2021 NIM at 1.56% holds us in good stead for 2022 with continued focus on lending mix and improved yields as a result of the base rate rises, potentially tempered by higher cost of deposits.

Fee, commission and other income

Fee, commission and other income remain below pre-pandemic levels as the lockdowns at the start of the year continued to constrain activity. However, as restrictions started to be lifted in the second half we saw an uptick in activity particularly in areas such as foreign exchange, where volumes had been significantly depressed throughout the pandemic.

Fees and commission income is an area where we believe that we can deliver strong capital efficient returns by building on our expanding account base and leading customer service, however the growth of these income streams will be influenced by the pace of recovery from the pandemic.

Operating expenses

Underlying operating expenses grew to GBP546.8 million from GBP486.0 million in 2020. The year-on-year increase is impacted by several factors, including the acquisition of RateSetter which occurred in September 2020.

As expected, expenditure on the 'Change the Bank' investment programme began to reduce in the second half of the year. This trend is anticipated to continue, contributing to an expected low single digit percentage reduction in total underlying operating costs in 2022.

On a statutory basis total operating expenses increased by less than 4% to GBP641.2 million compared to GBP617.3 million in 2020 as the underlying cost increase, including the additional RateSetter running costs, was partially offset by lower write downs and BCR costs together with reduced transformation and integration expenditure.

Depreciation and amortisation remained largely unchanged at GBP80.2 million (2020: GBP74.4 million).

 
                                              2021          2020 
                                       GBP'million   GBP'million  Change 
------------------------------------  ------------  ------------  ------ 
Depreciation and amortisation                 80.2          74.4      8% 
------------------------------------  ------------  ------------  ------ 
Total operating expense                      641.2         617.3      4% 
------------------------------------  ------------  ------------  ------ 
Total non-underlying operating 
 expense                                      94.4         131.3   (28%) 
------------------------------------  ------------  ------------  ------ 
Total underlying operating expenses          546.8         486.0     13% 
------------------------------------  ------------  ------------  ------ 
'Run the Bank' costs                         435.5         390.4     12% 
------------------------------------  ------------  ------------  ------ 
'Change the Bank' costs                      111.3          95.6     16% 
------------------------------------  ------------  ------------  ------ 
Statutory cost:income ratio                   153%          143% 
------------------------------------  ------------  ------------  ------ 
Underlying cost:income ratio                  137%          143% 
------------------------------------  ------------  ------------  ------ 
 

Remediation programmes continue to be a significant expense with associated costs of GBP45.9 million recognised in the period (2020: GBP40.8 million). These costs include the penalty resulting from the PRA investigation, which was concluded in December, as well as a provision for the settlement of the related FCA investigation. We are continuing to work closely with the regulators on the outstanding regulatory matters.

Non-underlying costs also reflect the decision taken to close three stores in 2022. We regularly review how our existing stores are performing as well as assess new markets where there is potential for growth in the longer term. The three stores have consistently underperformed compared to other locations and upcoming lease events provided us with an opportunity to close. We still remain committed to stores and continue to invest in them. In 2021 we opened our 78(th) store in Bradford, alongside preparing to launch our new store in Leicester.

We also acquired four further freeholds during the year; which means a third of our store estate is now freehold. By trading right of use assets for freeholds at attractive prices we can both reduce costs and gain flexibility for minimal additional risk weighted assets. Whilst we will continue to take advantage of opportunities where these arise and there is a strong commercial rationale for doing so, the stabilisation of commercial property prices will likely limit these opportunities in the near term.

Non-underlying items in 2022 are expected to be less than 20% of the GBP73.9 million total in 2021 as remediation costs fall away.

Expected credit loss expense

Although the macroeconomic environment has improved in 2021, uncertainty remains, particularly in respect of new COVID variants and the sustainability of recently lifted public health restrictions. The expected credit loss charge for the year of GBP22.4 million (2020: GBP126.7 million) is primarily driven by growth in unsecured lending origination, the purchase of RateSetter back book and a small number of large single name commercial cases.

A fourth severe downside macroeconomic scenario was introduced in 2021 across all portfolios, with associated changes in the probability weightings. This aligns our approach to market best practice and further captures the potential risks associated with a more extreme downside scenario.

We continue to maintain a prudent level of post model overlays to capture factors that are not fully reflected in the scenarios. These reflect our cautious outlook driven by the impact of higher energy prices, increase in national insurance contributions, and inflationary pressures on individual customer affordability. During the year we have reduced the overall number of post model overlays applied through the continued development of our models.

Unsecured lending has increased significantly in the year, in line with our strategy. We manage this exposure within a defined risk appetite, with a focus on prime lending, underpinned by strong credit scoring criteria to limit losses, which to date remain low.

Deposits

 
                                             2021          2020 
Customer deposits                     GBP'million   GBP'million  Change 
-----------------------------------  ------------  ------------  ------ 
Retail customers (excluding retail 
 partnerships)                              6,713         7,364    (9%) 
-----------------------------------  ------------  ------------  ------ 
Retail partnerships                         1,814         1,596     14% 
-----------------------------------  ------------  ------------  ------ 
Commercial customers (excluding 
 SMEs)                                      3,157         2,692     17% 
-----------------------------------  ------------  ------------  ------ 
SMEs                                        4,764         4,420      8% 
-----------------------------------  ------------  ------------  ------ 
Total customer deposits                    16,448        16,072      2% 
-----------------------------------  ------------  ------------  ------ 
 

Deposits grew by 2% from 31 December 2020 to GBP16,448 million at 31 December 2021 (31 December 2020: GBP16,072 million). The increase was primarily driven by commercial and SME customers which were up 17% and 8% respectively from the start of the year.

 
                                       2021          2020 
Customer deposits               GBP'million   GBP'million  Change 
-----------------------------  ------------  ------------  ------ 
Demand: current accounts              7,318         6,218     18% 
-----------------------------  ------------  ------------  ------ 
Demand: savings accounts              7,684         6,430     20% 
-----------------------------  ------------  ------------  ------ 
Fixed term: savings accounts          1,446         3,424   (58%) 
-----------------------------  ------------  ------------  ------ 
Total customer deposits              16,448        16,072      2% 
-----------------------------  ------------  ------------  ------ 
 

Current account balances grew by 18% during the year and make up 43% of total customer deposits as at 31 December 2021 (31 December 2020: 39%). We continue to see customer preference moving towards having instant access to funds, leading to growth of current accounts and instant access savings accounts, whilst at the same time we have proactively let higher cost fixed term deposits roll off as we continue to manage cost of deposits down.

In 2022 we anticipate higher growth in deposits than in 2021 with continued focus on mix improvement.

Assets

 
                                          2021          2020 
                                   GBP'billion   GBP'billion  Change 
--------------------------------  ------------  ------------  ------ 
Loans and advances to customers           12.3          12.1      2% 
--------------------------------  ------------  ------------  ------ 
Total assets                              22.6          22.6       - 
--------------------------------  ------------  ------------  ------ 
Loan to deposit ratio                      75%           75% 
--------------------------------  ------------  ------------  ------ 
Cost of risk                             0.18%         0.86% 
--------------------------------  ------------  ------------  ------ 
 

Net lending ended the period at GBP12,290 million, up 2% from GBP12,090 million at 31 December 2020. The GBP200 million increase has been driven by a GBP686 million growth in consumer lending, offset by a moderate reduction in the commercial loans and retail mortgage books. The growth in consumer lending is a result of both organic origination through the RateSetter platform, and the purchase of the GBP337 million back book from peer-to-peer investors. Our investment in consumer lending, including integrating the RateSetter lending capabilities in store, provides a strong base on which we can capitalise as the economy continues to recover and we are ready to serve a consumer-led recovery.

Retail mortgages remained the largest component of the lending book at 54% of gross lending (31 December 2020: 56%), down GBP169 million to GBP6,723 million at 31 December 2021 from GBP6,892 million at 31 December 2020. The decrease reflects the attrition of older loans, offset by our continued penetration through our specialist mortgage products into underserved areas of the mortgage market, which has replaced some of these balances.

Commercial loans, which now comprise 39% of our lending, saw a GBP302 million reduction from GBP5,148 million at 31 December 2020. The decrease is down to older term loans repaying combined with a slowdown and the start of repayments of BBLS loans in the second half, partially offset by government-backed Recovery Loan Scheme lending.

We anticipated a higher rate of growth in overall lending in 2022 compared to 2021, with expansion in existing categories with higher risk adjusted returns including consumer unsecured and specialist mortgages, complemented by the expected launch of new products including automotive finance and digital lending products for SMEs.

Non-current assets have decreased during the period, driven by a reduction in our PPE balance, reflecting the scaling back of our store opening programme.

Intangibles remained flat during the year as continued investment, albeit at a slower rate, was offset by amortisation and impairment charges.

Taxation

During 2021 we made a total tax contribution of GBP152.5 million (2020: GBP132.9 million), which comprised GBP91.6 million (2020: GBP86.5 million) of taxes we paid and a further GBP60.9 million (2020: GBP46.4 million) of taxes we collected.

 
Taxes paid                          2021      2020 
------------------------------  --------  -------- 
Business rates                     15.0%     13.5% 
------------------------------  --------  -------- 
Land transaction tax                1.6%      1.3% 
------------------------------  --------  -------- 
Employer NICs                      23.7%     20.4% 
------------------------------  --------  -------- 
Irrecoverable VAT and customs 
 duty                              59.4%     64.5% 
------------------------------  --------  -------- 
Other                               0.3%      0.3% 
------------------------------  --------  -------- 
Total taxes paid                GBP91.6m  GBP86.5m 
------------------------------  --------  -------- 
 
 
Taxes collected on behalf of HMRC       2021      2020 
----------------------------------  --------  -------- 
Employer NICs                          22.3%     25.1% 
----------------------------------  --------  -------- 
PAYE                                   64.0%     65.5% 
----------------------------------  --------  -------- 
Net VAT                                13.7%      9.1% 
----------------------------------  --------  -------- 
Other                                   0.0%      0.4% 
----------------------------------  --------  -------- 
Total taxes paid                    GBP60.9m  GBP46.4m 
----------------------------------  --------  -------- 
 

In 2021 our tax expense recognised in the income statement was GBP3.1 million (2020: credit of GBP9.7 million).

Capital and liquidity

 
                                   2021          2020 
                            GBP'million   GBP'million    Change 
-------------------------  ------------  ------------  -------- 
CET1 capital                        936         1,192     (21%) 
-------------------------  ------------  ------------  -------- 
Risk-weighted assets 
 (RWAs)                           7,454         7,957      (6%) 
-------------------------  ------------  ------------  -------- 
CET1 ratio                        12.6%         15.0%  (240bps) 
-------------------------  ------------  ------------  -------- 
Total regulatory capital 
 ratio                            15.9%         18.1%  (220bps) 
-------------------------  ------------  ------------  -------- 
Total regulatory capital 
 plus MREL ratio                  20.5%         22.4%  (190bps) 
-------------------------  ------------  ------------  -------- 
Regulatory leverage 
 ratio                             4.4%          5.6% 
-------------------------  ------------  ------------  -------- 
 

Our CET1, Tier 1 and MREL ratios at 31 December 2021 were 12.6%, 12.6% and 20.5% respectively, compared to the minimum capital requirement including buffers (excluding any confidential buffer, if applicable) of 7.6%, 9.3% and 20.5%, respectively. On 1 January 2022 software assets will revert to being deducted from capital, reducing our CET1 by c0.8%. At the same time, IFRS9 transitionary relief will move from 100% to 75%, reducing CET1 by c0.3%. From 13 December 2022, the Bank of England has announced that that the countercyclical buffer will increase from 0% back to its pre pandemic level of 1%.

Risk weighted assets ended the period down 6% to GBP7,454 million (31 December 2020: GBP7,957 million) reflecting our change in asset mix and our focus on improving return on regulatory capital. The reduction was also supported by the settlement of the final tranche of the mortgage portfolio in February 2021.

 
                                                      Reconciliation 
----------------------------------------------------  -------------- 
Total capital plus MREL ratio at 1 January 2021                22.4% 
----------------------------------------------------  -------------- 
Annual operational risk adjustment                            (0.1%) 
----------------------------------------------------  -------------- 
Intangibles investment and other                                0.1% 
----------------------------------------------------  -------------- 
RateSetter back book acquisition                              (0.3%) 
----------------------------------------------------  -------------- 
Profit and loss account (excluding ECL and mortgage 
 sale)                                                        (3.1%) 
----------------------------------------------------  -------------- 
Profit and loss account - ECL                                 (0.3%) 
----------------------------------------------------  -------------- 
Quick-fix ECL add back                                        (0.1%) 
----------------------------------------------------  -------------- 
Lending volume and mix                                        (0.1%) 
----------------------------------------------------  -------------- 
Mortgage book disposal completion                               2.0% 
----------------------------------------------------  -------------- 
Total capital plus MREL ratio at 31 December 2021              20.5% 
----------------------------------------------------  -------------- 
 

Our liquidity position continues to be strong owing to the liquidity freed up from the mortgage portfolio sale. We ended the year with a Liquidity Coverage Ratio (LCR) of 281%. We will continue to prudently manage our investments and to invest in high quality securities while maintaining a strong cash position.

We will operate in buffers but remain above regulatory minima. The Bank's AIRB application is progressing.

Following discussion with the BOE, post the publication of the BOE's December 2021 MREL Policy Statement, the BOE has provided Metro Bank with a 6 month adjustment to the point in time at which the BOE's revised policy on MREL eligibility is implemented. As such, the requirement to establish a Holding Company has moved to 26 June 2023, which is line with the call date of the existing T2 debt instrument. For the avoidance of doubt, there has been no change to Metro Bank's end-state MREL deadline of 1 January 2023.

Risk report

In line with the UK Corporate Governance Code requirements, we have performed a robust assessment of the principal and emerging risks we face, including those that could result in events or circumstances that might threaten our business model, future performance, solvency or liquidity, and reputation. In deciding on the classification of principal risks, we considered the potential impact and probability of the related events and circumstances and the timescale over which they may occur.

An overview of the principal risks and how they have changed over the year are set out below.

During the year, we have continued to support our customers and minimise the negative impact of COVID-19 for businesses and households across the UK, maintaining our customer service operations and store distribution with minimal interruption. However, COVID-19 continues to impact all of our principal risks. The measures introduced to support the economy have created operational, conduct and financial risks for the Bank. These risks are being managed and monitored in line with our risk management framework.

 
 Capital        Risk stable       The continued tightening of the regulatory 
  risk                             capital framework and economic uncertainty 
                                   relating to COVID-19 have been the primary 
                                   drivers of capital risk during 2021. 
                                   We continue to take a proactive, measured 
                                   approach to capital management and are 
                                   focused on building a greater risk adjusted 
                                   return on regulatory capital. Capital 
                                   risk is primarily managed through the 
                                   ICAAP which is based upon the Long Term 
                                   Plan. The Long Term Plan remained on 
                                   track during the year. 
-------------  ----------------  ---------------------------------------------- 
 Credit risk    Risk increasing   During 2021, the impact of COVID-19 
                                   and the potential for economic downturn 
                                   has remained the primary factor impacting 
                                   credit risk performance and outlook. 
                                   The lending portfolio has remained resilient 
                                   despite the disruption faced by our 
                                   customers. However, there continues 
                                   to be a high level of uncertainty within 
                                   the external environment due to the 
                                   potential longer-term impacts of the 
                                   pandemic which is reflected through 
                                   our ECL position. We continue to rebalance 
                                   our lending mix in line with our strategy, 
                                   increasing the proportion of unsecured 
                                   consumer lending and developing our 
                                   specialist mortgage portfolio. 
-------------  ----------------  ---------------------------------------------- 
 Model risk     Risk stable       Model risk remains stable with enhancements 
                                   to model risk governance, risk appetite 
                                   metrics and scope mitigating potential 
                                   increases in model risk from the impact 
                                   of COVID-19 and the resulting uncertain 
                                   economic environment. We continue to 
                                   monitor and assess model risk closely 
                                   through the model lifecycle. 
-------------  ----------------  ---------------------------------------------- 
 Liquidity      Risk stable       Liquidity and funding risk remained 
  and funding                      low through the year, with prudent liquidity 
  risk                             and funding levels. 
-------------  ----------------  ---------------------------------------------- 
 Market risk    Risk stable       Market risk remained low throughout 
                                   the year, following a temporary increase 
                                   resulting from the mortgage portfolio 
                                   sale. 
-------------  ----------------  ---------------------------------------------- 
 Strategic      Risk stable       There have continued to be significant 
  risk                             macroeconomic headwinds in 2021, notably 
                                   the ongoing effects of COVID-19. We 
                                   have considered this uncertainty and 
                                   potential challenges as part of the 
                                   annual strategic and financial planning 
                                   process. We have also continued our 
                                   work to understand how to define, monitor, 
                                   manage and report the impact of climate 
                                   change on our strategy, business and 
                                   sustainability aspirations. 
-------------  ----------------  ---------------------------------------------- 
 Financial      Risk stable       Financial crime risk has decreased residually 
  crime risk                       during the year. Whilst Financial Crime 
                                   continues to present a heightened risk 
                                   external to the Bank, enhancements made 
                                   to our AML and sanctions controls enable 
                                   the Bank to better manage this risk. 
-------------  ----------------  ---------------------------------------------- 
 Operational    Risk stable       Operational risk has remained largely 
  risk                             consistent this year. The impacts of 
                                   COVID-19 on our operations, colleagues 
                                   and customers have stabilised as we 
                                   have effectively transitioned into new 
                                   working patterns. Elevated risk has 
                                   been observed in certain areas including 
                                   cyber-attacks and evolving modes of 
                                   external fraud. Targeted and strategic 
                                   responses continue to be applied. 
-------------  ----------------  ---------------------------------------------- 
 Regulatory     Risk stable       Regulatory risk remains unchanged and 
  risk                             continues to be a key focus due to the 
                                   complexity, pace and volume of regulatory 
                                   change to be managed. During 2021, there 
                                   was ongoing regulatory oversight by 
                                   supervisory bodies as a result of COVID-19 
                                   which focused on the key areas of business 
                                   model and profitability risk, credit 
                                   risk, impairment provisioning, capital 
                                   adequacy, business continuity management 
                                   and operational resilience. Existing 
                                   programmes continued and new programmes 
                                   were established during the year to 
                                   continue preparations for the significant 
                                   regulatory change agenda over the coming 
                                   years. 
-------------  ----------------  ---------------------------------------------- 
 Conduct        Risk stable       Conduct risk remains unchanged but elevated, 
  risk                             where customers are increasingly vulnerable 
                                   to the challenges of the economic and 
                                   social impacts of the external environment, 
                                   driven by the COVID-19 pandemic. This 
                                   is leading to increased regulatory focus 
                                   on the treatment of customers in the 
                                   retail banking sector, especially in 
                                   relation to lending decisions, those 
                                   at risk of financial difficulty and 
                                   potential vulnerability. 
-------------  ----------------  ---------------------------------------------- 
 Legal risk     Risk stable       There continue to be uncertainties around 
                                   the UK legal framework as Brexit is 
                                   implemented, however, we have not faced 
                                   any significant additional legal risks 
                                   in 2021. 
-------------  ----------------  ---------------------------------------------- 
 

Consolidated statement of comprehensive income

For the year ended 31 December 2021

 
                                                           Year ended    Year ended 
                                                          31 December   31 December 
                                                                 2021          2020 
                                                  Notes   GBP'million   GBP'million 
------------------------------------------------  -----  ------------  ------------ 
Interest income                                     2           405.7         426.3 
                                                  -----  ------------  ------------ 
Interest expense                                    2         (110.4)       (176.6) 
------------------------------------------------  -----  ------------  ------------ 
Net interest income                                             295.3         249.7 
                                                  -----  ------------  ------------ 
Fee and commission income                                        71.2          61.1 
                                                  -----  ------------  ------------ 
Fee and commission expense                                      (1.6)         (1.2) 
------------------------------------------------  -----  ------------  ------------ 
Net fee and commission income                                    69.6          59.9 
                                                  -----  ------------  ------------ 
Net gains on sale of assets                                       9.4          73.3 
                                                  -----  ------------  ------------ 
Other income                                                     44.2          49.7 
------------------------------------------------  -----  ------------  ------------ 
Total income                                                    418.5         432.6 
------------------------------------------------  -----  ------------  ------------ 
 General operating expenses                                   (536.1)       (502.3) 
------------------------------------------------  -----  ------------  ------------ 
 Depreciation and amortisation                     7,8         (80.2)        (74.4) 
------------------------------------------------  -----  ------------  ------------ 
 Impairment and write-offs of property, plant, 
  equipment and intangible assets                  7,8         (24.9)        (40.6) 
------------------------------------------------  -----  ------------  ------------ 
Total operating expenses                                      (641.2)       (617.3) 
                                                  -----  ------------  ------------ 
Expected credit loss expense                                   (22.4)       (126.7) 
------------------------------------------------  -----  ------------  ------------ 
Loss before tax                                               (245.1)       (311.4) 
------------------------------------------------  -----  ------------  ------------ 
Taxation                                            3           (3.1)           9.7 
------------------------------------------------  -----  ------------  ------------ 
Loss for the year                                             (248.2)       (301.7) 
------------------------------------------------  -----  ------------  ------------ 
Other comprehensive income for the year 
                                                  -----  ------------  ------------ 
Items which will be reclassified subsequently 
 to profit or loss: 
                                                  -----  ------------  ------------ 
Movement in respect of investment securities 
 held at fair value through other comprehensive 
 income (net of tax): 
                                                  -----  ------------  ------------ 
- changes in fair value                                         (8.1)           5.6 
                                                  -----  ------------  ------------ 
- fair value changes transferred to the income 
 statement on disposal                                          (0.3)         (0.1) 
------------------------------------------------  -----  ------------  ------------ 
Total other comprehensive income                                (8.4)           5.5 
------------------------------------------------  -----  ------------  ------------ 
Total comprehensive loss for the year                         (256.6)       (296.2) 
------------------------------------------------  -----  ------------  ------------ 
Loss per share 
------------------------------------------------  -----  ------------  ------------ 
Basic (pence)                                      15         (144.0)       (175.0) 
------------------------------------------------  -----  ------------  ------------ 
Diluted (pence)                                    15         (144.0)       (175.0) 
------------------------------------------------  -----  ------------  ------------ 
 

Consolidated balance sheet

As at 31 December 2021

 
                                                           31 December   31 December 
                                                                  2021          2020 
                                                   Notes   GBP'million   GBP'million 
-------------------------------------------------  -----  ------------  ------------ 
Assets 
                                                   -----  ------------  ------------ 
Cash and balances with the Bank of England                       3,568         2,993 
                                                   -----  ------------  ------------ 
Loans and advances to customers                        5        12,290        12,090 
                                                   -----  ------------  ------------ 
Investment securities held at fair value through 
 other comprehensive income                            6           798           773 
                                                   -----  ------------  ------------ 
Investment securities held at amortised cost           6         4,776         2,640 
                                                   -----  ------------  ------------ 
Financial assets held at fair value through 
 profit and loss                                                     3            30 
                                                   -----  ------------  ------------ 
Property, plant and equipment                          7           765           806 
                                                   -----  ------------  ------------ 
Intangible assets                                      8           243           254 
                                                   -----  ------------  ------------ 
Prepayments and accrued income                                      68            77 
                                                   -----  ------------  ------------ 
Assets classified as held for sale                                   -           295 
                                                   -----  ------------  ------------ 
Other assets                                                        76         2,621 
-------------------------------------------------  -----  ------------  ------------ 
Total assets                                                    22,587        22,579 
-------------------------------------------------  -----  ------------  ------------ 
Liabilities 
                                                   -----  ------------  ------------ 
Deposits from customers                                         16,448        16,072 
                                                   -----  ------------  ------------ 
Deposits from central banks                                      3,800         3,808 
                                                   -----  ------------  ------------ 
Debt securities                                                    588           600 
                                                   -----  ------------  ------------ 
Financial liabilities held at fair value through 
 profit and loss                                                     -            30 
                                                   -----  ------------  ------------ 
Repurchase agreements                                              169           196 
                                                   -----  ------------  ------------ 
Derivative financial liabilities                                    10             8 
                                                   -----  ------------  ------------ 
Lease liabilities                                      9           269           327 
                                                   -----  ------------  ------------ 
Deferred grants                                                     19            28 
                                                   -----  ------------  ------------ 
Provisions                                            10            15            11 
                                                   -----  ------------  ------------ 
Deferred tax liability                                 3            12            12 
                                                   -----  ------------  ------------ 
Other liabilities                                                  222           198 
-------------------------------------------------  -----  ------------  ------------ 
Total liabilities                                               21,552        21,290 
-------------------------------------------------  -----  ------------  ------------ 
Equity 
                                                   -----  ------------  ------------ 
Called-up share capital                               11             -             - 
                                                   -----  ------------  ------------ 
Share premium                                         11         1,964         1,964 
                                                   -----  ------------  ------------ 
Retained losses                                                  (942)         (694) 
                                                   -----  ------------  ------------ 
Other reserves                                                      13            19 
-------------------------------------------------  -----  ------------  ------------ 
Total equity                                                     1,035         1,289 
-------------------------------------------------  -----  ------------  ------------ 
Total equity and liabilities                                    22,587        22,579 
-------------------------------------------------  -----  ------------  ------------ 
 

Consolidated statement of changes in equity

For the year ended 31 December 2021

 
                                       Called-up                                                   Share 
                                           share         Share      Retained         FVOCI        option         Total 
                                         capital       premium        losses       reserve       reserve        equity 
                                     GBP'million   GBP'million   GBP'million   GBP'million   GBP'million   GBP'million 
----------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
Balance as at 1 January 2021                   -         1,964         (694)             3            16         1,289 
----------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Loss for the year                             -             -         (248)             -             -         (248) 
----------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Other comprehensive income 
  (net of tax) relating to 
  investment 
  securities designated at FVOCI               -             -             -           (8)             -           (8) 
----------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
Total comprehensive loss                       -             -         (248)           (8)             -         (256) 
                                    ------------  ------------  ------------  ------------  ------------  ------------ 
Net share option movements                     -             -             -             -             2             2 
----------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
Balance as at 31 December 2021                 -         1,964         (942)           (5)            18         1,035 
----------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
Balance as at 1 January 2020                   -         1,964         (392)           (3)            14         1,583 
----------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Loss for the year                             -             -         (302)             -             -         (302) 
----------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Other comprehensive income 
  (net of tax) relating to 
  investment 
  securities designated at FVOCI               -             -             -             6             -             6 
----------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
Total comprehensive loss                       -             -         (302)             6             -         (296) 
                                    ------------  ------------  ------------  ------------  ------------  ------------ 
Net share option movements                     -             -             -             -             2             2 
----------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
Balance as at 31 December 2020                 -         1,964         (694)             3            16         1,289 
----------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
Notes                                         11            11 
----------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 

Consolidated cash flow statement

For the year ended 31 December 2021

 
                                                              Year ended    Year ended 
                                                             31 December   31 December 
                                                                    2021          2020 
                                                     Notes   GBP'million   GBP'million 
---------------------------------------------------  -----  ------------  ------------ 
Reconciliation of loss before tax to net cash 
 flows from operating activities: 
                                                     -----  ------------  ------------ 
Loss before tax                                                    (245)         (311) 
                                                     -----  ------------  ------------ 
Adjustments for: 
                                                     -----  ------------  ------------ 
Impairment and write-offs of property, plant, 
 equipment and intangible assets                       7,8            25            41 
                                                     -----  ------------  ------------ 
Interest on lease liabilities                            9            17            19 
                                                     -----  ------------  ------------ 
Depreciation and amortisation                          7,8            80            74 
                                                     -----  ------------  ------------ 
Share option charge                                                    2             2 
                                                     -----  ------------  ------------ 
Grant income recognised in the income statement                     (11)          (24) 
                                                     -----  ------------  ------------ 
Amounts provided for (net of amounts released)                         5             8 
                                                     -----  ------------  ------------ 
Gain on sale of assets and fair value gains 
 on derivatives                                                      (9)          (73) 
                                                     -----  ------------  ------------ 
Accrued interest on and amortisation of investment 
 securities                                                            5             3 
                                                     -----  ------------  ------------ 
Changes in operating assets and liabilities 
                                                     -----  ------------  ------------ 
Changes in loans and advances to customers                         (200)         2,591 
                                                     -----  ------------  ------------ 
Changes in deposits from customers                                   376         1,595 
                                                     -----  ------------  ------------ 
Changes in other operating assets                                  2,847       (2,820) 
                                                     -----  ------------  ------------ 
Changes in other operating liabilities                              (38)          (64) 
---------------------------------------------------  -----  ------------  ------------ 
Net cash inflows from operating activities                         2,854         1,041 
---------------------------------------------------  -----  ------------  ------------ 
Cash flows from investing activities 
                                                     -----  ------------  ------------ 
Sales of investment securities                                     1,269           615 
                                                     -----  ------------  ------------ 
Purchase of investment securities                               ( 3,438)       (1,460) 
                                                     -----  ------------  ------------ 
Purchase of property, plant and equipment                7          (42)          (29) 
Purchase and development of intangible assets            8          (39)          (81) 
Acquisition of subsidiary, net of cash acquired                        -           (1) 
---------------------------------------------------  -----  ------------  ------------ 
Net cash outflows from investing activities                      (2,250)         (956) 
---------------------------------------------------  -----  ------------  ------------ 
Cash flows from financing activities 
                                                     -----  ------------  ------------ 
Grant repaid                                                           -          (50) 
                                                     -----  ------------  ------------ 
Repayment of capital element of leases                   9          (29)          (31) 
---------------------------------------------------  -----  ------------  ------------ 
Net cash outflows from financing activities                         (29)          (81) 
---------------------------------------------------  -----  ------------  ------------ 
Net increase in cash and cash equivalents                            575             4 
                                                     -----  ------------  ------------ 
Cash and cash equivalents at start of year                         2,993         2,989 
---------------------------------------------------  -----  ------------  ------------ 
Cash and cash equivalents at end of year                           3,568         2,993 
---------------------------------------------------  -----  ------------  ------------ 
 
Loss before tax includes: 
---------------------------------------------------  -----  ------------  ------------ 
Interest received                                                    409           407 
---------------------------------------------------  -----  ------------  ------------ 
Interest paid                                                        126           176 
---------------------------------------------------  -----  ------------  ------------ 
 

Notes to the financial statements

1. Basis of preparation and significant accounting policies

Basis of preparation

The Group's consolidated financial statements have been prepared in accordance with UK adopted International

Accounting Standards (IAS), International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and the Companies Act 2006 applicable to companies reporting under IFRS. They were authorised by the Board for issue on 23 February 2022.

The financial statements are prepared on a going concern basis, the Directors are satisfied that the Group has the resources to continue in business for the foreseeable future.

Changes in accounting policy and disclosures

The accounting policies and methods of computation are consistent with those applied and disclosed in the Group's 2020 Annual Report and Accounts.

2. Net interest income

Interest income

 
                                                       2021          2020 
                                                GBP'million   GBP'million 
---------------------------------------------  ------------  ------------ 
Cash and balances held with central banks               4.4           6.1 
Loans and advances to customers                       378.1         393.3 
Investment securities held at amortised cost           20.6          24.8 
Investment securities held at FVOCI                     2.6           2.1 
---------------------------------------------  ------------  ------------ 
Total interest income                                 405.7         426.3 
---------------------------------------------  ------------  ------------ 
 

Interest expense

 
                                      2021          2020 
                               GBP'million   GBP'million 
----------------------------  ------------  ------------ 
Deposits from customers               40.1          99.1 
Deposits from central banks            4.0           8.7 
Debt securities                       47.4          47.8 
Lease liabilities                     16.7          18.7 
Repurchase agreements                  2.2           2.3 
----------------------------  ------------  ------------ 
Total interest expense               110.4         176.6 
----------------------------  ------------  ------------ 
 

3. Taxation

Tax expense

The components of the tax (expense)/credit for the year are:

 
                                                            2021          2020 
                                                     GBP'million   GBP'million 
--------------------------------------------------  ------------  ------------ 
Current tax 
Current tax                                                (0.5)         (0.1) 
Adjustment in respect of prior years                         0.6         (0.5) 
--------------------------------------------------  ------------  ------------ 
Total current tax credit/(expense)                           0.1         (0.6) 
--------------------------------------------------  ------------  ------------ 
Deferred tax 
Origination and reversal of temporary differences            3.4           3.6 
Effect of changes in tax rates                             (5.4)           2.1 
Adjustment in respect of prior years                       (1.2)           4.6 
--------------------------------------------------  ------------  ------------ 
Total deferred tax (expense)/credit                        (3.2)          10.3 
--------------------------------------------------  ------------  ------------ 
Total tax (expense)/credit                                 (3.1)           9.7 
--------------------------------------------------  ------------  ------------ 
 

Reconciliation of the total tax expense

The tax expense shown in the income statement differs from the tax expense that would apply if all accounting profits had been taxed at the UK corporation tax rate.

A reconciliation between the tax expense and the accounting profit multiplied by the UK corporation tax rate is as follows:

 
                                                          Effective                Effective 
                                                    2021   tax rate          2020   tax rate 
                                             GBP'million          %   GBP'million          % 
------------------------------------------  ------------  ---------  ------------  --------- 
Accounting loss before tax                       (245.1)                  (311.4) 
------------------------------------------  ------------  ---------  ------------  --------- 
Tax expense at statutory tax rate of 
 19%                                                46.6      19.0%          59.2      19.0% 
Tax effects of: 
Non-deductible expenses - depreciation 
 on non-qualifying fixed assets                    (2.7)     (1.1%)         (2.4)     (0.8%) 
Non-deductible expenses - investment 
 property impairment                               (1.8)     (0.8%)         (3.2)     (1.0%) 
Non-deductible expenses - remediation              (7.1)     (2.9%)         (6.6)     (2.1%) 
Non-deductible expenses - other                    (0.1)          -         (0.7)     (0.2%) 
Impact of intangible asset impairment 
 on R&D deferred tax liability                       3.0       1.2%           0.2       0.1% 
Share based payments                               (0.3)     (0.1%)         (0.2)     (0.1%) 
Adjustment in respect of prior years               (0.6)     (0.3%)           4.1       1.3% 
Current year losses for which no deferred 
 tax asset has been recognised                    (34.7)    (14.1%)        (42.8)    (13.7%) 
Effect of changes in tax rates                     (5.4)     (2.2%)           2.1       0.7% 
------------------------------------------  ------------  ---------  ------------  --------- 
Tax (expense)/credit reported in the 
 consolidated income statement                     (3.1)     (1.3%)           9.7       3.2% 
------------------------------------------  ------------  ---------  ------------  --------- 
 

The effective tax rate for this year is (1.3%) (2020: 3.2%). The main reasons for this, in addition to the reported accounting loss before tax for the year, are set out below:

Deferred tax

The following table shows deferred tax recorded in the statement of financial position and changes recorded in the tax expense:

 
                                               Investment                     Property, 
                                 Unused        securities   Share-based           plant    Intangible 
                             tax losses   and impairments      payments   and equipment        assets         Total 
                            GBP'million       GBP'million   GBP'million     GBP'million   GBP'million   GBP'million 
-------------------------  ------------  ----------------  ------------  --------------  ------------  ------------ 
2021 
Deferred tax assets                  13                 3             -               -             -            16 
Deferred tax liabilities              -                 2             -            (23)           (7)          (28) 
-------------------------  ------------  ----------------  ------------  --------------  ------------  ------------ 
Deferred tax liabilities 
 (net)                               13                 5             -            (23)           (7)          (12) 
-------------------------  ------------  ----------------  ------------  --------------  ------------  ------------ 
At 1 January 2021                    12                 2             -            (16)          (10)          (12) 
Income statement                      1                 -             -             (7)             3           (3) 
Other comprehensive 
 income                               -                 3             -               -             -             3 
-------------------------  ------------  ----------------  ------------  --------------  ------------  ------------ 
At 31 December 2021                  13                 5             -            (23)           (7)          (12) 
-------------------------  ------------  ----------------  ------------  --------------  ------------  ------------ 
 
 
                                               Investment                     Property, 
                                 Unused        securities   Share-based           plant    Intangible 
                             tax losses   and impairments      payments   and equipment        assets         Total 
                            GBP'million       GBP'million   GBP'million     GBP'million   GBP'million   GBP'million 
-------------------------  ------------  ----------------  ------------  --------------  ------------  ------------ 
2020 
Deferred tax assets                  12                 3             -               -             -            15 
Deferred tax liabilities              -               (1)             -            (16)          (10)          (27) 
-------------------------  ------------  ----------------  ------------  --------------  ------------  ------------ 
Deferred tax assets 
 (net)                               12                 2             -            (16)          (10)          (12) 
-------------------------  ------------  ----------------  ------------  --------------  ------------  ------------ 
At 1 January 2020                     -                 4             -            (15)           (4)          (15) 
Income statement                     12               (1)             -             (1)             -            10 
Other comprehensive 
 income                               -               (1)             -               -             -           (1) 
Acquisition                           -                 -             -               -           (6)           (6) 
-------------------------  ------------  ----------------  ------------  --------------  ------------  ------------ 
At 31 December 2020                  12                 2             -            (16)          (10)          (12) 
-------------------------  ------------  ----------------  ------------  --------------  ------------  ------------ 
 

4. Financial instruments

Our financial instruments primarily comprise customer deposits, loans and advances to customers, cash held at banks and investment securities, all of which arise as a result of our normal operations.

The main financial risks arising from our financial instruments are credit risk, liquidity risk and market risks (price and interest rate risk).

The financial instruments we hold are simple in nature and we do not consider that we have made any significant or material judgements relating to the classification of financial instruments under IFRS 9.

Cash and balances with the Bank of England, trade and other receivables, trade and other payables and other assets and liabilities which meet the definition of financial instruments are not included in the table below as the carrying value of those assets are a close approximation of their fair value.

 
                                         Fair value 
                                            through                           Fair value     Amortised         Total 
                                    profit and loss   through other comprehensive income          cost    fair value 
                                        GBP'million                          GBP'million   GBP'million   GBP'million 
---------------------------------  ----------------  -----------------------------------  ------------  ------------ 
31 December 2021 
Assets 
Loans and advances to customers                   -                                    -        12,290        12,290 
Investment securities                             -                                  798         4,776         5,574 
Financial assets held at FVTPL                    3                                    -             -             3 
---------------------------------  ----------------  -----------------------------------  ------------  ------------ 
Liabilities 
Deposits from customers                           -                                    -        16,448        16,448 
Deposits from central bank                        -                                    -         3,800         3,800 
Debt securities                                   -                                    -           588           588 
Derivative financial liabilities                 10                                    -             -            10 
Repurchase agreements                             -                                    -           169           169 
---------------------------------  ----------------  -----------------------------------  ------------  ------------ 
 
 
                                           Fair value 
                                              through                           Fair value     Amortised         Total 
                                      profit and loss   through other comprehensive income          cost    fair value 
                                          GBP'million                          GBP'million   GBP'million   GBP'million 
-----------------------------------  ----------------  -----------------------------------  ------------  ------------ 
31 December 2020 
Assets 
Loans and advances to customers                     -                                    -        12,090        12,090 
Investment securities                               -                                  773         2,640         3,413 
Financial assets held at FVTPL                     30                                    -             -            30 
Assets classified as held for sale                  -                                    -           295           295 
-----------------------------------  ----------------  -----------------------------------  ------------  ------------ 
Liabilities 
Deposits from customers                             -                                    -        16,072        16,072 
Deposits from central bank                          -                                    -         3,808         3,808 
Debt securities                                     -                                    -           600           600 
Financial liabilities held at FVTPL                30                                    -             -            30 
Derivative financial liabilities                    8                                    -             -             8 
Repurchase agreements                               -                                    -           196           196 
-----------------------------------  ----------------  -----------------------------------  ------------  ------------ 
 

5. Loans and advances to customers

 
                                                     31 December 2021 
                                        ------------------------------------------ 
                                        Gross carrying           ECL  Net carrying 
                                                amount     allowance        amount 
                                           GBP'million   GBP'million   GBP'million 
--------------------------------------  --------------  ------------  ------------ 
Consumer lending                                   890          (42)           848 
Retail mortgages                                 6,723          (19)         6,704 
Commercial lending                               4,846         (108)         4,738 
--------------------------------------  --------------  ------------  ------------ 
Total loans and advances to customers           12,459         (169)        12,290 
--------------------------------------  --------------  ------------  ------------ 
 
 
                                                     31 December 2020 
                                        ------------------------------------------ 
                                        Gross carrying           ECL  Net carrying 
                                                amount     allowance        amount 
                                           GBP'million   GBP'million   GBP'million 
--------------------------------------  --------------  ------------  ------------ 
Consumer lending                                   204          (25)           179 
Retail mortgages                                 6,892          (26)         6,866 
Commercial lending                               5,148         (103)         5,045 
--------------------------------------  --------------  ------------  ------------ 
Total loans and advances to customers           12,244         (154)        12,090 
--------------------------------------  --------------  ------------  ------------ 
 

Further information on the movements in gross carrying amounts and ECL can be found in note 11. An analysis of the gross loans and advances by product category is set out below:

 
                                         31 December   31 December 
                                                2021          2020 
                                         GBP'million   GBP'million 
--------------------------------------  ------------  ------------ 
Overdrafts                                        66            73 
Credit cards                                      13            10 
Term loans                                       811           121 
--------------------------------------  ------------  ------------ 
Total consumer lending                           890           204 
--------------------------------------  ------------  ------------ 
Residential owner occupied                     5,022         5,051 
Retail buy-to-let                              1,701         1,841 
--------------------------------------  ------------  ------------ 
Total retail mortgages                         6,723         6,892 
--------------------------------------  ------------  ------------ 
Total retail lending                           7,613         7,096 
--------------------------------------  ------------  ------------ 
Professional buy-to-let                          950         1,117 
Bounce back loans                              1,304         1,353 
Coronavirus business interruption 
 loans                                           165           114 
Recovery loan scheme(1)                          157             - 
Other term loans                               1,791         2,138 
--------------------------------------  ------------  ------------ 
Total commercial term lending                  4,367         4,722 
--------------------------------------  ------------  ------------ 
Overdrafts and revolving credit 
 facilities                                      156           149 
Credit cards                                       3             3 
Asset and invoice finance                        320           274 
--------------------------------------  ------------  ------------ 
Total commercial lending                       4,846         5,148 
--------------------------------------  ------------  ------------ 
Gross loans and advances to customers         12,459        12,244 
--------------------------------------  ------------  ------------ 
 

1. Recovery loan scheme includes GBP66 million acquired from third parties under forward flow arrangements (31 December 2020: GBPnil)

6. Investment securities

 
                                          31 December    31 December 
                                                 2021           2020 
                                          GBP'million    GBP'million 
---------------------------------------  ------------  ------------- 
Fair value through other comprehensive 
 income                                           798            773 
Amortised cost                                  4,776          2,640 
---------------------------------------  ------------  ------------- 
Total investment securities                     5,574          3,413 
---------------------------------------  ------------  ------------- 
 

Fair value through other comprehensive income

 
                                          31 December    31 December 
                                                 2021           2020 
                                          GBP'million    GBP'million 
---------------------------------------  ------------  ------------- 
Sovereign bonds                                   566            386 
Residential mortgage backed securities             38             50 
Covered bonds                                     156            337 
Multi-lateral development bank bonds               38              - 
Total investment securities held at 
 FVOCI                                            798            773 
---------------------------------------  ------------  ------------- 
 

Amortised cost

 
                                          31 December    31 December 
                                                 2021           2020 
                                          GBP'million    GBP'million 
---------------------------------------  ------------  ------------- 
Sovereign bonds                                 1,198            495 
Residential mortgage backed securities          1,687          1,624 
Covered bonds                                     442            521 
Multi-lateral development bank bonds            1,289              - 
Asset backed securities                           160              - 
---------------------------------------  ------------  ------------- 
Total investment securities held at 
 amortised cost                                 4,776          2,640 
---------------------------------------  ------------  ------------- 
 

7. Property, plant and equipment

 
                                                                                                   Right 
                                                                                                  of use 
                                                                                                  assets 
                                                                                                relating 
                                                    Freehold       Fixtures,                   to leased 
                   Investment      Leasehold            land        fittings                      stores 
                     property   improvements   and buildings   and equipment   IT hardware   and offices         Total 
                  GBP'million    GBP'million     GBP'million     GBP'million   GBP'million   GBP'million   GBP'million 
---------------  ------------  -------------  --------------  --------------  ------------  ------------  ------------ 
Cost 
1 January 2021             18            292             298              25            11           330           974 
Additions and 
 modifications              -             12              29               -             1           (4)            38 
Disposals                   -              -               -               -             -          (29)          (29) 
Write-offs                  -           (10)               -             (1)          (11)           (2)          (24) 
Transfers                   -           (14)              14               -             -             -             - 
---------------  ------------  -------------  --------------  --------------  ------------  ------------  ------------ 
31 December 
 2021                      18            280             341              24             1           295           959 
---------------  ------------  -------------  --------------  --------------  ------------  ------------  ------------ 
Accumulated 
depreciation 
1 January 2021             12             66              21              15             7            47           168 
Charge for the 
 year                       -             14               4               4             2            18            42 
Impairments                 -              -               -               -             -             6             6 
Disposals                   -              -               -               -             -           (4)           (4) 
Write-offs                  -            (9)               -               -           (9)             -          (18) 
Transfers                   -            (3)               3               -             -             -             - 
---------------  ------------  -------------  --------------  --------------  ------------  ------------  ------------ 
31 December 
 2021                      12             68              28              19             -            67           194 
---------------  ------------  -------------  --------------  --------------  ------------  ------------  ------------ 
Net book value              6            212             313               5             1           228           765 
---------------  ------------  -------------  --------------  --------------  ------------  ------------  ------------ 
 
                                                                                                   Right 
                                                                                                  of use 
                                                                                                  assets 
                                                                                                relating 
                                                    Freehold       Fixtures,                   to leased 
                   Investment      Leasehold            land        fittings                      stores 
                     property   improvements   and buildings   and equipment   IT hardware   and offices         Total 
                  GBP'million    GBP'million     GBP'million     GBP'million   GBP'million   GBP'million   GBP'million 
---------------  ------------  -------------  --------------  --------------  ------------  ------------  ------------ 
Cost 
1 January 2020             18            314             262              26            10           332           962 
Additions and 
 modifications              -              6              18               3             2             4            33 
Recognised in 
 business 
 combinations               -              1               -               -             1             3             5 
Disposals                   -              -               -               -             -           (9)           (9) 
Write-offs                  -           (11)               -             (4)           (2)             -          (17) 
Transfers                   -           (18)              18               -             -             -             - 
---------------  ------------  -------------  --------------  --------------  ------------  ------------  ------------ 
31 December 
 2020                      18            292             298              25            11           330           974 
---------------  ------------  -------------  --------------  --------------  ------------  ------------  ------------ 
Accumulated 
depreciation 
1 January 2020             10             49              14              12             5            16           106 
Charge for the 
 year                       -             11               5               5             4            16            41 
Recognised in 
 business 
 combinations               -              1               -               -             -             -             1 
Impairments                 2              9               -               1             -            16            28 
Disposals                   -              -               -               -             -           (1)           (1) 
Write-offs                  -            (2)               -             (3)           (2)             -           (7) 
Transfers                   -            (2)               2               -             -             -             - 
---------------  ------------  -------------  --------------  --------------  ------------  ------------  ------------ 
31 December 
 2020                      12             66              21              15             7            47           168 
---------------  ------------  -------------  --------------  --------------  ------------  ------------  ------------ 
Net book value              6            226             277              10             4           283           806 
---------------  ------------  -------------  --------------  --------------  ------------  ------------  ------------ 
 

Impairments

During the year impairments were recognised in relation to the right of use assets on the three stores announced for closure. Prior to impairment, the right of use assets and lease liabilities were remeasured through to the next break clause. The leasehold improvements, fixtures and fittings associated with these stores have been written off on the basis that they will not provide the Group with any economic benefit post closure.

Write-offs

As well as the write-offs relating to the store closures outlined above during the year we wrote-off a number of items of IT hardware that are no longer being used or no longer providing the Group with any economic benefit.

Transfers

Transfers represent costs associated with the improvements made to previously leased stores which have been purchased. These stores were purchased where there was a strong commercial rationale for doing so.

8. Intangible assets

 
                          Goodwill         Brand      Software         Total 
                       GBP'million   GBP'million   GBP'million   GBP'million 
--------------------  ------------  ------------  ------------  ------------ 
Cost 
1 January 2021                  10             2           328           340 
Additions                        -             -            39            39 
Write-offs                       -             -          (32)          (32) 
Deferred grant                   -             -             1             1 
--------------------  ------------  ------------  ------------  ------------ 
31 December 2021                10             2           336           348 
--------------------  ------------  ------------  ------------  ------------ 
Amortisation 
1 January 2021                   -             -            86            86 
Charge for the year              -             -            38            38 
Impairment                       -             -             7             7 
Write-offs                       -             -          (26)          (26) 
31 December 2021                 -             -           105           105 
--------------------  ------------  ------------  ------------  ------------ 
Net book value                  10             2           231           243 
--------------------  ------------  ------------  ------------  ------------ 
 
 
                                          Goodwill         Brand      Software         Total 
                                       GBP'million   GBP'million   GBP'million   GBP'million 
------------------------------------  ------------  ------------  ------------  ------------ 
Cost 
1 January 2020                                   4             -           224           228 
Additions                                        -             -            81            81 
Recognised in business combinations              6             2            32            40 
Write-offs                                       -             -          (10)          (10) 
Deferred grant                                   -             -             1             1 
------------------------------------  ------------  ------------  ------------  ------------ 
31 December 2020                                10             2           328           340 
------------------------------------  ------------  ------------  ------------  ------------ 
Amortisation 
1 January 2020                                   -             -            60            60 
Charge for the year                              -             -            33            33 
Write-offs                                       -             -           (7)           (7) 
31 December 2020                                 -             -            86            86 
------------------------------------  ------------  ------------  ------------  ------------ 
Net book value                                  10             2           242           254 
------------------------------------  ------------  ------------  ------------  ------------ 
 

Impairments

Following the purchase of the RateSetter back book in April 2021 an impairment was recognised in relation to the peer-to-peer component of the RateSetter lending platform.

Write-offs

The write-offs in the year consisted primarily of software and applications that are no longer being used and are no longer providing any further economic benefits.

9. Leases

Lease liabilities

 
                                                 2021          2020 
                                          GBP'million   GBP'million 
------------------------------------  ---------------  ------------ 
1 January                                         327           341 
Additions and modifications                       (6)             4 
Recognised in business combinations                 -             3 
Disposals                                        (40)           (9) 
Lease payments made                              (29)          (31) 
Interest on lease liabilities                      17            19 
------------------------------------  ---------------  ------------ 
31 December                                       269           327 
------------------------------------  ---------------  ------------ 
 

Right of use assets

All disclosures relating to right of use assets, including accounting policy can be found in note 7.

Additions and modifications

As part of our decision to close three stores the lease liabilities on these stores were remeasured out to their first break clause (where available). This led to a modification of the lease liabilities of GBP6 million, with a corresponding adjustment made to the associated right of use assets.

Disposals

The disposals during year relate to the four stores where we purchased the freehold or long-lease during the year (2020: three stores). Following the purchase both the lease liabilities and right of use assets relating to these stores were derecognised. Additionally we disposed of the majority of our leases at Old Bailey office space, which we vacated during 2020. We had already impaired the right of use assets related during 2020 following our decision to no longer use this space.

Low value and short leases

During the year ended 31 December 2021 GBP0.7 million (year ended 31 December 2020: GBP0.2 million) was recognised in the income statement with respect to assets of low value or a lease of less than12 months. The lease for the Bishopsgate office was transferred over to Metro Bank in October 2021 from RateSetter. This amounted to an immaterial amount (less than GBP0.1 million) therefore has been excluded from the note.

Future income due under non-cancellable operating leases

The Group leases out surplus space in some of its properties. The table below sets out the cash payments expected over the remaining non-cancellable term of each lease, exclusive of any VAT.

 
                                  31 December   31 December 
                                         2021          2020 
                                  GBP'million   GBP'million 
----------------------------  ---------------  ------------ 
Within one year                             1             1 
Due in one to five years                    4             4 
Due in more than five years                 4             5 
----------------------------  ---------------  ------------ 
Total                                       9            10 
----------------------------  ---------------  ------------ 
 

10. Provisions

 
                       Customer                      Onerous            Legal 
                    remediation  Dilapidations     contracts   and regulatory         Other         Total 
                    GBP'million    GBP'million   GBP'million      GBP'million   GBP'million   GBP'million 
-----------------  ------------  -------------  ------------  ---------------  ------------  ------------ 
1 January 2021                2              3             6                -             -            11 
Additions                     -              2             5                5             1            13 
Released                      -            (2)           (4)                -             -           (6) 
Utilised                    (1)              -           (2)                -             -           (3) 
-----------------  ------------  -------------  ------------  ---------------  ------------  ------------ 
31 December 2021              1              3             5                5             1            15 
-----------------  ------------  -------------  ------------  ---------------  ------------  ------------ 
 
 
                             Customer                      Onerous            Legal 
                          remediation  Dilapidations     contracts   and regulatory         Other         Total 
                          GBP'million    GBP'million   GBP'million      GBP'million   GBP'million   GBP'million 
-----------------------  ------------  -------------  ------------  ---------------  ------------  ------------ 
1 January 2020                     12              3             -                -             2            17 
Additions                           1              -             9                -             -            10 
Recognised in business 
 combinations                       -              -             3                -             -             3 
Released                            -              -             -                -           (2)           (2) 
Utilised                         (11)              -           (6)                -             -          (17) 
-----------------------  ------------  -------------  ------------  ---------------  ------------  ------------ 
31 December 2020                    2              3             6                -             -            11 
-----------------------  ------------  -------------  ------------  ---------------  ------------  ------------ 
 

All additions have been recognised in the income statement, with the exception of GBP2 million provision for dilapidations. This has been recognised as an addition to the right of use assets (see note 7).

Dilapidations

The amounts provided in respect of dilapidations are calculated based on assessments by an independent qualified valuer. They represent the best estimate of the present value to restore the site to the condition required under the lease. As the date restoration is required may be up to 25 years in the future, there is uncertainty in this estimation. Additionally, for sites that are outside the Landlord and Tenant Act 1954, should we be successful in renewing the lease at the end of its term, it is possible that the provision recognised may not be utilised.

The additional provision for dilapidations during the year relate to the three stores we will be closing in 2022 (where a provision had not already been recognised). A provision for the restoration of the Old Bailey office space was substantially released in the year following the disposal of the majority of this site.

The provision made in relation to these sites is expected to be utilised within the next two years.

Onerous contract

Onerous contracts primarily relate to the non-rental costs of fulfilling property contracts from which we will no longer benefit. The additions in year primarily relate to the three stores announced for closures and have been determined with reference to the occupancy costs from the date of closure through to the next lease event. Rental costs on these sites from which we will receive no future economic benefits are represented by an impairment to the right of use asset (see note 7 for further details). The utilisation and releases in the year relate to both occupancy costs at Old Bailey, a previous head office site, the majority of which has now been disposed of as well as a provision in relation to negative margin peer-to-peer loans, which is no longer required following the acquisition of the RateSetter back book in April 2021.

The majority of our current onerous contract provisions are anticipated to be utilised within the next two years.

Legal and regulatory

Provision for regulatory matters consists of GBP5 million provided in respect of the FCA investigation into potential rule breaches in the period prior to the announcements made on 23 January 2019 and 26 February 2019 in relation to risk-weighted assets and AIRB accreditation respectively.

As at 31 December 2021 we believe there to be sufficient certainty in the outcome of this investigation to make a provision against the likely penalty. The actual level of penalty remains uncertain. Management expects that the outcome will sit within a range up to GBP13 million. The provision reflects Management's best estimate of the outcome at this stage.

11. Called-up share capital

The Group has a single class of shares. As at 31 December 2021 172.4 million ordinary shares of 0.0001p (31 December 2020: 172.4 million) were authorised and in issue.

Called-up ordinary share capital, issued and fully paid

The called-up share capital reserve is used to record the nominal share capital. At the 31 December 2020 the Group's called up share capital was GBP172.42 (31 December 2019: GBP172.42).

 
                     2021          2020 
              GBP'million   GBP'million 
-----------  ------------  ------------ 
31 December             -             - 
-----------  ------------  ------------ 
 

Share premium

The share premium reserve is used to record the excess consideration of any shares issued over the nominal share value.

 
                      2021          2020 
               GBP'million   GBP'million 
------------  ------------  ------------ 
31 December          1,964         1,964 
------------  ------------  ------------ 
 

12. Credit Risk

Credit risk concentration

Retail mortgage lending by DTV banding

 
                                31 December 2021                    31 December 2020 
                                   GBP'million                         GBP'million 
                       ----------------------------------  ---------------------------------- 
                          Retail                    Total     Retail                    Total 
                           owner       Retail      retail      owner       Retail      retail 
                        occupied   buy-to-let   mortgages   occupied   buy-to-let   mortgages 
---------------------  ---------  -----------  ----------  ---------  -----------  ---------- 
DTV ratio 
Less than 50%              1,907          524       2,431      1,855          502       2,357 
51-60%                       767          415       1,182        842          390       1,232 
61-70%                     1,092          564       1,656        836          533       1,369 
71-80%                       805          188         993      1,084          407       1,491 
81-90%                       400            3         403        359            4         363 
91-100%                       51            3          54         74            -          74 
More than 100%                 -            4           4          1            5           6 
---------------------  ---------  -----------  ----------  ---------  -----------  ---------- 
Total retail mortgage 
 lending                   5,022        1,701       6,723      5,051        1,841       6,892 
---------------------  ---------  -----------  ----------  ---------  -----------  ---------- 
 

Retail mortgage lending by geographic exposure

 
                                     31 December 2021                            31 December 2020 
                                        GBP'million                                 GBP'million 
                        ------------------------------------------  ------------------------------------------ 
                                 Retail       Retail  Total retail           Retail       Retail  Total retail 
                         owner occupied   buy-to-let     mortgages   owner occupied   buy-to-let     mortgages 
----------------------  ---------------  -----------  ------------  ---------------  -----------  ------------ 
Region 
Greater London                    2,130        1,048         3,178            2,213        1,147         3,360 
South east                        1,157          283         1,440            1,157          309         1,466 
South west                          434           82           516              433           91           524 
East of England                     309           69           378              298           73           371 
North west                          264           62           326              265           63           328 
West Midlands                       190           61           251              179           58           237 
Yorkshire and the 
 Humber                             139           34           173              139           37           176 
East Midlands                       140           25           165              131           25           156 
Wales                               110           20           130              102           21           123 
North east                           62           10            72               62           10            72 
Scotland                             87            7            94               72            7            79 
----------------------  ---------------  -----------  ------------  ---------------  -----------  ------------ 
Total retail mortgage 
 lending                          5,022        1,701         6,723            5,051        1,841         6,892 
----------------------  ---------------  -----------  ------------  ---------------  -----------  ------------ 
 

Retail mortgage lending by repayment type

 
                                 31 December 2021                    31 December 2020 
                                    GBP'million                         GBP'million 
                        ----------------------------------  ---------------------------------- 
                           Retail                    Total     Retail                    Total 
                            owner       Retail      retail      owner       Retail      retail 
                         occupied   buy-to-let   mortgages   occupied   buy-to-let   mortgages 
----------------------  ---------  -----------  ----------  ---------  -----------  ---------- 
Repayment 
Interest                    2,113        1,620       3,733      2,337        1,751       4,088 
Capital and interest        2,909           81       2,990      2,714           90       2,804 
----------------------  ---------  -----------  ----------  ---------  -----------  ---------- 
Total retail mortgage 
 lending                    5,022        1,701       6,723      5,051        1,841       6,892 
----------------------  ---------  -----------  ----------  ---------  -----------  ---------- 
 

Commercial term lending (exc. BBLS) by DTV banding

 
                             31 December 2021                        31 December 2020 
                                GBP'million                             GBP'million 
                  --------------------------------------  -------------------------------------- 
                  Professional        Other        Total  Professional        Other        Total 
                    buy-to-let   term loans   commercial    buy-to-let   term loans   commercial 
                                              term loans                              term loans 
----------------  ------------  -----------  -----------  ------------  -----------  ----------- 
DTV ratio 
Less than 50%              306          770        1,076           353          876        1,229 
51-60%                     232          483          715           261          546          807 
61-70%                     282          158          440           351          255          606 
71-80%                     112           63          175           133          100          233 
81-90%                       8           30           38             9           51           60 
91-100%                      6           27           33             6           13           19 
More than 100%               4          582          586             4          411          415 
----------------  ------------  -----------  -----------  ------------  -----------  ----------- 
Total commercial 
 term loans                950        2,113        3,063         1,117        2,252        3,369 
----------------  ------------  -----------  -----------  ------------  -----------  ----------- 
 

Commercial term lending (exc. BBLS) by geographic exposure

 
                                 31 December 2021                            31 December 2020 
                                    GBP'million                                 GBP'million 
                    ------------------------------------------  ------------------------------------------ 
                    Professional  Other term  Total commercial  Professional  Other term  Total commercial 
                      buy-to-let       loans        term loans    buy-to-let       loans        term loans 
------------------  ------------  ----------  ----------------  ------------  ----------  ---------------- 
Region 
Greater London               676       1,186             1,862           780       1,358             2,138 
South east                   160         390               550           205         399               604 
South west                    28         151               179            31         156               187 
East of England               39          71               110            48          67               115 
North west                    18         150               168            20         146               166 
West Midlands                  9          84                93            10          66                76 
Yorkshire and the 
 Humber                        3          17                20             3          13                16 
East Midlands                  9          27                36            11          18                29 
Wales                          4          12                16             5          10                15 
North east                     3          17                20             3          18                21 
Scotland                       1           2                 3             1           -                 1 
Northern Ireland               -           6                 6             -           1                 1 
------------------  ------------  ----------  ----------------  ------------  ----------  ---------------- 
Total commercial 
 term loans                  950       2,113             3,063         1,117       2,252             3,369 
------------------  ------------  ----------  ----------------  ------------  ----------  ---------------- 
 

Commercial term lending (exc. BBLS) by repayment type

 
                                  31 December 2021                        31 December 2020 
                                     GBP'million                             GBP'million 
                       --------------------------------------  -------------------------------------- 
                       Professional        Other        Total  Professional        Other        Total 
                         buy-to-let   term loans   commercial    buy-to-let   term loans   commercial 
                                                   term loans                              term loans 
---------------------  ------------  -----------  -----------  ------------  -----------  ----------- 
Repayment 
Interest                        897          230        1,127         1,058          281        1,339 
Capital and interest             53        1,883        1,936            59        1,971        2,030 
---------------------  ------------  -----------  -----------  ------------  -----------  ----------- 
Total commercial 
 term loans                     950        2,113        3,063         1,117        2,252        3,369 
---------------------  ------------  -----------  -----------  ------------  -----------  ----------- 
 

A Commercial term lending (exc. BBLS) by industry exposure

 
                                         31 December 2021                            31 December 2020 
                                            GBP'million                                 GBP'million 
                            ------------------------------------------  ------------------------------------------ 
                            Professional  Other term  Total commercial  Professional  Other term  Total commercial 
                              buy-to-let       loans        term loans    buy-to-let       loans        term loans 
--------------------------  ------------  ----------  ----------------  ------------  ----------  ---------------- 
Industry sector 
Real estate (rent, 
 buy and sell)                       950         837             1,787         1,117       1,032             2,149 
Hospitality                            -         361               361             -         376               376 
Health and social 
 work                                  -         225               225             -         248               248 
Legal, accountancy 
 and consultancy                       -         206               206             -         208               208 
Retail                                 -         136               136             -         107               107 
Real estate (development)              -          46                46             -          60                60 
Recreation, cultural 
 and sport                             -          88                88             -          53                53 
Construction                           -          85                85             -          36                36 
Education                              -          17                17             -          30                30 
Real estate (management 
 of)                                   -           9                 9             -          10                10 
Investment and unit 
 trusts                                -           6                 6             -           9                 9 
Other                                  -          97                97             -          83                83 
--------------------------  ------------  ----------  ----------------  ------------  ----------  ---------------- 
Total commercial 
 term loans                          950       2,113             3,063         1,117       2,252             3,369 
--------------------------  ------------  ----------  ----------------  ------------  ----------  ---------------- 
 

Credit risk exposures

Retail mortgages

 
                                31 December 2021                                            31 December 2020 
                                  GBP' million                                                GBP' million 
---------  ----------------------------------------------------------  ---------------------------------------------------------- 
                 Stage 1        Stage 2        Stage 3           POCI        Stage 1        Stage 2        Stage 3           POCI 
            12 month ECL   Lifetime ECL   Lifetime ECL   Lifetime ECL   12 month ECL   Lifetime ECL   Lifetime ECL   Lifetime ECL 
---------  -------------  -------------  -------------  -------------  -------------  -------------  -------------  ------------- 
Up to 
 date              5,544          1,010             38              -          5,911            802             47              - 
1 to 29 
 days 
 past due              2             27              9              -              -             18              8              - 
30 to 89 
 days 
 past due              -             26             16              -              -             43             13              - 
90+ days 
 past due              -              -             51              -              -              -             50              - 
---------                                                              -------------  -------------  -------------  ------------- 
Gross 
 carrying 
 amount            5,546          1,063            114              -          5,911            863            118              - 
---------                                                              -------------  -------------  -------------  ------------- 
 

Consumer lending

 
                                31 December 2021                                            31 December 2020 
                                  GBP' million                                                GBP' million 
                                                                       ---------------------------------------------------------- 
                 Stage 1        Stage 2        Stage 3           POCI        Stage 1        Stage 2        Stage 3           POCI 
            12 month ECL   Lifetime ECL   Lifetime ECL   Lifetime ECL   12 month ECL   Lifetime ECL   Lifetime ECL   Lifetime ECL 
           -------------  -------------  -------------                 -------------  -------------  -------------  ------------- 
Up to 
 date                786             71              2              -            149             38              -              - 
1 to 29 
 days 
 past due              -              2              -              -              -              3              -              - 
30 to 89 
 days 
 past due              -              9              3              -              -              2              -              - 
90+ days 
 past due              -              -             16              1              -              -             12              - 
           -------------                                               -------------  -------------  -------------  ------------- 
Gross 
 carrying 
 amount              786             82             21              1            149             43             12              - 
                                                                       -------------  -------------  -------------  ------------- 
 

Commercial lending

 
                                31 December 2021                                            31 December 2020 
                                  GBP' million                                                GBP' million 
---------  ----------------------------------------------------------  ---------------------------------------------------------- 
                 Stage 1        Stage 2        Stage 3           POCI        Stage 1        Stage 2        Stage 3           POCI 
            12 month ECL   Lifetime ECL   Lifetime ECL   Lifetime ECL   12 month ECL   Lifetime ECL   Lifetime ECL   Lifetime ECL 
---------  -------------  -------------  -------------  -------------  -------------  -------------  -------------  ------------- 
Up to 
 date              3,727            656            118              -          4,115            863             96              - 
1 to 29 
 days 
 past due             12             46              2              -              -             21              2              - 
30 to 89 
 days 
 past due              -             78             23              -              -             22             11              - 
90+ days 
 past due              -              -            184              -              -              -             18              - 
---------  -------------  -------------  -------------  -------------  -------------  -------------  -------------  ------------- 
Gross 
 carrying 
 amount            3,739            780            327              -          4,115            906            127              - 
---------  -------------  -------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 

Loss allowance

The following tables explain the changes in both the gross carrying amount and loss allowances of the Group's loans and advances during the period. Significant changes in the gross carrying amount which contributed to changes in the loss allowance are explained below. Other movements consist of changes to model assumptions and forward looking information.

Retail mortgages

 
                           Gross carrying amount                   Loss allowance                   Net carrying amount 
                    ------------------------------------  --------------------------------  ------------------------------------ 
                      Stage  Stage  Stage                 Stage  Stage  Stage                 Stage  Stage  Stage 
GBP'million               1      2      3  POCI    Total      1      2      3  POCI  Total        1      2      3  POCI    Total 
1 January 
 2021                 5,911    863    118     -    6,892    (5)   (17)    (4)     -   (26)    5,906    846    114     -    6,866 
Transfers 
 to/(from) 
 stage 1(1)             362  (345)   (17)     -        -    (8)      8      -     -      -      354  (337)   (17)     -        - 
Transfers 
 to/(from) 
 stage 2              (469)    477    (8)     -        -      1    (1)      -     -      -    (468)    476    (8)     -        - 
Transfers 
 to/(from) 
 stage 3               (19)   (26)     45     -        -      -      1    (1)     -      -     (19)   (25)     44     -        - 
Net remeasurement 
 due to 
 transfers(2)             -      -      -     -        -      7    (1)      -     -      6        7    (1)      -     -        6 
New lending(3)          894    233      -     -    1,127    (1)    (4)      -     -    (5)      893    229      -     -    1,122 
Repayments, 
 additional 
 drawdowns 
 and interest 
 accrued              (131)   (17)    (2)     -    (150)      -      -      -     -      -    (131)   (17)    (2)     -    (150) 
Transfer                  -      -      -     -        -      -      -      -     -      -        -      -      -     -        - 
 to held for 
 sale(4) 
Derecognitions(5)   (1,002)  (122)   (22)     -  (1,146)      1      1      1     -      3  (1,001)  (121)   (21)     -  (1,143) 
Changes to 
 model 
 assumptions(6)           -      -      -     -        -      3      1    (1)     -      3        3      1    (1)     -        3 
31 December 
 2021                 5,546  1,063    114     -    6,723    (2)   (12)    (5)     -   (19)    5,544  1,051    109     -    6,704 
 
 
                           Gross carrying amount                   Loss allowance                   Net carrying amount 
                    ------------------------------------  --------------------------------  ------------------------------------ 
                      Stage  Stage  Stage                 Stage  Stage  Stage                 Stage  Stage  Stage 
GBP'million               1      2      3  POCI    Total      1      2      3  POCI  Total        1      2      3  POCI    Total 
1 January 
 2020                 9,874    502     54     -   10,430      -    (3)    (5)     -    (8)    9,874    499     49    --   10,422 
Transfers 
 to/(from) 
 stage 1(1)             109  (106)    (3)     -        -    (1)      1      -     -      -      108  (105)    (3)     -        - 
Transfers 
 to/(from) 
 stage 2              (559)    560    (1)     -        -      -      -      -     -      -    (559)    560    (1)     -        - 
Transfers 
 to/(from) 
 stage 3               (55)   (22)     77     -        -      -      1    (1)     -      -     (55)   (21)     76     -        - 
Net remeasurement 
 due to 
 transfers(2)             -      -      -     -        -      1    (8)    (1)     -    (8)        1    (8)    (1)     -      (8) 
New lending(3)          522     48      1     -      571    (3)    (3)      -     -    (6)      519     45      1     -      565 
Repayments, 
 additional 
 drawdowns 
 and interest 
 accrued              (122)   (11)      -     -    (133)      -      -      -     -      -    (122)   (11)      -     -    (133) 
Transfer 
 to held for 
 sale(4)              (289)    (7)      -     -    (296)      1      -      -     -      1    (288)    (7)      -     -    (295) 
Derecognitions(5)   (3,569)  (101)   (10)     -  (3,680)      3      1      1     -      5  (3,566)  (100)    (9)     -  (3,675) 
Changes to 
 model 
 assumptions(6)           -      -      -     -        -    (6)    (6)      2     -   (10)      (6)    (6)      2     -     (10) 
31 December 
 2020                 5,911    863    118     -    6,892    (5)   (17)    (4)     -   (26)    5,906    846    114     -    6,866 
 

1. Represents stage transfers prior to any ECL remeasurements

2. Represents the remeasurement between the twelve month and lifetime ECL due to stage transfer, including any changes to the model assumptions and forward looking information.

3. Represents the increase in balances resulting from loans and advances that have been newly originated, purchased or renewed.

4. Represents the loans and advance reclassified as held for sale at year end.

5. Represents the decrease in balances resulting from loans and advances that have been fully repaid, disposed of or written off.

6. Represents the change in loss allowances resulting from changes to the model assumptions, forward looking information and changes in the customers risk profile

Consumer lending

 
                       Gross carrying amount                 Loss allowance                 Net carrying amount 
                  --------------------------------  --------------------------------  -------------------------------- 
                  Stage  Stage  Stage               Stage  Stage  Stage               Stage  Stage  Stage 
GBP'million           1      2      3  POCI  Total      1      2      3  POCI  Total      1      2      3  POCI  Total 
1 January 
 2021               149     43     12     -    204    (6)    (9)   (10)     -   (25)    143     34      2     -    179 
Transfers 
 to/(from) 
 stage 1              8    (8)      -     -      -    (1)      1      -     -      -      7    (7)      -     -      - 
Transfers 
 to/(from) 
 stage 2            (6)      6      -     -      -      -      -      -     -      -    (6)      6      -     -      - 
Transfers 
 to/(from) 
 stage 3            (2)    (3)      5     -      -      -      2    (2)     -      -    (2)    (1)      3     -      - 
Net 
 remeasurement 
 due to 
 transfers            -      -      -     -      -      1      -    (2)     -    (1)      1      -    (2)     -    (1) 
New lending         697     66     12     1    776   (16)    (7)    (9)     -   (32)    681     59      3     1    744 
Repayments, 
 additional 
 drawdowns 
 and interest 
 accrued           (20)    (9)    (1)     -   (30)      -      -      -     -      -   (20)    (9)    (1)     -   (30) 
Derecognitions     (40)   (13)    (7)     -   (60)      1      2      7     -     10   (39)   (11)      -     -   (50) 
Changes to 
 model 
 assumptions          -      -      -     -      -      3      3      -     -      6      3      3      -     -      6 
31 December 
 2021               786     82     21     1    890   (18)    (8)   (16)     -   (42)    768     74      5     1    848 
 
 
                       Gross carrying amount                 Loss allowance                 Net carrying amount 
                  --------------------------------  --------------------------------  -------------------------------- 
                  Stage  Stage  Stage               Stage  Stage  Stage               Stage  Stage  Stage 
GBP'million           1      2      3  POCI  Total      1      2      3  POCI  Total      1      2      3  POCI  Total 
1 January 
 2020               223      -     10     -    233    (3)    (1)    (9)     -   (13)    220    (1)      1     -    220 
Transfers             -      -      -     -      -      -      -      -     -      -      -      -      -     -      - 
 to/(from) 
 stage 1 
Transfers 
 to/(from) 
 stage 2           (62)     62      -     -      -      1    (1)      -     -      -   (61)     61      -     -      - 
Transfers 
 to/(from) 
 stage 3            (3)    (1)      4     -      -      -      -      -     -      -    (3)    (1)      4     -      - 
Net 
 remeasurement 
 due to 
 transfers            -      -      -     -      -      -    (7)    (3)     -   (10)      -    (7)    (3)     -   (10) 
New lending          55      2      -     -     57    (2)      -      -     -    (2)     53      2      -     -     55 
Repayments, 
 additional 
 drawdowns 
 and interest 
 accrued           (14)   (20)    (1)     -   (35)      -      -      -     -      -   (14)   (20)    (1)     -   (35) 
Derecognitions     (50)      -    (1)     -   (51)      -      -      1     -      1   (50)      -      -     -   (50) 
Changes to 
 model 
 assumptions          -      -      -     -      -    (2)      -      1     -    (1)    (2)      -      1     -    (1) 
31 December 
 2020               149     43     12     -    204    (6)    (9)   (10)     -   (25)    143     34      2     -    179 
 

Commercial lending

 
                       Gross carrying amount                 Loss allowance                 Net carrying amount 
                  --------------------------------  --------------------------------  -------------------------------- 
                  Stage  Stage  Stage               Stage  Stage  Stage               Stage  Stage  Stage 
GBP'million           1      2      3  POCI  Total      1      2      3  POCI  Total      1      2      3  POCI  Total 
1 January 
 2021             4,115    906    127     -  5,148   (19)   (43)   (41)     -  (103)  4,096    863     86     -  5,045 
Transfers 
 to/(from) 
 stage 1            189  (184)    (5)     -      -    (7)      7      -     -      -    182  (177)    (5)     -      - 
Transfers 
 to/(from) 
 stage 2          (297)    304    (7)     -      -      1    (2)      1     -      -  (296)    302    (6)     -      - 
Transfers 
 to/(from) 
 stage 3          (181)   (81)    262     -      -      -      3    (3)     -      -  (181)   (78)    259     -      - 
Net 
 remeasurement 
 due to 
 transfers            -      -      -     -      -      3   (10)   (17)     -   (24)      3   (10)   (17)     -   (24) 
New lending         566     58      6     -    630    (6)    (2)    (1)     -    (9)    560     56      5     -    621 
Repayments, 
 additional 
 drawdowns 
 and interest 
 accrued          (167)   (31)   (13)     -  (211)      -      -      -     -      -  (167)   (31)   (13)     -  (211) 
Derecognitions    (486)  (192)   (43)     -  (721)      3      8     12     -     23  (483)  (184)   (31)     -  (698) 
Changes to 
 model 
 assumptions          -      -      -     -      -    (2)     10    (3)     -      5    (2)     10    (3)     -      5 
31 December 
 2021             3,739    780    327     -  4,846   (27)   (29)   (52)     -  (108)  3,712    751    275     -  4,738 
 
 
                       Gross carrying amount                 Loss allowance                 Net carrying amount 
                  --------------------------------  --------------------------------  -------------------------------- 
                  Stage  Stage  Stage               Stage  Stage  Stage               Stage  Stage  Stage 
GBP'million           1      2      3  POCI  Total      1      2      3  POCI  Total      1      2      3  POCI  Total 
1 January 
 2020             3,929     72     51     -  4,052    (6)    (1)    (6)     -   (13)  3,923     71     45     -  4,039 
Transfers 
 to/(from) 
 stage 1             13   (11)    (2)     -      -      -      -      -     -      -     13   (11)    (2)     -      - 
Transfers 
 to/(from) 
 stage 2          (678)    679    (1)     -      -      -      -      -     -      -  (678)    679    (1)     -      - 
Transfers 
 to/(from) 
 stage 3           (84)   (20)    104     -      -      -      1    (1)     -      -   (84)   (19)    103     -      - 
Net 
 remeasurement 
 due to 
 transfers            -      -      -     -      -      -   (28)   (30)     -   (58)      -   (28)   (30)     -   (58) 
New lending       1,562    199      9     -  1,770    (6)   (13)    (3)     -   (22)  1,556    186      6     -  1,748 
Repayments, 
 additional 
 drawdowns 
 and interest 
 accrued          (201)      1    (9)     -  (209)      -      -      -     -      -  (201)      1    (9)     -  (209) 
Derecognitions    (426)   (14)   (25)     -  (465)      1      1      2     -      4  (425)   (13)   (23)     -  (461) 
Changes to 
 model 
 assumptions          -      -      -     -      -    (8)    (3)    (3)     -   (14)    (8)    (3)    (3)     -   (14) 
31 December 
 2020             4,115    906    127     -  5,148   (19)   (43)   (41)     -  (103)  4,096    863     86     -  5,045 
 

13. Legal and regulatory matters

As part of the normal course of business we are subject to legal and regulatory matters which, with the exception of the matters set out below, are not considered to have a material impact on the business.

The matters outlined below represent contingent liabilities and as such at the reporting date no provision has been made for any of these cases within the financial statements (details of our provisions are set out in note 10). This is because, based on the facts currently known, it is not practicable to predict the outcome of any of these matters or reliably estimate any financial impact. Their inclusion does not constitute any admission of wrongdoing or legal liability.

Financial crime

In 2017 and 2019 initial disclosures were made to the US Office of Foreign Assets Control (OFAC) in relation to Cuba and Iran. We completed our review in respect of these matters in December 2021 and have submitted our findings to OFAC. We continue to engage and co-operate fully with our regulators. At this stage it is not practicable to identify the likely outcome or to estimate the potential financial impact with any certainty.

In addition, we continue to engage and co-operate fully with the FCA's enquiries regarding the Bank's financial crime systems and controls. These enquiries remain at a relatively early stage.

14. Fair value of financial instruments

 
                                                       Quoted         Using  With significant 
                                                       market    observable      unobservable 
                                                        price        inputs            inputs         Total 
                                       Carrying         Level         Level             Level          fair 
                                          value             1             2                 3         value 
                                    GBP'million   GBP'million   GBP'million       GBP'million   GBP'million 
31 December 2021 
Assets 
Loans and advances to customers          12,290             -             -            12,356        12,356 
Investment securities held 
 at FVOCI                                   798           760            38                 -           798 
Investment securities held 
 at amortised costs                       4,776         2,977         1,710                60         4,747 
Financial assets held at FVTPL                3             -             -                 3             3 
Liabilities 
Deposits from customers                  16,448             -             -            16,452        16,452 
Deposits from central bank                3,800             -             -             3,800         3,800 
Debt securities                             588           495             -                 -           495 
Derivative financial liabilities             10             -            10                 -            10 
Repurchase agreements                       169             -             -               169           169 
 
 
                                                       Quoted         Using  With significant 
                                                       market    observable      unobservable 
                                                        price        inputs            inputs         Total 
                                       Carrying         Level         Level             Level          fair 
                                          value             1             2                 3         value 
                                    GBP'million   GBP'million   GBP'million       GBP'million   GBP'million 
31 December 2020 
Assets 
Loans and advances to customers          12,090             -             -            11,892        11,892 
Investment securities held 
 at FVOCI                                   773           723            50                 -           773 
Investment securities held 
 at amortised costs                       2,640         1,021         1,567                66         2,654 
Financial assets held at FVTPL               30             -             -                30            30 
Liabilities 
Deposits from customers                  16,072             -             -            16,147        16,147 
Deposits from central bank                3,808             -             -             3,808         3,808 
Debt securities                             600           483             -                 -           483 
Financial liabilities held 
 at FVTPL                                    30             -             -                30            30 
Derivative financial liabilities              8             -             8                 -             - 
Repurchase agreements                       196             -             -               196           196 
 

Information on how fair values are calculated for the financial assets and liabilities noted above are explained below:

Loans and advances to customers

Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the balance sheet date, adjusted for future credit losses and prepayments, if considered material.

Investment securities

The fair value of investment securities is based on either observed market prices for those securities that have an active trading market (fair value level 1 assets),or using observable inputs (in the case of fair value level 2 assets).

Deposits from customers

Fair values are estimated using discounted cash flows, applying current rates offered for deposits of similar remaining maturities. The fair value of a deposit repayable on demand is approximated by its carrying value.

Debt securities

Fair values are determined using the quoted market price at the balance sheet date.

Deposits from central banks/repurchase agreements

Fair values are estimated using discounted cash flows, applying current rates. Fair values approximate carrying amounts as their balances are generally short dated.

15. Loss per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary equity holders of Metro Bank by the weighted average number of ordinary shares in issue during the year.

 
                                                      2021     2020 
Earnings attributable to ordinary equity holders 
 of Metro Bank (GBP'million)                       (248.2)  (301.7) 
Weighted average number of ordinary shares in 
 issue - basic ('000)                              172,421  172,420 
Basic earnings per share (pence)                   (144.0)  (175.0) 
 

Diluted earnings per share has been calculated by dividing the earnings attributable to ordinary equity holders of Metro Bank by the weighted average number of ordinary shares in issue during the year plus the weighted average number of ordinary shares that would be issued on the conversion to shares of options granted to colleagues. As the Group made a loss during the years to 31 December 2021 and 31 December 2020 the share options would be antidilutive, as they would reduce the loss per share. Therefore all the outstanding options have been disregarded in the calculation of dilutive earnings per share.

 
                                                      2021     2020 
Earnings attributable to ordinary equity holders 
 of Metro Bank (GBP'million)                       (248.2)  (301.7) 
Weighted average number of ordinary shares in 
 issue - diluted ('000)                            172,421  172,420 
Diluted earnings per share (pence)                 (144.0)  (175.0) 
 

There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of the completion of these financial statements which would require the restatement of EPS.

16. Related parties

Key management personnel

Our key management personnel, and persons connected with them, are considered to be related parties for disclosure purposes. Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group. The Directors and members of the Executive Leadership Team are considered to be the key management personnel for disclosure purposes.

Key management compensation

Total compensation cost for key management personnel for the year by category of benefit was as follows:

 
                                                          2021          2020 
                                                   GBP'million   GBP'million 
Short-term benefits                                        5.4           5.3 
Post-employment benefits                                   0.1           0.1 
Share-based payment costs                                  1.3           0.7 
Total compensation for key management personnel            6.8           6.1 
 

Short-term employee benefits include salary, medical insurance, bonuses and cash allowances paid to key management personnel. The share based payment cost consists of the IFRS 2 charge for the year (including charges associated with share options awarded in previous years.

Banking transactions with key management personnel

We provide banking services to Directors and other key management personnel and persons connected to them. Loan transactions during the year and the balances outstanding at 31 December were as follows:

 
                                                                   2021          2020 
                                                            GBP'million   GBP'million 
Loans outstanding at 1 January                                      1.9           0.7 
Loans relating to persons and companies newly considered 
 related parties                                                      -           1.8 
Loans relating to persons and companies no longer 
 considered related parties                                       (0.5)         (0.6) 
Loans issued during the year                                        1.8             - 
Loans outstanding as at 31 December                                 3.2           1.9 
Interest expense on loans payable to the Group (GBP'000)             30            34 
 

There were three (31 December 2020: three) loans outstanding at 31 December 2021 totalling GBP3.2 million (31 December 2020: GBP1.9 million). Of these, two are residential mortgages secured on property and one is an asset finance loan; all loans were provided on our standard commercial terms.

In addition to the loans detailed above, we have issued credit cards and granted overdraft facilities on current accounts to Directors and key management personnel.

Credit card balances outstanding at 31 December were as follows:

 
                                                 2021      2020 
                                              GBP'000   GBP'000 
Credit cards outstanding as at 31 December          5        22 
 

Deposit balances outstanding at 31 December were as follows

 
                                                               2021          2020 
                                                        GBP'million   GBP'million 
Deposits held at 1 January                                      2.1           3.3 
Deposits relating to persons and companies newly 
 considered related parties                                     0.1           0.2 
Deposits relating to persons and companies no longer 
 considered related parties                                   (0.1)         (0.3) 
Net amounts withdrawn                                         (0.6)         (1.1) 
Deposits outstanding as at 31 December                          1.5           2.1 
 

17. Post balance sheet events

There have been no material post balance sheet events.

Underlying to statutory results reconciliation

 
                                          Impairment 
                                                 and 
                                           write-off 
                                                  of 
                                           property, 
                                              plant,                                               Business 
                                           equipment                                            acquisition 
                                Listing          and                                                    and     Mortgage 
                 Statutory        Share   intangible     C&I fund  Transformation  Remediation  integration    portfolio   Underlying 
Year ended 31        basis       Awards       assets        costs           costs        costs        costs         sale        basis 
December 2020  GBP'million  GBP'million  GBP'million  GBP'million     GBP'million  GBP'million  GBP'million  GBP'million  GBP'million 
Net interest 
 income              295.3            -            -          0.4               -            -            -            -        295.7 
Net fee and 
 commission 
 income               69.6            -            -            -               -            -            -            -         69.6 
Net gains on 
 sale of 
 assets                9.4            -            -            -               -            -            -        (8.7)          0.7 
Other income          44.2            -            -        (9.4)               -            -            -        (2.9)         31.9 
Total income         418.5            -            -        (9.0)               -            -            -       (11.6)        397.9 
General 
 operating 
 expenses          (536.1)            -            -          9.0             8.9         45.9          2.4          3.3      (466.6) 
Depreciation 
 and 
 amortisation       (80.2)            -            -            -               -            -            -            -       (80.2) 
Impairment 
 and 
 write-offs 
 of PPE and 
 intangible 
 assets             (24.9)            -         24.9            -               -            -            -            -            - 
Total 
 operating 
 expenses          (641.2)            -         24.9          9.0             8.9         45.9          2.4          3.3      (546.8) 
Expected 
 credit loss 
 expense            (22.4)            -            -            -               -            -            -            -       (22.4) 
Loss before 
 tax               (245.1)            -         24.9            -             8.9         45.9          2.4        (8.3)      (171.3) 
 
 
                                          Impairment 
                                                 and 
                                           write-off 
                                                  of 
                                           property, 
                                              plant,                                               Business 
                                           equipment                                            acquisition 
                                Listing          and                                                    and     Mortgage 
                 Statutory        Share   intangible     C&I fund  Transformation  Remediation  integration    portfolio   Underlying 
Year ended 31        basis       Awards       assets        costs           costs        costs        costs         sale        basis 
December 2020  GBP'million  GBP'million  GBP'million  GBP'million     GBP'million  GBP'million  GBP'million  GBP'million  GBP'million 
Net interest 
 income              249.7            -            -          0.6               -            -            -            -        250.3 
Net fee and 
 commission 
 income               59.9            -            -            -               -            -            -            -         59.9 
Net gains on 
 sale of 
 assets               73.3            -            -            -               -            -            -       (69.0)          4.3 
Other income          49.7            -            -       (23.3)               -            -            -            -         26.4 
Total income         432.6            -            -       (22.7)               -            -            -       (69.0)        340.9 
General 
 operating 
 expenses          (502.3)        (0.2)            -         22.7            16.7         40.8          5.4          5.3      (411.6) 
Depreciation 
 and 
 amortisation       (74.4)            -            -            -               -            -            -            -       (74.4) 
Impairment 
 and 
 write-offs 
 of PPE and 
 intangible 
 assets             (40.6)            -         40.6            -               -            -            -            -            - 
Total 
 operating 
 expenses          (617.3)        (0.2)         40.6         22.7            16.7         40.8          5.4          5.3      (486.0) 
Expected 
 credit loss 
 expense           (126.7)            -            -            -               -            -            -            -      (126.7) 
Loss before 
 tax               (311.4)        (0.2)         40.6            -            16.7         40.8          5.4       (63.7)      (271.8) 
 

Key capital disclosures

The information set out within this section does not form part of the statutory accounts for the years ended 31 December 2021 or 31 December 2020.

Key Metrics

The table below summarises our key regulatory metrics as at 31 December 2021 and 31 December 2020.

 
                                        31 December   31 December 
                                               2021          2020 
                                        GBP'million   GBP'million 
Available capital 
CET1 capital                                    936         1,192 
Tier 1 capital                                  936         1,192 
Total capital                                 1,184         1,441 
Total capital plus MREL                       1,527         1,783 
 
Risk weighted assets (RWAs) 
Total risk weighted assets                    7,454         7,957 
 
Risk-based capital ratios as % 
 of RWAs 
CET1 ratio                                    12.6%         15.0% 
Tier 1 ratio                                  12.6%         15.0% 
Total capital ratio                           15.9%         18.1% 
Total capital plus MREL                       20.5%         22.4% 
 
Additional CET1 buffer requirements 
 as % of RWAs 
Countercyclical capital conservation 
 buffer requirement                            2.5%          2.5% 
Countercyclical buffer requirement             0.0%          0.0% 
Total of bank CET1 specific buffer 
 requirements                                  2.5%          2.5% 
 
Leverage ratio 
Leverage ratio                                4.41%         5.62% 
 
Liquidity coverage ratio 
Liquidity coverage ratio (LCR)                 281%          187% 
 

Leverage Ratio

The table below shows the Bank's Tier 1 Capital and Total Leverage Exposure that are used to derive the Leverage Ratio. The leverage ratio is the ratio of Tier 1 Capital to Total Leverage exposure.

 
                                31 December   31 December 
                                       2021          2020 
                                GBP'million   GBP'million 
Common equity tier 1 capital            936         1,192 
Additional tier 1 capital                 -             - 
Tier 1 capital                          936         1,192 
 
CRD IV Leverage exposure             21,230        21,211 
 
Leverage ratio                        4.41%        5.62 % 
 

Our leverage ratio is 4.41% which is in excess of the minimum capital requirement of 3.00% as at 31 December 2021.

Liquidity coverage ratio

The table below shows the Bank's Total HQLA and total net cash outflow that are used to derive the liquidity coverage ratio.

 
                                  31 December   31 December 
                                         2021          2020 
                                  GBP'million   GBP'million 
Total HQLA                              6,754         3,762 
Total net cash outflow                  2,406         2,011 
Liquidity coverage ratio (LCR)           281%          187% 
 
   Our LCR was 281% at 31 December 2020 which exceeds the Basel Committee's   minimum of 100%. 

Overview of RWAs and capital requirements

The table below sets out the risk weighted assets and Pillar 1 capital requirements for Metro Bank. The bank has applied the standardised approach to measure credit risk and the basic indicator approach to measure operational risk. Under the approach the Bank calculates its Pillar 1 capital requirement based on 8% of total RWAs. This covers credit risk, operational risk, market risk and counterparty credit risk.

 
                                                                                Pillar 1 
                                                                                 capital 
                                                                                required 
                                                 31 December   31 December   31 December 
                                                        2021          2020          2021 
                                                 GBP'million   GBP'million   GBP'million 
Credit risk (excluding counterparty 
 credit risk (CCR))                                    6,709         7,251           537 
            Of which the standardised 
             approach                                  6,709         7,251           537 
CCR                                                        6             7           0.5 
            Of which mark to market                        3             5           0.3 
            Of which CVA                                   3             2           0.2 
Market risk                                               10            14           0.8 
Operational risk                                         729           686            58 
            Of which basic indicator approach            729           686            58 
            Amounts below the thresholds                   -             -             - 
             for deduction (subject to 
             250% risk weight) 
Total                                                  7,454         7,957           596 
 

Credit risk exposures by exposure class

Metro Bank's Pillar 1 capital requirement for Credit Risk is set out in the table below.

 
Exposures subject to the standardised               Exposure           RWA        Capital 
 approach                                              Value   GBP'million       Required 
                                                 GBP'million                  GBP'million 
Central governments or central 
 banks                                                 6,847             -              - 
Multi-lateral development banks                        1,327             -              - 
Institutions                                             167            33              3 
Corporates                                               507           437             35 
Retail                                                 1,320           931             74 
Secured by mortgages on immovable 
 property                                              8,898         3,808            305 
Covered bonds                                            597            60              5 
Claims on institutions and corporates                      -             -              - 
 with a short-term credit assessment 
Securitisation position                                1,804           261             21 
Exposure at default                                      209           211             17 
Items associated with particularly 
 high risk                                                 8            12              1 
Other exposures                                        1,032           956             76 
Total                                                 22,716         6,709            537 
 

Credit risk exposures by exposure class 2020

 
                                                                           Capital 
Exposures subject to the standardised   Exposure Value           RWA      Required 
 approach                                  GBP'million   GBP'million   GBP'million 
Central governments or central 
 banks                                           5,131             -             - 
Institutions                                     2,767           553            44 
Corporates                                         521           406            32 
Retail                                             572           376            30 
Secured by mortgages on immovable 
 property                                        9,895         4,338           347 
Covered bonds                                      860            86             7 
Claims on institutions and                           -             -             - 
 corporates with a short-term 
 credit assessment 
Securitisation position                          1,611           240            19 
Exposure at default                                247           248            20 
Items associated with particularly 
 high risk                                          14            21             2 
Other exposures                                  1,045           987            79 
Total                                           22,663         7,251           580 
 

Capital Resources

The table below summarises the composition of regulatory capital.

 
                                                  31 December 
                               31 December 2021          2020 
                                    GBP'million   GBP'million 
Share capital and premium                 1,964         1,964 
Retained earnings                         (694)         (392) 
(Loss)/profit for the year                (248)         (302) 
Available for sale reserve                  (5)             3 
Other reserves                               18            16 
Intangible assets                         (243)         (254) 
Other regulatory adjustments                144           157 
CET 1 capital                               936         1,192 
 
Tier 1 capital                              936         1,192 
Tier 2 capital                              249           249 
Total capital resources                   1,184         1,441 
 

The Bank's capital adequacy was in excess of the minimum required by the regulators at all times.

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END

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February 23, 2022 02:01 ET (07:01 GMT)

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