Annual Report
and Accounts 2023
Summary of the year
Our purpose and strategy framework
Strategic report
1
2
4 Chair’s statement
6 Operating environment
8
11 Business model
14 Key performance indicators
16 Financial review
20 Environmental, social and
Chief Executive Officer’s statement
31
governance review
Non financial information and
sustainability information statement
34 Section 172 statement
35 Task Force on Climate-related
Financial Disclosures
44 Risk overview summary
49 Viability statement
Corporate governance introduction
Governance
52
54 Board of Directors
56 2023 governance at a glance
57
Board activities and stakeholder
engagement
59 Stakeholder engagement
62
Letter from the Designated Non-
Executive Director for Colleague
Engagement
64 Board leadership and company
purpose
66 Board roles and responsibilities
67 Board effectiveness
70 Group Audit Committee report
75
78 Group Nomination Committee report
82
People and Remuneration Committee
report
Group Risk Oversight Committee report
86 Remuneration at a glance
91
Remuneration for colleagues below
Board level
94 Directors’ remuneration policy
105 Annual report on remuneration
120 Directors’ report
Risk
125 Risk management framework
126 Risk governance and oversight
128 Risk culture
130 Financial risks
151 Non-financial risks
Financial statements
159 Independent auditors’ report
to the members
of Metro Bank Holdings PLC
167 Consolidated statement of
comprehensive income
168 Consolidated balance sheet
169 Consolidated statement
of changes in equity
170 Consolidated cash flow statement
171 Notes to the financial statements
219 Company balance sheet
220 Company statement
of changes in equity
221 Company cash flow statement
222 Notes to the financial statements
Additional information
226 Country-by-country report
227 Independent auditors’
report to the Directors of
Metro Bank Holdings PLC
229 Other disclosures
230 Alternative performance measures
235 Abbreviations
236 Shareholder information
Building resilience
Whilst 2023 has had its challenges, we have successfully
undertaken the ground work necessary to ensure we
have a strong platform for sustainable profitability in the
years ahead. This has seen us establish our new holding
company, execute a £925 million capital package and
take the first steps in delivering a disciplined cost
reduction programme.
Focused on growth
We remain focused on the opportunities for future
growth and ensuring we fulfil our ambition to be the
number one community bank. We will achieve this by
continuing to deliver on our strategy through which we
aim to create value for all our stakeholders.
Read more in the Chief Executive
Officer’s statement on page 8
The actions we have
taken provide us with
the platform to create
sustainable growth.
Daniel Frumkin
Chief Executive Officer
Metro Bank Holdings PLC Annual Report and Accounts 2023
Summary of the year
Strategic report
Governance
Risk report
Financial statements
Additional information
1
2023 has been a year of two halves: whilst the first six
months saw us return to profitability on both a statutory
and underlying basis, our results in the second six
months were impacted by speculation surrounding our
capital options, contributing to the need to raise capital.
Statutory profit/(loss) before tax
(£m)
Loan to deposit ratio
(%)
Who we are
We opened our doors in the summer of
2010 and were the first high street bank
to open in the UK in over 100 years.
Since then, we’ve built a business that
is providing meaningful competition
against larger incumbents and offering
a compelling alternative for retail, private,
small business and commercial customers.
Our approach
Our approach is centred on our colleagues,
customers and communities. This allows us
to deliver our ambition to be the number
one community bank and create FANS. Our
community-centric model and focus on our
localness informs everything we do and the
decisions we make.
30.5
(70.7)
2023
2022
2021
(245.1)
2020
(311.4)
2019
(130.8)
Net interest margin
(%)
2023
2022
2021
2020
2019
1.98
1.92
1.40
1.22
1.51
2023
2022
2021
2020
2019
Deposits
(£bn)
2023
2022
2021
2020
2019
Underlying loss before tax
(£m)
Loans and advances
(£bn)
2023
2022
2021
2020
(271.8)
2019
(171.3)
(16.9)
(50.6)
(11.7)
2023
2022
2021
2020
2019
79
82
75
75
101
15.6
16.0
16.4
16.1
14.5
12.3
13.1
12.3
12.1
14.7
#1
In-store service for personal
and business customers¹
Top 10
Most loved UK workplaces²
3m
Customer accounts
1.
Competition and Markets Authority (CMA) survey carried out in Great Britain by Ipsos and BVA-BDRC between
January 2023 and December 2023 - Services in branches. Results at ipsos.com and bva-bdrc.com
2. Newsweek survey carried out in the United Kingdom. Results at newsweek.com
Metro Bank Holdings PLC Annual Report and Accounts 2023
Our purpose and strategy framework
Our ambition is to
be the number one
community bank
Despite the challenges faced in 2023, our
ambition remains the same: to be the
number one community bank. Community
banking means being embedded in the
local communities we serve and prioritising
local decision-making. It also means we
provide simple and straightforward
business, commercial and retail banking
services that meet the needs of our
customers in the area.
It’s achieved
through our
purpose
Our purpose is to create FANS.
FANS are customers created
through delivering exceptional
customer service, who then
champion us through actively
recommending us to friends
and family.
This simple purpose guides
everything we do as it places the
customer at the heart of all of our
decision-making.
2
Strengthened
by our AMAZEING
behaviours
Our AMAZEING behaviours
strengthen everything we do and
are ingrained throughout our
organisation helping us drive
our customer centric-approach.
• Attend to every detail.
• Make every wrong right.
• Ask if you’re not sure,
bump it up.
• Zest is contagious, share it.
• Exceed expectations.
• Inspire colleagues to
create FANS.
• Nurture colleagues so
they grow.
• Game-change because this is
a revolution.
Read more about our people
and culture on page 22
Metro Bank Holdings PLC Annual Report and Accounts 2023
Our purpose and strategy framework
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
3
Delivered via
our business
model
Supported by
our strategic
priorities
Measured by our
key performance
indicators
Aligned with
performance based
remuneration
Our business model is how we
generate stakeholder value. It
involves combining stores and
digital channels with exceptional
customer service to generate
sustainable long-term value and
tangible book growth.
Integrated model
Our model combines delivery
through physical and digital
channels.
Unique culture
Our colleagues deliver superior
service and are the heart of our
people-people banking approach.
Service-led core deposits
We seek to attract core deposits
through our service-led
relationship banking model with
specific emphasis on our core
retail and SME franchise.
Risk-adjusted returns
We seek to balance our lending
mix through a broad yet simple
product offering that is priced
proportionate to risk.
Our strategic priorities are what
we focus on on a day-to-day basis
that are crucial to developing our
long-term success.
Revenue
Create FANS to deliver strong
growth.
Balance sheet optimisation
Continued focus on risk-adjusted
returns.
Cost
Cost discipline to support
profitable growth and
reinvestment.
Infrastructure
Protect value through safe,
scalable infrastructure.
Communications
Engage colleagues, communities
and other stakeholders to tell our
story.
Our key performance indicators
(KPIs) are the metrics we monitor
to check we are on track with the
delivery of our strategy as well as
to assess how our business
model is performing. These
consist of:
• Customer accounts.
• Colleague engagement.
• Customer satisfaction.
• Senior leadership diversity.
• Statutory profit/(loss).
• Underlying profit/(loss).
• Total capital plus MREL.
• Cost of deposits.
• Cost of risk.
• Statutory cost:income ratio.
• Return on tangible equity.
• Loan-to-deposit ratio.
• Total shareholder return.
Our approach to remuneration
for management is based on a
simple and clear scorecard in
addition to a Long Term Incentive
Plan (LTIP). Scorecard measures
are aligned to the four
components of our business
model with the LTIP based upon
the successful generation of
sustainable long-term value and
tangible book growth.
Read more about our
business model on page 11
Read more about our
strategy on page 12
Read more about our
KPIs on page 14
Read more about our
remuneration on page 86
Metro Bank Holdings PLC Annual Report and Accounts 2023
Chair’s statement
4
In a world of continued uncertainty we remain focused
on delivering value for all of our stakeholders. We aim
to achieve this through the continued execution of our
strategy and an unrelenting focus on our ambition to
be the number one community bank.
Dear stakeholder
I am pleased to introduce the first annual
report of Metro Bank Holdings PLC, following
the successful insertion of our new holding
company in May 2023. Whilst our name might
have changed, our ambition to be the number
one community bank has not, and 2023 has
been another key year in moving towards this.
As I reflect upon both the progress and
challenges we have overcome during the past
year, I do so with immense gratitude. The
continued trust shown to us by you, our
shareholders, bondholders, customers and
colleagues reinforces mine and the Board’s
determination to see Metro Bank thrive and
succeed. I want to take this opportunity to
express my deepest thanks to you all.
Capital raise
The announcement in October of our
£925 million capital package (comprising
£150 million of new equity, £175 million of new
MREL-eligible debt and £600 million of debt
refinancing) was a defining moment. The
Board was fully engaged in this process
and active in both supporting and challenging
the executive team to set this important
foundation for the future. The shareholder
vote of over 90% in favour of this was a
demonstration of the support shareholders
have for the business and the importance of
strengthening our capital position.
Whilst we acknowledge that many
shareholders were unable to participate in
the capital raise, we believe that the package
represented the best possible outcome for
all stakeholders and will allow us to move
forward with strengthened financial resources
and renewed sense of purpose.
As part of the capital package, Jaime Gilinski
Bacal – a long-time investor, became our
majority shareholder through his company,
Spaldy Investment Limited. Spaldy Investments
Limited is entitled to appoint up to three
shareholder appointed Non-Executive
Directors to the Board. Dorita Gilinski, who has
been a shareholder-appointed Non-Executive
Director since September 2022 will continue
as one of the three roles. The Board continues
to be made up of a majority of independent
Non-Executive Directors and together the
Board remains committed to fulfilling its
duty to act on behalf of all shareholders and
wider stakeholders.
Results
The first six months of 2023 saw us return
to profitability on both a statutory and
underlying basis, a culmination of all the hard
work delivered by Dan and the team over the
past few years. The second six months of
2023, however, precipitated the conditions
that required us to raise capital.
As I reflect upon both the progress and
challenges we have overcome during the
past year, I do so with immense gratitude.
Robert Sharpe
Chair
Metro Bank Holdings PLC Annual Report and Accounts 2023
Metro Bank Holdings PLC Annual Report and Accounts 2023
Chair’s statement
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
5
The increase in capital requirements in July
through the increase in the counter cyclical
capital buffer, alongside the news that we
should not expect to receive AIRB approval
in 2023 placed incremental pressure on
our capital position. The Board has been
continuously considering capital options, and
these factors, along with the need to refinance
our existing MREL debt before October 2024,
meant that the window for raising capital from
the market was scheduled for the fourth
quarter of 2023. At the start of October,
several speculative media reports contributed
to uncertainty around the capital negotiations
and an increased outflow of customer
deposits. Our strong levels of liquidity and
prudent approach meant these outflows were
manageable and, indeed, as at 31 December
2023 we had returned to broadly the same
deposit levels as we reported for the third
quarter, with strong liquidity and funding
regulatory ratios.
Since the capital package announcement,
and financial completion, we have seen core
deposit flows stabilise, supplemented through
a combination of repricing and new deposit
initiatives. The higher cost of this funding
combined with the higher interest rate payable
on our new and refinanced debt have acted
as a drag on underlying profitability in the
fourth quarter.
Crucially, the delivery of the capital package in
November has seen us restore our regulatory
capital ratios, ending the year with total
capital plus MREL of 22.0% (31 December
2022: 17.7%) providing both certainty to
stakeholders and a platform for future growth.
Responding to an evolving landscape
In November, the Board approved a cost saving
plan to ensure the organisation is right-sized
going forward. The programme included
reducing our store hours, leading to 1,000
colleagues across stores and the wider business
being made redundant. Alongside the cost
savings, plans include making additional
investments in areas including automation of
services, improving our productivity and
responding to customer trends.
On 29 February 2024, we announced the
appointment of Marc Page as the permanent
Chief Financial Officer and member of the
Board from September 2024 (subject to
regulatory approval). Marc will join us from
Barclays where he was Chief Financial Officer
of Kensington Mortgages since its acquisition
by Barclays in 2023. He will bring with him a
wealth of knowledge and experience across
retail banking strategy, distribution and
product management.
The Board remains fully engaged in helping
drive our strategy and supporting the
executive team in its execution. In doing so, we
remain mindful of the need to appropriately
balance the interests and expectations of all
our stakeholders.
Governance
During the year we appointed Clare Gilligan
as our new Company Secretary. Clare joins us
from Bank of Ireland (UK) plc where she was
Company Secretary, bringing with her a
wealth of expertise. Her appointment helps
to ensure that our governance framework
remains of the highest standard.
At the end of the year Anne Grim, Monique
Melis and Ian Henderson stepped down from
the Board. On 11 January, we announced that
James Hopkinson, Chief Financial Officer,
would step down as Executive Director and
would leave the business during the first
quarter of 2024 after a period of handover.
I would like to thank all of them for their
contribution.
The Board appointed Cristina Alba Ochoa to
act as interim Chief Financial Officer, effective
15 January 2024.
Whilst we will be a leaner organisation going
forward, including at Board level, this is not at
the expense of having the right level of skills
within the organisation.
Outlook
The road ahead is not without uncertainty.
We continue to see political and economic
turbulence with a general election likely in
2024 set against the backdrop of cost-of-
living pressures and a subdued economy.
Alongside these external challenges, we also
face Bank-specific headwinds. This includes
entering 2024 with elevated funding costs,
which act as a drag on near-term profitability.
Despite these challenges, I remain confident in
our ability to be the number one community
bank. Metro Bank’s resilience and ability to
navigate obstacles as well as seize new
opportunities is one of its great strengths and
will drive our success in the coming year. We
will continue to champion customer service
and traditional banking values of trust,
honesty and integrity, delivering excellence in
our products and services and nurturing the
relationships we hold dear.
Robert Sharpe
Chair
16 April 2024
Where to find out more
How governance
is supporting our
transformation
Stakeholder impact
We focus on the impact on our
stakeholders of all the decisions we make
and ensuring we are delivering the right
outcomes to them is fundamental to
delivering our ambition to be the number
one community bank.
Read more in our Stakeholder
Engagement on pages 59 to 61 and
in our Section 172 Statement on
page 34.
Stakeholder engagement
We were pleased to get support of over
90% for all our resolutions in relation to the
capital package in November.
We look forward to further shareholder
engagement throughout 2024 including
at our AGM which will take place on
21 May 2024.
Read more in the Chair’s
governance letter on pages 52 to
53 and in our Section 172
Statement on page 34.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Operating environment
6
The environment we operate in is both competitive and rapidly changing.
This presents us with challenges but also creates exciting opportunities for us as we grow.
Economic and
political outlook
Competition
Customer
behaviour
How we see it
Whilst 2023 has been a turbulent year with continued global
uncertainty, the UK economy has been remarkably resilient,
despite entering a technical recession in the final two quarters
of the year. Inflation has fallen back from recent highs
although remains in excess of the Bank of England’s long-term
target of 2%. Part of this softening has been as a result of
continued increases in base rates which were increased from
3.50% to 5.25% over the course of the year. Whilst the outlook
is that rates have peaked, the increases seen in 2023 will
continue to impact customers in the years ahead as they
roll-off lower-cost fixed-rate borrowing. Although this has
resulted in an increase in arrears, this has come off a low base.
We have started to see signs of the job market softening, with
lower levels of hiring activities and the prospect of potential
rises in unemployment in 2024, adding to an uncertain
economic outlook.
How we are responding
We see the current levels of uncertainty remaining elevated
through 2024 due to continuing global conflict and key
elections in both the UK and USA, as well as a subdued
economic outlook.
We continue to take a prudent approach to expected credit
loss (ECL) provisioning and believe this reflects the current
uncertainties, including those related to slower economic
growth and increased unemployment.
At the end of 2023 we took the decision to move away from
unsecured lending given the return on capital it is providing in
the current economic climate.
How we see it
The UK banking market remains highly competitive in respect
of both deposits and lending.
For core current accounts, digital-only operators are achieving
high levels of customer satisfaction whilst incumbent players
continue to deploy switching offers and heavy marketing
campaigns to maintain market share. At the same time,
average current account balances are reducing industry-wide
as customers repay debt, deploy excess deposits into higher
rate savings and weather the increased cost of living.
In the lending market, larger incumbent players continue to
competitively price mortgages with mortgage rates ending
2023 at below 4%, compared to the base rate of 5.25%.
Equally, specialist lenders continue to make inroads into
non-relationship driven segments, often delivered via
intermediaries or aggregators.
We have also started to see the early signs of consolidation
within the industry, which is likely to see market share
concentrated further between larger incumbents.
How we are responding
We are continuing to invest in our deposit proposition to
ensure we remain competitive and gain market share. Whilst
we saw a reduction in average current account balances, both
due to wider-market forces and the speculation around our
capital raise, we continue to grow account numbers and
deepen customer relationships.
In the lending space we are focusing our attention on
targeting more specialist segments of the market. This is in
part due to the setback in our AIRB ambitions, which we
announced in September. Being a non-AIRB approved lender
makes it hard to compete in the prime ‘vanilla’ segment of the
market in respect of both volume and price due to the
structural disadvantages in the capital treatment of residential
mortgages compared to larger AIRB-approved competitors.
How we see it
Customer behaviour in 2023 has been marked by the higher
rate environment and cost-of-living pressures. This has seen
customers move their money to savings accounts to maximise
interest as well as becoming increasingly willing to switch
providers. The higher savings rates have also seen customers
making greater use of ISAs as a tax shield, particularly
amongst savers with high balances where interest payments
exceed the personal savings allowance.
We are also continuing to witness the acceleration of
digitisation with customers continuing to prefer digital-first
channels. This rise in use of new technology also gives rise to
increasingly sophisticated fraud.
How we are responding
We have increased our investment in our deposit gathering
channels including building out our ISA proposition ready for
the 2024 season. We were able to deploy some of these
deposit gathering tools in the fourth quarter where we were
able to quickly attract new deposits to replace balances lost in
response to the speculation surrounding our capital raise.
We expect the current digitisation trend to continue and we
will carry on making disciplined investment choices in
this area.
We remain committed to stores and maintaining a fully
integrated offering, although have reduced hours in response
to changing customer needs.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Operating environment
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
7
Regulatory
environment
Capital and
funding regime
Focus on
sustainability
How we see it
The UK regulatory environment has undergone significant
changes in recent years and continues to evolve, with multiple
changes on the horizon from key regulatory bodies.
Regulatory authorities including the Prudential Regulation
Authority (PRA) and Financial Conduct Authority (FCA) have
introduced reforms aimed at enhancing financial stability,
consumer protection and market integrity.
Key regulatory initiatives have included the new Consumer
Duty requirement and Basel 3.1, which sees changes to the
industry’s capital requirements.
We are also continuing to see regulators take a firm approach
to misconduct and ensuring fair outcomes for customers. An
example of this is the FCA’s review into historical motor
finance commission arrangements, the cost of which to
lenders could be significant.
How we are responding
We continue to deliver a range of comprehensive projects to
ensure we remain compliant with changes to the regulatory
environment. During the year, we have made good progress
on the implementation of our Consumer Duty requirements
and continue to prepare for the introduction of Basel 3.1.
We retain proactive engagement with our regulators, industry
bodies and other stakeholders to help shape the regulatory
agenda, provide feedback on proposed reforms and continue
to advocate for proportionate and pragmatic regulations that
support both innovation and growth, whilst protecting the
integrity of the financial system.
The current FCA investigation into motor finance shows the
continued focus of regulators on ensuring customers are
treated fairly. As a community bank we support the regulator
to achieve this outcome for customers.
How we see it
The UK’s stringent approach to capital management continues
to shape the banking industry. This is particularly true for new
and mid-sized challengers like ourselves who remain subject
to MREL requirements but unable to take advantage of the
structural advantages of larger players who are able to benefit
from their Advanced Internal Ratings Based (AIRB) status for
determining risk-weightings. This makes providing the
required return on capital challenging, particularly in
mainstream lending, which would benefit from additional
competition.
With respect to funding, the Bank of England’s continued
planned withdrawal of TFSME (combined with additional
quantitative tightening) will put additional pressure on banks’
funding requirements, with firms needing to either shrink
balance sheets or increase their deposits to replace this form
of funding. Equally, given the high-profile international bank
failures in 2023, we see liquidity remaining a core focus for
banks going into 2024, with firms likely to continue to hold
excess liquidity over minimum requirements.
How we are responding
The capital raise during the year saw us restore all our capital
ratios to above minima including CRD4 buffers.
The cost of capital remains high, both industry-wide and for
ourselves in particular. We are therefore continuing to ensure
we optimise our return on regulatory capital when
determining our product and pricing strategy. Equally, we are
working to ensure we are right-sizing our cost base to aid in
the delivery of sustainable organic capital generation.
We retain high levels of liquidity with a liquidity coverage ratio
(LCR) as at 31 December of 332% (compared to the minimum
requirement of 100%), and were able to weather deposit
outflows in response to press speculation in October 2023.
Our strong levels of liquidity have also allowed us to repay
£550 million of TFSME drawings early.
How we see it
2023 was the hottest year on record globally and we are
continuing to see the impacts of climate change both around
the world and in the UK.
As awareness of environmental and social issues continues to
grow, stakeholders are increasingly scrutinising companies’
responses to these sustainability challenges. In particular,
customers are continuing to have increased expectations of
companies they interact with to deliver for the environment
and wider society.
As well as our own decisions around sustainability, we
recognise the role we play in broader society, primarily
through the decisions over who and what we choose to
finance. We see that the financial system has a central role in
acting as a catalyst for change in broader society and as such
can play an outsized role in contributing to the transition to a
more sustainable and resilient economy.
How we are responding
We recognise the interconnectedness between sustainable
business practices and long-term financial performance and
as a result continue to integrate sustainability into all of our
core operations and decision-making processes.
We continue to deliver our plan to achieve our 2030 net zero
carbon emissions goal. In achieving this we remain committed
to being transparent in respect of our reporting of progress to
deliver this.
As a community bank we also recognise the importance of
giving back to society and this will continue to be achieved
through a range of initiatives which utilise our physical and
digital channels.
Our corporate governance structure ensures that
sustainability remains a key focus as part our ambition to be
the number one community bank.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Chief Executive Officer’s statement
8
With 3.0 million customer accounts covering retail, SME
and commercial, a national network of stores and our
continued digital investments we remain the UK’s leading
full-service mid-sized bank.
The start of the year began with continued
momentum from 2022, which saw us return to
profit on both a statutory and underlying basis
and deliver our best set of results for several
years in the first half. For the full year, we
recognised an underlying loss before tax
of £16.9 million for 2023 (2022: loss of
£50.6 million), impacted in part by deposit
pricing actions taken in the second half of the
year. On a statutory basis, we delivered a
profit before tax of £30.5 million (2022: loss of
£70.7 million), largely as the result of a one-off
gain from the capital restructure completed
in November.
2023 saw the continued execution of our
strategic priorities with tangible progress
made across all areas. We enter 2024 with an
improved and longer-dated capital position,
and continue to take a disciplined approach
to cost saving and have commenced further
activities to achieve the savings outlined, all
of which will set us up to continue on our
path to sustainable profitability, and deliver
on our ambition to be the number one
community bank.
Capital package
Going into the year we were always clear
about our need both to access the capital
markets comfortably ahead of the call date
for our MREL in October 2024 and to deliver
profitability as a prerequisite. The increased
capital requirements in July, combined with
the setback in September to our ambition to
achieve AIRB accreditation for residential
mortgages, put pressure on our capital
position, impacting the levels to which we
were able to grow capital organically.
Speculative media reporting contributed to
our decision to accelerate and address our
capital position in the fourth quarter.
The ability to secure the £925 million capital
package demonstrates our investors’ faith in
us and in our customer service-centric model.
We believe that this capital support provides
certainty for us going forward.
Strategic delivery
Throughout the year, our customers have
remained supportive and our promise to
provide better service and to support the
communities in which we operate continues
to resonate. Progress has been achieved in
the automation of back-office processes and
investment in core infrastructure aimed at
ensuring the stability and security of systems.
Alongside this we have seen the launch of new
products including enhanced commercial
overdrafts and business credit cards. Whilst
we see near-term pressure on profitability
resulting from the increased cost of deposits
gathered in the final quarter of the year, we
are optimistic that the good work put in
throughout 2023 continues to set us up well
for the future.
We remain committed to increasing
market share as we support more
customers and communities.
Daniel Frumkin
Chief Executive Officer
Metro Bank Holdings PLC Annual Report and Accounts 2023
Metro Bank Holdings PLC Annual Report and Accounts 2023
Chief Executive Officer’s statement
Continued
Revenue
Revenue during the year benefitted from
increases in base rates and the continued
growth in customer accounts, with total
underlying income increasing 5% to
£546.5 million (2022: £522.1 million).
Like most banks, a large proportion of our
lending is fixed rate and therefore, despite
base rates having stabilised, we are continuing
to see the benefits as older loans mature into
a higher rate environment. We will see further
upside in 2024, 2025 and 2026 as loans and
fixed rate treasury investments continue to
reprice. Offsetting this, the weakened outlook
for base rates and the competitive nature of
the lending market will likely compress
front-book loan pricing through 2024.
We also saw the increase in base rates flow
through to deposit pricing, particularly as
competition in the savings market continued
to increase. As cost-of-living pressures
continue, which is leading to customers
utilising current account balances, and
industry-wide drawings under TFSME mature,
we envisage these pressures continuing
through 2024 and for the medium term. To
aid this, we have been investing in our deposit
capabilities, including preparing for the ISA
season in 2024 through improvements to our
ISA switching capabilities. We have also
started to provide savings accounts on
deposit aggregator sites and are launching a
new ‘boost’ proposition for savings accounts.
While these deposits are more expensive than
our core current account deposits, they are
priced to be net interest income accretive,
enable more lending and help to support our
strong liquidity position.
Strategic report
Governance
Risk report
Financial statements
Additional information
9
Following the announcement of the successful
completion of the capital package in
November, we launched a deposit campaign
to replace the deposits we lost in October
resulting from speculative media reports.
As a result, our deposits ended the year at
£15.6 billion, up 1% from the level reported in
our interim results. This campaign and the
prevailing higher rate environment, saw
cost of deposits in the second half of the
year increase to 1.29%, up from 0.66% in the
first half.
Our priority remains growing the number,
depth and quality of our deposit relationships
and we remain committed to supporting more
customers and communities.
Costs
We continue to take a disciplined approach to
costs, with underlying costs slightly down year
on year, despite the continued high inflationary
environment. The executive team has worked
hard to improve processes helping manage
costs. Our processes are still not as efficient
or as automated as we would want which
gives us the opportunity to identify and
deliver further cost savings going forward. As
committed at the time of the capital package,
we are on track to deliver up to £50 million in
annualised cost savings. As part of this
approach, we took the decision to reduce our
store hours, to focus on the times when
customers need us most, and introduced
changes to our organisational structure
resulting in a reduction of roles. As a people-
focused organisation, it is always incredibly
difficult to let good colleagues go. I want to
thank all of them for their hard work and
dedication to Metro Bank. Whilst this was a
very tough decision, it was ultimately
necessary and is a key step in helping support
our long-term sustainability. The exits agreed
result in £43 million of annual savings and we
remain confident in exceeding £50 million in
total annual cost savings in 2024.
We will continue to explore options to further
right-size our cost base in the months ahead,
as we look to secure a sustainably profitable
future for the bank. Part of this will include
continuing to review our options around stores
and our real estate which remain one of the
largest components of our fixed cost base.
Infrastructure
Whilst we have reduced our operating hours,
we remain committed to stores, which remain
central to our proposition. During the year, we
acquired a freehold site in Chester which will
be our next new location. We continue to
focus on building a pipeline to deliver our
growth in the years ahead and have placed
a greater focus on securing locations with a
strong SME presence. Further store openings
in the north of England will predominantly
focus on out-of-town locations with parking
which are easier for businesses to access and
can serve larger populations.
Although a physical presence remains core
to our offering, our priority will be to continue
to digitalise to ensure we remain both
competitive against larger high-street peers
and new digital entrants. A particular area of
focus will continue to be on enhancing our
self-service features as well as building out our
SME offering where we feel we are continuing
to win market share in an area which remains
underserved by the market.
During the year we worked to transform our
mortgage origination platform, which has
streamlined the process for both mortgage
intermediaries and customers. As mortgages
will continue to be the largest component of
our lending portfolio we envisage that this
investment will yield improvements in
productivity and allow us to launch a greater
range of products.
Where to find out more
How we are planning
on delivering
Our financial approach
Our results for the year reflect the
challenges faced in the final quarter of
the year. Ensuring we are on a path to
sustainable profitability remains the
highest priority for the ExCo.
Read more in our financial review
on pages 16 to 19
Our approach to sustainability
As a community bank we recognise the
important role we play in delivering the
sustainability agenda. Key to this is
ensuring the decisions we take are right for
our customers, communities, colleagues,
suppliers and the environment.
Read more in our environmental,
social and governance review on
pages 20 to 33
Our approach to managing risk
Maintaining an effective approach to
risk management underpins and
strengthens our ability to deliver, ensuring
decisions made are managed within
acceptable limits.
Read more in our risk report on
pages 124 to 157
Metro Bank Holdings PLC Annual Report and Accounts 2023
Chief Executive Officer’s statement
Continued
In May, we completed the implementation of
our holding company marking an important
milestone in meeting our requirements in
respect of the Bank of England’s resolution
framework.
Balance sheet optimisation
Over the course of 2023, the management
team actively constrained lending to around
replacement levels in an effort to build capital
organically. Following the capital raise it is
now more important than ever that we
continue to optimise our balance sheet and
utilise our capital stack most efficiently to get
the best possible sustainable returns for
all stakeholders.
The return to a more normalised interest rate
environment has led us to shift our focus away
from unsecured lending back towards
commercial, whilst mortgages will remain the
largest component of our balance sheet. With
the feedback from the PRA that we would not
receive AIRB approval in 2023, our focus is to
participate in niche parts of the mortgage
market where our manual underwriting
capacity is a competitive advantage. This will
likely mean that we seek to compete less for
vanilla mortgages where AIRB-approved
competitors benefit from a materially lower
RWA weightage than either standardised
weightages or those expected under the
Basel 3.1 regulations. The pivot to commercial
and specialist lending will drive higher risk
adjusted returns but will also increase risk
density. In order to meet customer demand
and improve profitability, we will manage the
balance sheet to optimise returns, which may
include (but not limited to) periodically
utilising capital buffers or electing to access
capital markets to support growth.
We are determined that the right-sizing of our
workforce will not impede our ability to be a
great place to work or a great place to bank.
We will continue to foster an environment
where colleagues can grow their careers and
thrive. I was particularly pleased that during
the year we were voted as a top 10 place to
work in the UK and our annual Voice of the
Colleague survey, conducted in October,
saw some of the best results in our history as
well as being significantly higher than the
global benchmark.
We continue to focus on our culture of
promoting from within, with over 40% of the
positions in the first half of the year filled by
colleagues being promoted or moving around
the business. For the remaining hires, we
have amplified our community focus when
recruiting talent, increased opportunities
available for apprentices from disadvantaged
backgrounds, run a series of roadshows
for professional returners trying to get back
into the workplace and engaged with later
in career populations to support our
diverse workforce.
In May, we launched a five-year partnership
with the England and Wales Cricket Board,
later jointly pledging to treble the number of
girls’ cricket teams to support the development
of women’s and girls’ cricket both at a national
and community level, with the aim of
delivering a lasting legacy for female
representation in the sport. The partnership
includes the sponsorship of key sporting
events including the Women’s Ashes where
we are the title partner.
Communication
Our focus on delivering excellent customer
service is reflected in the latest Independent
Competition and Markets Authority (CMA)
survey where we retained the number one
spot for in-store service for personal and
business customers. 2023 also saw us
implement Consumer Duty and sign up to the
Government’s Mortgage Charter supporting
our commitment to customers, especially as
many dealt with the effects of increases in the
cost of living.
Whilst we have reduced our store opening
hours in 2024, we remain committed to
maintaining a physical presence and ensuring
that stores remain both accessible and at the
heart of local communities. In 2023, we rolled
out our British Sign Language service which
customers can now access in any of our stores,
on the phone, in app or online. Fifty-two of our
stores are also now designated as Safe Spaces
– places where those suffering domestic abuse
can go to safely start the process of rebuilding
their lives.
Our community bank ethos also saw us deliver
our financial education programme Money
Zone in record numbers. The programme has
now been delivered to 2,800 schools and
250,000 children, which in 2023 included
delivering to 1,100 children in just one day at
the Hertfordshire Agricultural Society Food
and Farming Day. We have also introduced
bespoke programmes for our armed forces’
communities as well as for teenagers aged
16 to 18.
Alongside Money Zone, we support our
communities through a wider range of
initiatives. We have dedicated over 5,600
hours to local causes ranging from litter picks
to sponsored walks, as well as celebrating
large scale community events, notably Pride
in London, Birmingham and Cardiff.
10
Looking ahead
2023 has been a varied year for performance
with the continued strong momentum towards
achieving underlying profitability in the first
half of the year and our successful capital raise
being key highlights. These have been offset
by continued external headwinds combined
with the need to make difficult decisions in the
last quarter of the year. Some of these
decisions, including our higher cost of
deposits will continue to impact earnings
potential into 2024, whilst we will not fully
benefit from the effects of loan and
investment repricing until 2026, therefore
acting as a drag on our near-term results.
Despite this, I remain confident that the work
we have undertaken has allowed us to build
the foundations of a structurally profitable
bank – which is fundamentally different from
where we were four years ago.
I remain grateful for the continued support of
all our colleagues, customers, debt holders
and shareholders as well as wider stakeholders.
Daniel Frumkin
Chief Executive Officer
16 April 2024
Metro Bank Holdings PLC Annual Report and Accounts 2023
Business model
Strategic report
Governance
Risk report
Financial statements
Additional information
11
Our business model is simple. By delivering great customer service
we can attract and grow a sustainable deposit base, allowing us to
lend money to help individuals and businesses fund their ambitions.
is underpinned by...
Environmental and
social priorities
We ensure that our business
model and approach is focused
on the areas that matter most
to our stakeholders.
Read more on pages 20 to 43
Risk management
We continue to focus on enhancing
our control environment and risk
capabilities, ensuring we balance
the risks that need to be taken
to deliver our strategy against
ensuring this is done in a managed
and appropriate manner.
Read more on pages 124 to 157
Governance
We are continually improving our
approach to governance. Ensuring
we maintain a robust governance
framework is important in allowing
all stakeholders to have confidence
that we are making decisions in the
right way.
Our model
delivers value for...
Combined
with...
Integrated
model
Unique
culture
Creating
long-term
value allowing
investment
in...
Creating FANS
who bring...
Risk-adjusted
returns
Service-led
core deposits
Allowing us
to generate...
How we make money
We make money through the difference we charge on the loans we issue
and the deposits we take, less our operating costs and changes in ECL.
Customers
Without the loyalty of our customers we
would not exist. Ensuring we are turning
our customers into FANS ensures the
enduring success of our business.
Colleagues
We strive to make Metro Bank a great
place to work; where colleagues can excel,
grow and be themselves.
Investors
We are committed to ensuring that we can
be an attractive investment for equity and
bondholders. We never take our investors
for granted and are working hard to build
and maintain trust.
Regulators
We continue to play our part in ensuring
a safe and stable financial system.
Suppliers
Building a trusted supplier base is key
to delivering our ambitions. We want
to ensure that as we grow they share in
our success.
Communities
To be the number one community bank
we have to be at the heart of the
neighbourhoods we serve, delivering
societal value day-in day-out.
Read more on pages 51 to 123
Read more on pages 16 to 19
Read more on pages 59 to 61
Metro Bank Holdings PLC Annual Report and Accounts 2023
Business model
Continued
Integrated
model
Our integrated model
aims to combine delivery
through physical and
digital channels.
Unique culture
Our colleagues deliver
superior service and are
at the heart of our
people-people banking
approach.
12
Progress in 2023
Operating environment
Priorities
Risks
KPIs
We continue to deliver stand-out
service through our stores and
digital presence.
Our focus on our SME offering
has seen us launch a new
commercial overdraft and
business credit card which
includes straight through
processing and automated
decision-making. During the
year we transformed our
mortgage origination platform,
streamlining the process for
both mortgage intermediaries
and customers. As mortgages
will continue to be the largest
component of our lending we
envisage that this investment
will yield improvements in
productivity, allowing us
to launch a greater range
of products.
We pride ourselves on being a
bank that puts our colleagues at
the heart of what we do. 2023
has been an incredibly difficult
year with changes to our
organisational structure resulting
in the reduction of 1,000 roles in
early 2024.
Despite this, we continue to be
focused on being an employer of
choice. In 2023 we were awarded
the Diversity, Equity & Inclusion
Award from The Top 1%
Workplace Awards 2023,
reflecting our commitment to
attract and retain talent from
within the diverse communities
we serve.
Competition
The UK banking market
continues to be very competitive
with high levels of innovation.
To remain competitive we need
to continue to invest in all of our
channels to ensure they meet our
customers’ needs.
Consumer behaviour
Customers are continuing to
place a strong reliance on
in-person service, although
the move to digital continues.
Focus on sustainability
We continue to see strong
pressure from all of our key
stakeholders to ensure all of
our operations are sustainable.
Competition
The market for talent remains
highly competitive, and the high
inflationary environment has
continued to put pressure on
wages. We must remain
competitive to help colleagues
and retain talent.
We will explore options to
further right-size our cost base in
the months ahead. While we
remain committed to serving
customers through stores, we
will look to optimise how this
best works for our customers
and for our business. This is
expected to be through focusing
on opening smaller sites in
strategic locations in the north of
England, and through
reassessing our store opening
hours, based on how and when
our customers use our services.
Although a physical presence
remains core to our offering, our
focus will be to digitalise to
ensure we remain competitive
against both larger high-street
peers and new digital-first or
digital-only entrants.
We are committed to ensuring
our people are our key focus
and that recent cost reduction
measures do not impact our
unique culture. We will continue
to support a diverse and inclusive
workforce where colleagues can
be themselves, investing in
training and promoting from
within where possible.
Our cost reduction initiatives
in 2024 will focus on further
automation to free up
colleagues’ time and allow
them to focus on what they
do best – creating FANS.
Our principal risks in respect
of delivering our integrated
model are:
• Conduct risk.
• Operational risk.
• Strategic risk.
We continue to enhance our
processes and systems to
minimise the risk of operational
issues, and to continue delivering
on our strategy.
Number of accounts (m)
2023
2022
Customer satisfaction
New to bank
2023
2022
Existing
2023
2022
3.0
2.7
76
85
36
33
Our principal risks in respect of
delivering our unique culture:
Colleague engagement (%)
• Conduct risk.
• Legal risk.
• Operational risk.
• Strategic risk.
Planned automation and
strategic re-focus is key to
managing risk within a smaller
workforce.
2023
2022
75
75
Senior leadership diversity
BAME
2023
2022
Female
2023
2022
20
19
38
41
Read more about our
operating environment on
pages 6 to 7
Read more about risk on
pages 125 to 157
Read more KPIs on
pages 14 to 15
Metro Bank Holdings PLC Annual Report and Accounts 2023
Business model
Continued
Service-led
core deposits
We seek to attract core
deposits through our
service-led relationship
banking model with
specific emphasis
on our core retail and
SME franchise.
Risk-adjusted
returns
We seek to balance our
lending mix through
a broad yet simple
product offering that
is priced proportionate
to risk.
Strategic report
Governance
Risk report
Financial statements
Additional information
13
Progress in 2023
Operating environment
Priorities
Risks
At the start of October, several
speculative media reports on the
strength of our capital position
led to an increased outflow of
customer deposits. Whilst
liquidity levels remained strong,
a deposit campaign was
launched in the last months of
the year to replace the deposits
lost. As at 31 December 2023,
we had returned to broadly the
same deposit levels as we
reported for the third quarter,
albeit at a higher cost.
Through 2023, we have invested
in our deposit capabilities,
started to provide savings
accounts under our RateSetter
brand on deposit aggregator
sites, and launched new limited
edition savings accounts.
Throughout 2023, we actively
constrained lending to around
replacement levels in an effort to
preserve capital. Going into the
year we were always clear about
our need to access the capital
markets, however external
pressures caused us to
accelerate our initial timetable.
We successfully completed the
delivery of a capital package in
November, following which we
decided to refocus our attention
on commercial and mortgage
lending, with a shift away from
consumer lending.
Like most banks, a large
proportion of our lending is fixed
rate and therefore despite base
rates having stabilised, we are
continuing to see the benefits as
older loans mature into a higher
rate environment.
Competition
As interest rates have risen,
competition for deposits has
increased, both from challenger
banks and larger incumbents.
Alongside this, newer digital-
only fintechs continue to grow.
Regulatory environment
The regulatory environment
continues to work towards
ensuring the fair treatment of
customers with a particular focus
on vulnerable customers and
Consumer Duty. This trend is
seeing deposit-taking
institutions, like ourselves,
implement an increasing amount
of regulatory requirements.
During 2024, our focus will be
on utilising the deposit building
capabilities we built during 2023.
A key component of this will be
the new ISA season with a
particular emphasis on switching.
Alongside this, we will also
launch a new ‘boost’ proposition
for savings accounts, which will
provide us with greater flexibility
in the deposit pricing.
We also concentrate on
continuing to grow our current
account numbers, with priority
geared towards increasing
business accounts, where
balances tend to be higher, fee
earning opportunities are greater.
Competition
Competition in the lending space
remains strong notably in the
mortgage space from larger
competitors as well as specialist
lenders in other key segments.
Following the capital raise, we
continue to optimise our balance
sheet and utilise our capital stack
most efficiently to get the best
possible sustainable returns for
all stakeholders.
We plan to shift our focus away
from unsecured lending back
towards commercial, whilst
mortgages will remain the
largest component of our
balance sheet with a focus on
niche parts of the mortgage
market where our manual
underwriting capacity is a
competitive advantage.
Capital and funding regime
The UK’s rigorous capital regime
continues to see large financial
firms, including ourselves,
dependent on capital markets to
support regulatory requirements.
Economic and political outlook
We expect interest rates to
continue at a more normalised
level in 2024, but financial
pressure on households
and an uncertain political
outlook remains.
Read more about our
operating environment on
pages 6 to 7
Our principal risks in respect
of delivering service-led core
deposits are:
• Conduct risk.
• Financial crime.
• Legal risk.
• Liquidity and funding risk.
• Market risk.
• Regulatory risk.
We continue to actively manage
our balance sheet to ensure we
retain high levels of liquidity and
appropriately hedge our interest
rate risk.
Alongside this, we continue to
enhance our controls and review
our products to both protect our
customers and ensure we are
delivering fair outcomes.
Our principal risks in respect
of delivering risk-adjusted
returns are:
• Conduct risk.
• Credit risk.
• Market risk.
• Regulatory risk.
• Model risk.
• Capital risk.
• Strategic risk.
We take a prudent approach to
lending to minimise the risk of
losses. We continue to review
and update our credit models to
support this issue.
KPIs
Cost of deposits (%)
2023
2022
0.20
0.97
Cost of risk (%)
2023
2022
0.26
0.32
Loan-to-deposit ratio (%)
2023
2022
79
82
Total capital plus
MREL ratio (%)
2023
2022
22.0
17.7
Read more about risk on
pages 125 to 157
Read more KPIs on
pages 14 to 15
Metro Bank Holdings PLC Annual Report and Accounts 2023
Key performance indicators
14
Our KPIs are the metrics we monitor to check we are
on track with the delivery of our strategy as well as to
assess how our business model is performing.
Link to business model
Components of our business model
Our business model is set out on page 11.
Further details of each component of our
business model can be found on pages 12 to
13, including how our KPIs link to measure our
performance for each of these components.
KPI performance during 2023
Despite the challenging operating
environment in 2023, we have performed
robustly on the majority of our KPIs. A
particular highlight has been maintaining
record colleague engagement scores and the
continued growth in customer numbers.
Customer satisfaction remains a key area of
focus as whilst our scores remain favourable
compared to market peers, we want to ensure
the reversal of the decrease seen in year on
new account openings, as well as to continue
to increase the net promoter score on
continuing relationships.
In respect of our financial metrics, we have
reported a statutory profit and a smaller
underlying loss for the year. Equally our capital
ratios have improved following successful
delivery of the capital package during
the year.
Output of our business model
The output of our business model is to
generate long-term value and create tangible
book growth, measured through:
• Total shareholder return.
• Return on tangible equity.
Link to remuneration approach
Our approach to remuneration for
management is based on a simple and clear
scorecard. The scorecard measures are
aligned to the four components of our
business model to ensure management is
focused on these. In addition to this we
provide an LTIP which is linked to our
scorecard outcomes of long-term value
generation and tangible book growth.
Alternative performance measures
Where a financial KPI is an alternative
performance measure a reconciliation to the
nearest statutory measure can be found on
pages 230 to 234.
Non-financial
Customer accounts (m)
Colleague engagement
2023
2022
2021
3.0
2.7
2.5
2023
2022
2021
75
75
69
How we define it
Number of active customer accounts.
Why it is important
Growing our customer accounts is key to our
franchise and validates that our approach is
working and that our proposition resonates
with customers.
How we define it
The result is taken from our annual Voice of
the Colleague survey.
Why it is important
Attracting and retaining talent is vital to
delivering superior service and preserving
our culture and therefore we want to ensure
colleagues enjoy working for us.
Customer satisfaction (%)
Senior leadership diversity (%)
New account openings
Female
2023
2022
2021
76
85
90
2023
2022
2021
Continuing relationships
Minority ethnic
38
41
43
20
19
20
We did see a noticeable increase in our
cost of deposits, which was driven by a
combination of rising base rates as well as
the cost of the deposit initiatives undertaken
in the fourth quarter.
2023
2022
2021
36
33
42
2023
2022
2021
Key
Score card measure
LTIP measure
Alternative performance measure
How we define it
Net promoter score for new account openings
and continuing customer relationships.
Why it is important
Our purpose is to create FANS and as such
ensuring strong ongoing levels of customer
satisfaction is important in measuring this.
How we define it
Proportion of female/minority ethnic colleagues
amongst our senior leadership team (ExCo
and their direct reports).
Why it is important
Ensuring diversity amongst our senior
management ensures we are representative
of the communities we serve and our colleagues
as a whole. This means we are more likely to
make decisions that are beneficial to all our
stakeholders and help us deliver on our strategy.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Key performance indicators
Continued
Financial
Strategic report
Governance
Risk report
Financial statements
Additional information
15
Statutory profit/(loss) before tax (£m)
Underlying loss before tax (£m)
Total capital plus MREL ratio (%)
2023
2022
2021
(245.1)
30.5
(70.7)
2023
2022
2021
(171.3)
(16.9)
(50.6)
2023
2022
2021
22.0
17.7
20.5
How we define it
Our earnings before tax as defined by International Accounting
Standards (IAS) and International Financial Reporting Standards
(IFRS).
Why it is important
Achieving sustainable profitability is the key financial measure to
demonstrate we are creating long-term value.
How we define it
Our statutory earnings adjusted for certain items that distort
year-on-year comparisons.
Why it is important
It provides further understanding of the underlying trends in
the business.
How we define it
Our total capital plus MREL expressed as a percentage of RWAs.
Why it is important
Our capital ratio represents the level of solvency of the bank, and
the ability to be resilient in events of stress. This is important for
all our stakeholders.
Cost of deposits (%)
Cost of risk (%)
Statutory cost:income ratio (%)
2023
2022
0.20
2021
0.24
0.97
2023
2022
2021
0.26
0.32
0.18
2023
2022
2021
90
106
153
How we define it
Interest expense on customer deposits divided by the average
deposits from customers for the year.
Why it is important
Our ability to attract service-led core deposits is a component of
our business model with cost of deposits being a key determinant
in measuring this.
How we define it
ECL expense divided by average gross loans for the year.
Why it is important
We seek to minimise our cost of risk, balanced with the interest
received, to ensure we are optimising our lending.
How we define it
Total costs (excluding ECL expense) expressed as proportion
of total income.
Why it is important
As we become more efficient, the ratio decreases and indicates
our path to achieve the relevant scale for our capabilities of
products and services.
Return on tangible equity (%)
Loan-to-deposit ratio (%)
Total shareholder return (%)
2023
2022
2021
(28)
4
(10)
2023
2022
2021
79
82
75
2023
2022
2021
(94)
(71)
(41)
How we define it
Earnings for the year divided by average tangible shareholders’
equity (total equity less intangible assets).
How we define it
Net loans and advances to customers expressed as a percentage
of total deposits.
How we define it
Total capital gains and dividends returned to investors over a
three-year rolling period.
Why it is important
This is the strategic output of our business model and how we
judge success.
Why it is important
As we seek to be a deposit funded bank, ensuring we maintain an
appropriate loan-to-deposit ratio is a key measure in managing this.
Why it is important
We want to ensure shareholders are rewarded for their continued
investment in us.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial review
Summary of the year
2023 was another important year for us as we
returned to profit on both a statutory and
underlying basis in the first half of the year,
established our new holding company and
secured a successful capital package that will
allow us to continue to profitably grow the
business over the coming years.
For the full year ended 31 December 2023,
we recorded an underlying loss before tax of
£16.9 million, a reduction of 67% from 2022
(2022: loss of £50.6 million), partially
reflecting the higher cost of deposits and
wider market trend of declining current
account balances.
On a statutory basis we recognised a profit
before tax of £30.5 million (2022: loss of
£70.7 million), reflecting the one-off gain on
the refinancing of our existing Tier 2 debt as
part of the capital package.
Additionally, non-underlying items included
£20.2 million of costs associated with our
announced cost reduction plan which is
designed to improve the ongoing efficiency
of our business as we look to deliver
sustainable profitability.
Our results were impacted by the setback in
September to our ambitions to achieve AIRB
accreditation for residential mortgages and
associated speculative media reports
regarding our capital position led to an
outflow of customer deposits, with a decrease
in current account balances. Our strong levels
of liquidity and prudent approach meant these
outflows were manageable and we were able
to quickly replace these balances with
longer-term deposits, albeit at a higher cost,
which contributed to a material increase in
our cost of deposits in the fourth quarter.
16
Despite these challenges, we have entered
2024 with both a stronger capital and liquidity
position. We have taken the first steps to
deliver a disciplined cost reduction programme
that will act to mitigate many of the
headwinds we face and ensure a return to
sustainable profitability.
Statutory and underlying results
Financial information in this report is
prepared on a statutory (taken from our
financial statements on pages 158 to 224)
and underlying basis (which we use to
assess performance on a management
basis). Further details on how we calculate
underlying performance, as well as our
other alternative performance measures
can be found on pages 230 to 234.
Income statement
Underlying net
interest income
Underlying non-net
interest income
Total underlying
income
Underlying operating
expenses
2023
£m
2022
£m
Change
%
411.9 404.2
2%
134.6
117.9
14%
546.5
522.1
5%
(530.2) (532.8)
–
ECL expense
(33.2) (39.9)
(17%)
Underlying loss
before tax
(16.9) (50.6) (67%)
Non-underlying items
47.4
(20.1)
n/a
Statutory profit/
(loss) before tax
30.5
(70.7)
n/a
Interest income
Interest income benefitted from a rising base
rate during the period, increasing 52% to
£855.7 million (2022: £563.7 million). Lending
income continues to be the largest component
of our interest income.
Residential mortgage assets benefitted from
higher rates for new and retained customers,
with asset yields increasing to 3.37% (2022:
2.65%). Our retail mortgages are 92% fixed,
with an average time to reversion of 2.41 years
(31 December 2022: 2.45 years); we expect to
see continued rate growth in the years ahead
as older balances roll-off and are replaced
with new lending at a higher rate.
Our commercial lending portfolio income
grew due to higher yields, predominantly
driven by our floating business loans which
have seen greater yields as a result of the
higher base rate environment, as well as
the continued attrition of lower-yielding
government-backed lending which was
written during the COVID-19 pandemic.
Commercial lending remains a strong and
growing part of our book; as part of our
strategy, we will continue to rotate and grow
our commercial lending, with a particular
focus on small and medium enterprises as
well as more specialist lending.
Consumer lending income also increased,
driven by higher yielding originations due to
the base rate environment. In 2024, we will no
longer provide new consumer lending and
instead focus on the commercial and
specialised mortgages for new originations.
We also saw the benefits of increased rates
flowing through to our treasury portfolio with
interest income on our cash and investment
securities increasing. This increase was also
aided by our decision to adjust our portfolio
mix towards lower risk-weighted investment
securities and restrict levels of new lending
origination to repayment levels.
Interest expense
Interest expense increased 178% to
£443.8 million (2022: £159.6 million). This
increase reflected the combination of the
continued gradual reduction in non-interest
bearing personal current accounts as well as
an increase in cost of deposits reflecting the
rising rate environment.
The reduction in average balances started
across the industry in late 2022 in response
to increases in the cost of living, as customers
looked to pay down debt and move excess
deposits into savings accounts, as well as
weather the higher inflationary environment.
We saw additional attrition in the fourth
quarter following media speculation
surrounding our capital options although we
have continued to see the number of current
accounts grow.
During 2023, we have enhanced our deposit
capabilities, including serving aggregators and
the launch of limited-edition savings products.
This has successfully aided deposit inflows,
whilst also increasing our average cost of
deposits to 0.97% (2022: 0.20%).
Our wholesale funding expenses have also
increased as a function of interest rates, where
the largest expense is the Bank of England’s
Term Funding Scheme (TFSME) which is
directly linked to base rate. Due to a higher
rate environment, we have seen expenses for
TFSME increase to £161.3 million (2022:
£55.5 million). Despite this increase, it remains
an additional stable cost of funding and is
accretive to net interest income.
During the year, we repaid early the TFSME
maturities scheduled for 2024 and the start of
2025. This repayment was partially funded by
repurchase agreements, which represented a
more cost-effective form of funding. We also
used repurchase agreements in the fourth
quarter which provided additional liquidity,
which were largely repaid by the year-end.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Strategic report
Governance
Risk report
Financial statements
Additional information
17
Operating expenses
Non-underlying items
Expected credit loss expense
Financial review
Continued
A combination of these factors, along with
the increase in base rate, led to an increase
in interest expense on repurchase agreements
from £3.4 million in 2022 to £50.1 million
in 2023.
As part of the capital package, our existing
Tier 2 notes, which repriced to 9% in June 2023,
were redeemed and replaced with £150 million
of new Tier 2 notes at a coupon of 14%. The
redemption date of our existing MREL debt was
extended, and £175 million new MREL debt
issued, both at a coupon of 12%.
The repricing and restructuring has
resulted in an increase to interest expense
on debt securities in 2023 which rose from
£48.7 million in 2022 to £55.7 million in 2023;
this increased cost of funding will continue
into the future. Despite the increased cost,
the refinancing of our wholesale debt has
enhanced our balance sheet strength,
provides additional certainty to all
stakeholders and allows us greater runway
to continue to deliver our strategy thereby
assisting in delivering greater earnings
potential in the future.
Non-interest income
Net fee and commission income has increased
by £8.6 million to £90.4 million in 2023 (2022:
£81.8 million), reflecting growth in retail and
business current account volumes. Interchange
income grew by £3.0 million to £40.0 million
(2022: £37.0 million) reflecting increased
consumer spending using a Metro Bank card.
Safe deposit box income increased by
£1.7 million to £18.2 million (2022: £16.5 million)
reflecting higher volumes as occupancy levels
increased, driven by greater consumer
demand in strategic geographical locations.
Foreign exchange income has remained
broadly static year on year at £34.0 million
(2022: £34.1 million), providing a valuable
source of income, whilst having minimal
impact on our capital ratios.
Underlying cost: income ratio
97% 102%
Statutory cost: income ratio
90% 106%
2023
2022
Despite inflationary pressures, our disciplined
approach to cost management has led to a
slight decrease in underlying operating
expenses to £530.2 million compared to
£532.8 million in 2022.
This was aided by the decision at the end of
2022 to reduce the number of consultants
and contractors used in the business, and to
streamline our project delivery capabilities.
Salary costs remain our biggest contributor
to operating expenses and in the current year
we incurred costs of £241.2 million (2022:
£236.6 million). A £13.8 million provision for
the cost of the restructure has been booked
in 2023 as a non-underlying item.
Professional fees have reduced significantly
by £15.2 million to £23.2 million (2022:
£38.4 million) as we have moved away from
the use of contractors. In addition to this,
information technology costs have also
fallen by £2.5 million to £59.7 million (2022:
£62.2 million), reflecting our cost discipline.
Occupancy expenses continue to be a fixed
cost being driven by our store portfolio;
costs have remained broadly flat despite
the inflationary environment as we continue
to actively reduce the cost base whilst
maintaining our presence on the high street.
The continued discipline in operational cost
has also funded areas of increased expenses,
including greater investment into deposit
product capability as well as a new multi-year
sponsorship of women and girls cricket with
the ECB. We see this as part of our ongoing
commitment to become the number one
community bank.
2023
£m
2022
£m
Change
%
31 December 2023
ECL
allowance
£m
Coverage
ratio
%
NPL ratio
%
Retail mortgages
19
0.24%
1.87%
Impairment and
write-off of property,
plant, equipment and
intangible assets
(4.6)
(9.7) (53%)
Consumer
lending
Remediation costs
–
(5.3)
n/a
Commercial
Transformation costs
(20.2)
(3.3) 512%
Total lending
108
72
199
8.33% 5.94%
2.13%
1.59%
4.91%
3.11%
Capital raise and
refinancing
74.0
–
n/a
Retail mortgages
20
0.26%
1.45%
31 December 2022
Holding company
insertion costs
(1.8)
Non-underlying items 47.4
(1.8)
–
Consumer
lending
(20.1) (336%)
Commercial
Total lending
75
92
187
5.07% 3.38%
2.21% 4.59%
1.41%
2.65%
We have recognised non-underlying income
in 2023 of £47.4 million (2022: expenses of
£20.1 million) driven by the capital package
secured in October 2023 which resulted in a
40% haircut, and a £100 million gain, on the
£250 million Tier 2 debt issuance. As part of
the capital package, we incurred costs of
£26.0 million. These consisted of fees paid
to our advisors in relation to the debt
restructuring, the acceleration of unamortised
issuance costs, as well as the impacts from
the breaking of the hedge relationships the
instruments were previously in.
This is offset by the recognition of £20.2 million
of transformation costs, which includes a
£15.0 million provision for restructuring and
associated costs. We have benefitted from the
completion of remediation activities which
were settled in 2022.
We recognised an expected credit loss
expense of £33.2 million in year 2023 (2022:
£39.9 million), reflecting the challenging
economic environment arising from the
increased cost of living. The decrease from
2022 is due to management actions to
optimise the credit quality of new lending,
combined with releases relating to commercial
customers that we have worked with and
have secured repayments from. We continue
to maintain management overlays and
adjustments of £23.4 million (2022:
£30.9 million) which represents 12% of ECL
stock (31 December 2022: 16%). As at
31 December 2023, our coverage ratio was
1.59% (2022: 1.41%) and we believe we remain
appropriately provided at this stage in the
economic cycle.
Consumer lending accounted for the majority
of the expected credit loss expense driven by
loan maturation and deteriorated performance
due to macroeconomic factors. The loan
coverage ratio for consumer lending ended
the year at 8.33% compared to 5.07% as at
31 December 2022.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial review
Continued
18
Commercial lending has been more resilient
in 2023, with a release of expected credit
losses during the year. The coverage ratio for
commercial lending has decreased slightly to
2.13% as at 31 December 2023, down from
2.21% as at 31 December 2022.
We also saw a release of expected credit
losses in respect of our retail mortgage
portfolio, where credit quality remains high,
leading to a slight decrease in coverage ratio
from 0.26% to 0.24% over the year to
31 December 2023.
Looking forwards into 2024, we expect to
continue the rotation of assets away from
consumer unsecured and towards the
commercial sector where we see strategic
opportunity to support SMEs, a vital segment
of the UK economy. The economic
environment and wider outlook remain
challenging and uncertain; however our
processes ensure we continue to maintain
adequate coverage ratios and continue to
actively manage our portfolios.
Balance sheet
Lending
31 December
2023
£m
2022
£m
Change
%
Retail mortgages
7,817
7,649
2%
Consumer
lending
1,297
1,480
(12%)
Commercial
3,382
4,160
(19%)
Gross lending
ECL allowance
12,496
13,289
(199)
(187)
Net lending
12,297
13,102
(6%)
6%
(6%)
Net loans and advances to customers ended
the year at £12,297 million, down 6% from
£13,102 million as at 31 December 2022, as we
actively managed our RWA capacity reflecting
our capital constraints for the majority of
the year.
The increased interest rate environment is
ensuring that we are achieving a higher return
on regulatory capital in all areas of lending as
new loans are written at higher yields but with
the same risk-weighting.
Retail mortgages continue to form the largest
component of our lending base at £7,817 million
(31 December 2022: £7,649 million),
representing 63% of lending (31 December
2022: 58%). With the feedback from the PRA
that we should not expect to receive AIRB
approval in 2023, our focus going forward will
be to dominate in niche parts of the mortgage
market where our manual underwriting
capacity is a competitive advantage. This will
likely mean that we seek to compete less for
vanilla mortgages with competitors benefitting
from a materially lower RWA weightage than
either standardised weightages or those
expected under the Basel 3.1 regulations.
The commercial portfolio has decreased
from £4,160 million as at 31 December 2022,
to £3,382 million as at 31 December 2023. The
decrease primarily related to our government-
backed COVID relief loans which continue
to run off following the closure of most
schemes in 2021. As at 31 December 2023
outstanding lending under these schemes
totalled £938 million (31 December 2022:
£1,313 million). Although these loans are
highly capital efficient due to their
government backing, as these were written
at the bottom of the interest rate cycle,
they are relatively low-yielding and we
will continue to see the benefit to interest
income as these loans roll-off.
Commercial lending is expected to increase
in 2024 as we shift our asset focus to
commercial and specialist lending, especially
in the SME sector which is currently
underserved in the market. This includes
launching a suite of relationship-driven
products to ensure we can meet all of our
customer needs.
In 2023, we launched our new business credit
card and commercial overdraft, which are fully
digital journeys with automated acceptance
and decision scoring. This comes off the back
of our business overdraft in 2022 which
continues to be popular with customers.
The consumer portfolio has also decreased
to £1,297 million (31 December 2022:
£1,480 million), driven in part to minimise
exposure to a higher risk segment during this
part of the economic environment, but also
partly reflecting our evolving strategic
priorities where we are looking to prioritise
relationship lending as part of our ambition to
be the best community bank.
Treasury portfolio
Over the year, we have continued to optimise
our treasury portfolio to maximise our risk
adjusted return on regulatory capital,
particularly as rates have risen. We ended the
year with £8,770 million of treasury assets
(31 December 2022: £7,870 million), comprising
£4,879 million investment securities and
£3,891 million cash and balances at the Bank
of England (31 December 2022: £5,914 million
and £1,956 million respectively). Our investment
securities remain high quality and liquid,
with 75% being either AAA-rated or gilts
(31 December 2022: 68%).
Other assets
Property, plant and equipment ended the year
at £723 million, down from £748 million as at
31 December 2022. Depreciation continues
to outstrip additions, due to no new store
openings taking place in 2023, although we
are continuing to identify sites for future
stores in the North of England. These sites are
likely to be smaller than previously envisaged
and more likely to be in locations that are
most convenient for surrounding businesses.
Freehold and long-leasehold properties total
30 out of our 76 stores. This strategy
continues to provide us with a more cost-
effective way of delivering our store-based
service-led model.
Intangible assets have decreased to
£193 million, down from £216 million in 2022,
reflecting a more selective approach to
investments. Our investments in 2023 have
included delivering confirmation of payee
services, improved deposit propositions and
a new mortgage platform.
Deposits
Retail customer
(excluding retail
partnerships)
Retail partnership
Commercial
customers
(excluding SMEs)
SMEs
Total customer
deposits
Of which:
Demand: current
accounts
Demand: savings
accounts
Fixed term:
savings accounts
31 December
2023
£m
2022
£m
Change
%
7,235
1,708
5,797
1,949
25%
(12%)
2,898
3,188
(9%)
3,782
5,080
(26%)
15,623
16,014
(2%)
5,696
7,888
(28%)
7,827
7,501
4%
2,100
625
236%
We remain focused on being a service-led
deposit-driven bank. We ended the year with
deposits of £15,623 million (31 December
2022: £16,014 million), a decrease of 2% year
on year but up 1% from 30 June 2023.
Deposits have been gradually decreasing
during 2023 due to the increased cost of living
weighing on people’s savings capacity as well
as the increasingly competitive interest rate
environment which has seen customers both
paying down debt and increasingly move
deposits to higher-earning savings accounts.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial review
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
19
Following press speculation surrounding our
capital raise, we saw a time-limited outflow of
deposits. Core deposit flows have since
stabilised to more recent normal ranges and
we have seen a return to growth in these
balances following the successful completion
of the capital raise. The launch of a deposit
gathering promotion in November 2023 saw
us successfully attract new funding albeit at
a higher cost.
Overall our deposit base continues to remain
diversified with a 57%:43% split between retail
and commercial customers (31 December
2022: 49%:51%).
We expect to continue raising deposits along
with current account growth with planned
store openings in the North of England, as well
as continuing to pursue growth in the Instant
Access and Cash ISA markets.
Wholesale funding
We remain predominantly a deposit funded
organisation, with wholesale funding utilised
where appropriate. Our wholesale funding
continues to be mainly the Term Funding
Scheme with additional incentives for SMEs
(TFSME). During the year we have reduced
our utilisation of the TFSME by £750 million,
reducing our holding to £3,050 million
(31 December 2022: £3,800 million) as we
repaid some maturities due in 2024 and 2025
early. Part of this has been funded by our high
levels of liquidity, as well as via the utilisation
of short-term repurchase agreements which
represented a more cost-effective source
of financing.
Taxation
We recorded a tax charge of £1.0 million
(2022: £2.0 million) in the year. This charge is
primarily due to the offsetting impact of
achieving a statutory profit, against exemptions
in tax law for the gain recognised on the
Tier 2 haircut.
We have unused tax losses of £912 million
(2022: £859 million) for which no deferred tax
asset is being recognised. The current value of
our deferred tax asset is £214 million (2022:
£215 million). There is no time limit on the
utilisation of tax losses and as such the Bank
will recognise a deferred tax asset once
sustainable profitability is achieved.
Liquidity
Our liquidity position remains strong and in
excess of regulatory minimum requirements.
We ended the year with a liquidity coverage
ratio of 332% (31 December 2022: 213%) and a
net stable funding ratio of 145% (31 December
2022: 134%).
We continue to hold large amounts of
high-quality liquid assets totalling £6,656 million
(2022: £4,976 million). This included
£3,642 million of cash held at the Bank of
England (2022: £1,761 million).
Capital
CET1 capital
RWAs
CET1 ratio
Total regulatory
capital ratio
Total regulatory
capital plus MREL
ratio
UK regulatory
leverage ratio
2023
£m
985
7,533
13.1%
2022
£m
819
7,990
Change
%
20%
(6%)
10.3% 280bps
15.1%
13.4% 170bps
22.0%
17.7% 430bps
5.3%
4.2% 110bps
We ended the year with CET1, total capital and
total capital plus MREL ratios of 13.1%, 15.1%
and 22.0% respectively (31 December 2022:
10.3%, 13.4% and 17.7%), above regulatory
minima, including buffers (excluding any
confidential buffers, where applicable), of
9.2%, 10.8% and 21.2%.
The capital raise saw us issue £150 million of
new equity and £175 million in new MREL-
eligible debt. As part of the capital package, a
long-time investor, Spaldy Investment Limited,
became our majority shareholder.
In addition to raising new capital, we also
refinanced all of our existing regulatory debt.
This consisted of £350 million of MREL, which
had a call date in November 2024. The
refinanced debt, along with the new MREL
has a call date of 30 April 2028, providing
additional runway for us to deliver our
strategy. Alongside this, we replaced our
existing £250 million of Tier 2 debt with
£150 million of new instruments. The
£100 million haircut agreed by bondholders
has led to a one-off gain which has been
reported as a non-underlying income amount
in 2023.
We ended the year with risk-weighted assets
of £7,533 million (31 December 2022:
£7,990 million), reflecting the active capital
management we have delivered since the end
of 2022 as well as prudent lending decisions at
this stage in the economic cycle.
At the end of the first half of 2023, we also
completed the implementation of our holding
company marking an important milestone in
meeting our requirements in respect of the
Bank of England’s resolution framework. All of
our regulatory capital and debt capital is now
issued from the new holding company.
Basel 3.1
The PRA has published the first of two
near-final policy statements covering the
implementation of the Basel 3.1 standards for
market risk, credit valuation adjustment risk,
counterparty credit risk, and operational risk,
with remaining elements of the standards
expected to be published in the second
quarter of 2024.
In September 2023, the PRA announced a
delay in implementation of the proposals until
1 July 2025. However, the phase in period for
the output floor was reduced from 5 years to
4.5 years to maintain full implementation by
1 January 2030.
Based on our balance sheet and lending mix
as at 31 December 2023 and the current
proposals, our initial assessment of the
impact indicates that there should be no
material change to our capital position on
implementation day. It should be noted that
the rules are still subject to change.
Looking ahead
We enter 2024 with a stronger and longer
dated capital base, putting us in a good
position to deliver on strategy. We have also
started the process of delivering a disciplined
cost reduction programme, which will help to
mitigate some of the near-term headwinds,
notably the increased cost of deposits.
Ensuring we reduce our cost of deposits from
their 2023 exit rate through the generation of
additional core-deposits remains a priority.
Alongside this, a key area of focus will be
rotation of assets from consumer unsecured
towards commercial lending, where we
believe we can generate a better return in the
current environment.
This combination of selective capital
allocation, pricing rigour and cost discipline
is core to our execution, with these steps
meaning we are on the path to long term
sustainable profitability.
Cristina Alba Ochoa
Interim Chief Financial Officer
16 April 2024
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social
and governance review
Our ambition to be the number one community bank
is built on doing the right thing by our customers,
communities, colleagues, suppliers and the environment.
Our customers,
communities
and colleagues
Governance, resilience,
suppliers, data privacy
and security
Our planet and
climate-related
disclosures
Page 22
Page 27
Page 29
The strong connection between
community banking and ESG
There is a strong synergy between our
ambition to be the number one community
bank, and our approach to ESG. Inherent to
our community banking model is acting
supportively, sustainably and responsibly
towards our customers, our communities,
our colleagues and our environment.
Metro Bank has always strived to be a different
kind of bank. We operate at the heart of local
communities, delivering fantastic customer
service. As we have grown, our community-
focused activities have expanded too, and in
parallel to this we have incorporated ESG
priorities into our business.
We embrace diversity and champion
inclusivity; value sustainability and act
responsibly towards the environment; make
a positive difference through the local
colleagues we employ, the local businesses we
work with and the local causes we support.
We simply aim to do the right thing by our
stakeholders. In short, a true community
bank. Our support for communities in 2023
has included:
• Easter Egg Appeal between 20 March and
6 April distributing eggs to local community
groups.
• Pride events in London and Birmingham.
• Diwali in Leicester (one of the largest Diwali
celebrations outside of India) in October
and November.
• 21 stores participated in Silver Sunday on
1 October 2023, a campaign to tackle
loneliness and isolation among older people.
• Armed forces day in June.
• The Morph art trail in central London.
• International Women’s Day in March.
• Hertfordshire County Show and the
Hertfordshire Food and Farming day in July.
20
2023 ESG governance structure
The Audit Committee reviews our ESG
update and disclosures for TCFD
requirements as part of its wider role in
reviewing our Annual Report and Accounts.
Non-Executive Director Nick Winsor has an
informal Board role for ESG oversight which
includes engaging with senior management
on ESG matters. The Chief People Officer is
the ExCo member responsible for ESG
strategy and the Chief Risk Officer has SMF
responsibility for climate change risk.
ESG governance and structure
The Board has oversight of our ESG
strategy and priorities and ESG issues are
regularly considered by ExCo. Our internal
ESG structure comprises an ExCo-level
ESG Steering Committee which coordinates
all our ESG activities and reports into the
Board on an annual basis, plus Working
Groups of subject matter experts that
coordinate progress and activity across
ESG themes and report into the ESG
Steering Committee every quarter.
The Risk Oversight Committee (ROC) has
oversight of the framework for managing
and reporting the risks from climate change,
as set out in the Enterprise Risk Management
Framework. ROC can escalate climate-
related risk matters to the Board.
Board of Directors
Risk Oversight
Committee
Audit
Committee
Executive
Committee
Executive Risk
Committee
ESG Steering
Committee
Environment
Working Group
Social
Working Group
Governance
Working Group
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
21
ESG materiality and priority themes
In 2022, we conducted a materiality assessment of our approach towards current and emerging ESG issues to obtain deeper understanding
of our external and internal stakeholders’ views. We used the Global Reporting Initiative approach. Following research and a shortlisting
exercise, we asked stakeholders to rank 19 issues, which we mapped against six overarching priority themes. We take account of the results
in our considerations of ESG issues.
Our customers and communities
Our colleagues
Data privacy and security
Turning customers and the communities
we serve into FANS is central to
everything we do.
We are committed to an AMAZEING
colleague experience, based on an
inclusive culture.
We continue to assess evolve and
mature our data privacy and cyber
security capabilities
Topics identified via materiality
assessment:
Topics identified via materiality
assessment:
Topics identified via materiality
assessment:
• Customer service and experience –
• Colleague attraction training and
creating FANS.
development.
• Data privacy and cyber security.
• Financial crime and fraud.
• Financial inclusion, literacy and
• Colleague engagement, health, safety
education.
• Supporting vulnerable customers.
• Community engagement, investment
and fundraising.
and wellbeing.
• Diversity, equality and inclusion.
Our suppliers
Governance and resilience
Our planet
We work with suppliers who uphold our
values and actively assess and monitor
the controls they put in place.
Topics identified via materiality
assessment:
• Supply chain engagement and
responsible procurement.
• Human rights and modern slavery.
• Anti-bribery and corruption.
Good governance, compliance and risk
management practices make sure we
remain a sustainable, strong and resilient
business.
Topics identified via materiality
assessment:
• Good governance practices.
• Ethics and compliance.
• Risk management and business
resilience.
We are taking the actions required to
make positive changes and reduce our
impact on the environment.
Topics identified via materiality
assessment:
• Climate change.
• Operational environmental efficiency.
• Responsible investment and
stewardship.
• Sustainable product innovation.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
22
UN SDGs
Our ESG strategy contributes to a
number of the United Nations
Sustainable Development Goals
(UN SDGs) and this is highlighted as
appropriate in the following pages.
Our customers,
communities and
colleagues
We believe that by fostering these
key relationships we can generate
wider shared prosperity.
Our commitment to community banking
aligns with the ‘S’ of ESG. It informs everything
we do and runs through every aspect of our
model and engagement with our colleagues,
customers and communities. By helping our
communities thrive, we believe our business
will too. Responsibility for delivery is shared
across all Metro Bank colleagues, led by our
stores with their physical presence in
communities across the country. In the
following section, we present how our
approach to community banking promotes
Education, Employment, Equality and Equity.
Education
Alignment to
UN SDGs:
We have always championed financial
education in our local communities. Research
from the Money and Pension Service in
summer 2023 found that under half of children
aged seven to 17 have been taught the skills
they need to handle money as adults. Our free
Money Zone financial education programme
recognises this need and colleagues in all our
stores are specially trained to deliver Money
Zone to children at Key Stage 2 and 3 in local
schools and clubs. We have reached well over
250,000 children with Money Zone to date,
including more than 170 schools and
community groups in 2023. This year we
extended Money Zone to large community
events including to 1,100 children at the
Hertfordshire Food and Farming day in July.
Last year we launched a financial education
programme for young care leavers, and in
2023, we extended it to young people in sixth
forms and colleges and to people serving in
the armed forces.
In 2023, we delivered 16 ‘Tech Zone’
workshops with more than 300 primary
school kids from the most deprived parts of
London, teaching basic coding skills using
micro:bit – tiny computers that have various
sensors and capabilities such as buttons,
LEDs, light sensor, temperature sensor,
microphone, compass, accelerometer,
speaker, radio and pins to connect to other
devices or extensions. As part of this, Metro
Bank built a strong relationship with STEM
Learning and became accredited as a STEM
organisation, in order to facilitate training to
the community. We also created a train the
trainer workshop to educate Metro Bank
colleagues to deliver the programme
in schools.
Education for our colleagues has always
been a critical part of creating FANs in our
communities. In addition to onboarding
1,155 new colleagues, this year we have
run three learning campaigns with subject
experts to develop skills and to foster a
culture of learning.
Campaigns focused on key topics:
• data literacy and protection
• personal development and careers
• focusing on leadership mindset and skills.
The career campaign alone saw 61%
of our colleagues accessing the new modules
and events, with over 3,000 views
on our Metro Bank University (MBU)
internal digital platform.
250k+
children have attended our Money Zone
education programme
Further developing our technical capabilities,
we extended access to learning resources to
support the majority of our corporate
functions. We have access to over 2,150 new
courses from expert training providers
globally and we have seen 4,729 colleague
interactions (equating to 1,085 learning hours).
Our popular MSc Sustainable and Digital
Banking apprenticeship programme has seen
seven graduates this year, with 19 colleagues
starting in December. We also launched our
Tech Academy, developing skills through
apprenticeships in cyber and IT operations,
and currently we have 137 colleagues
completing apprenticeships.
75% of our senior leaders attended one or
more events hosted by a series of five thought
leaders and industry experts. Topics ranged
from developing a human customer
experience to competition in the banking
sector, to the barriers that women face
returning to work after a career break.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
Strategic report
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Risk report
Financial statements
Additional information
23
Inspiring the
next generation
In September 2023, we worked with
Phoenix Primary School in Basildon to
deliver three one-hour workshops to
pupils with different ability levels
including children with ADHD and
autism. We adapted our training plans
and sessions to reflect this, including
simplifying our materials to ensure they
were appropriate. As a result of these
successful workshops, we were asked to
run a session at Roehampton Gate
Primary School which specialises in
children with mild to moderate autism
and Asperger’s syndrome.
Employment
Alignment to
UN SDGs:
We are delighted to be named in Newsweek’s
UK top ten Most Loved Workplaces® for the
second year running – the ranking recognises
companies that put respect, caring, and
appreciation for their colleagues at the centre
of their business model. The numerous awards
we’ve won in 2023 include:
• Top ten UK Most Loved Workplaces.
• Top 1% Workplaces Awards: Diversity,
Equity and Inclusion Award and Leader of
the Year Award.
• Global Diversity List 2023: Diversity and
Inclusion Professional and Champion.
• 2023 Inclusive Awards: Inclusive Culture
Initiative Award.
• Elite Women 2023: Best women mortgage
leaders in the UK.
• Women in Finance Awards 2023: Diversity
Lead of the Year.
• MoneyAge Mortgage Awards 2023: Large
Loans Mortgage Lender of the Year.
• British Specialist Lending Awards: Lender:
Head of Sales.
• Mortgage Strategy Awards: Best Large
Loan Lender.
• UK National Contact Centre Awards: Quality
Manager of the Year.
• Credit Strategy Car Finance Awards:
Company Award for Diversity & Inclusion.
• M&A Today, Global Awards 2023: Best
Lender of the Year – UK.
• Forbes Advisor Best of 2023 Awards: Best
Business Credit Card.
• Moneynet Personal Finance Awards 2023:
Best Business Credit Card.
In 2023, 95 colleagues joined us on our Level 2
and 3 Financial Services Customer Advisor
Apprenticeship Programmes which support
people starting a career in banking – the
programme has achieved an overall
effectiveness rating of ‘good’ from Ofsted.
63% of our apprentices in our stores and
Amaze Direct contact centres come from the
50% most deprived areas of England.
Through the opportunity to share up to 25%
of our apprenticeship levy, we can support
non-levy paying businesses in our local
communities to recruit apprentices. In 2023,
we focussed on supporting female-led
businesses in the Northants area.
300+
female business leaders attended networking
events across our stores
Metro Bank is a founding signatory to the
Investing in Women Code, and as a
community bank we can be instrumental in
supporting female entrepreneurs. In 2023,
in addition to our stores’ regular networking
events for local businesses, stores hosted ten
events for more than 300 female business
leaders. We have redeveloped our public
webpage dedicated to supporting women
in business, adding a range of case studies
to inspire future female business leaders,
highlighting the support we can provide, and
including the details of our local ambassadors
for female entrepreneurs.
200k
businesses have their current account with us
and more are switching to us everyday
Metro Bank customer case studies also
featured prominently in the British Business
Bank’s Investing in Women Code Annual 2023
Report. Our stores celebrated International
Women’s Day by hosting more than 2,000
people at complimentary networking events
for local businesses.
We’re committed to helping local businesses,
who form such an important part of thriving
communities. We put relationship banking at
the heart of our support for businesses, with
every small business customer enjoying direct
access to a Local Business Manager.
We provide current accounts to more than
200,000 businesses and more are switching
to us every day. Building on the successful
introduction of our enhanced business
overdraft last year, this year we have launched
our enhanced Business Credit Card providing
fast, flexible access to up to £60,000 of credit,
underpinned by an automated and simplified
application process meaning customers can
walk out of their local store with their new
credit card in under 45 minutes. We have also
radically improved our small business lending
products increasing lending amounts up to
£60,000 with a faster journey from application
to decision to receiving funds.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
24
Armed Forces
Business
Insights Day
25 people attended our Armed Forces
Insight Day, where they heard from our
Chief People Officer and Managing
Director of Banking Products, plus a
number of other senior leadership team
members representing a range of
business areas.
Attendees had the opportunity to have
their CVs reviewed by our internal
recruitment team and meet hiring
managers. This led to three attendees
following up and beginning the process
for applying for roles. This process is
continuing in view of the 12-month
timeframe for those leaving the
Armed Forces.
We are strong supporters of the Armed
Forces Covenant and hold the Gold Award.
We are proud to have been named in the 100
GREAT British Employers of Veterans by the
Ex-Forces in Business Awards. In 2023, we
recruited three ex-services colleagues and in
June we hosted a business insights day in
central London for veterans preparing for
employment outside the military, and a
number of our stores hosted celebrations
for Armed Forces Day in June.
Our new stores planned in the north of
England will create more than 200 roles
directly, with around 30 in place already, and
support a significant number of jobs indirectly
via the many businesses we support in our
local communities.
Our wellbeing programme offers a range of
tools including our Employee Assistance
Programme, plus support through our health
partner Vitality and the Bank Workers Charity.
Colleagues inspire each other with articles and
blogs, which are shared on a weekly basis. To
support the launch of our wellbeing strategy,
we ran a Wellbeing at Work week which saw
400 colleagues attend a webinar for financial
wellbeing and over 100 colleagues booking
Vitality Health checks. This is in addition to
training and awareness sessions and online
support materials. We also offer flexible
working options and introduced a Day 1 right
to request flexibility in May 2023. This
generated a c.400% monthly increase in
flexible working applications.
Equality and equity
Progress this year has included:
Alignment to
UN SDGs:
The current economic environment remains
challenging for our customers and we have
brought together information regarding the
support we can offer into an online hub, along
with money tips and links to specialist
organisations. Recognising this is a concerning
time for some of our mortgage customers,
particularly those approaching the end of their
existing deal, we have signed up to the
Government’s Mortgage Charter to offer
additional support including for customers
struggling to keep up with mortgage payments.
52of our stores are now Safe Spaces
We are committed to financial inclusion and
offer all our customers market-leading service,
access and support. We have continued our
extensive internal vulnerable customer
programme throughout 2023 with a focus on
bedding-in skills and capability across all
functions so that vulnerability is considered
across all relevant processes and practices.
• Further specialist training for customer-
facing colleagues;
• Further support for victims of financial
abuse, including the roll-out of Safe Spaces
across 52 stores and training for our store
colleagues. Safe Spaces offer a private area
for people to access support safely in
partnership with the UK Says No More
campaign;
• Launch of direct referral processes with
StepChange, PayPlan and GamCare for
customers in financial difficulty to get
specialist support to manage their debt;
• Launch of a dedicated Vulnerable Customer
page on our intermediary website to help
brokers understand how to identify a
vulnerable customer; and
• A new Mortgage Payment Support page for
customers if they are worried about their
finances.
Supporting our
local causes
Just a handful of examples of our
support for local good causes: our west
London and Staines stores celebrated
the Sikh New Year festival, Vaisakhi, by
donating to local foodbanks; our local
colleagues conducted extensive litter
clean ups on a nature trail in Croydon
and at St Edeyrns Village in Cardiff; our
Oxford colleagues helped prepare a new
premises for the local Yellow Submarine
charity for people with learning
difficulties and autism; and our
Wolverhampton store donated 180
boxes of banana, apple and blueberry
treats to Birmingham Dogs Home.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
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Additional information
25
From grassroots clubs all the way up
to the Metro Bank Women’s Ashes
2023 was a record-breaking season for the
England Women’s cricket team, making the
launch of our partnership even more
impactful. With viewership on the rise too,
our message is travelling further than ever.
In fact, the highest number of people on
record watched the women’s games this
summer – a total of 7.4 million, which is
nearly a quarter of total women’s sport
viewership in the UK.
With our name up in lights for 138 matches
– including the Metro Bank Women’s Ashes
and Metro Bank One Day Series – and two
brand campaigns with a dynamic new look
and feel, the figures are brilliant from a
brand perspective too.
With our brand awareness growing
+5ppt amongst cricket fans, coupled with
a +9ppt increase in brand trust among
female fans, we’re off to a flying start. As
always, our colleagues are also a huge
priority for us, and it’s been fantastic to see
so many attending matches, meeting the
players, and even presenting trophies on
match days.
Our partnership has only just started to
scratch the surface, and with the
momentum in women’s sport growing ever
stronger, this is a real opportunity for us to
make a difference in our communities both
on and off the field.
In May we launched a free, on-demand
British Sign Language (BSL) interpreters
service to support deaf customers. The
service is available for in-person visits to
our stores and for phone calls to our
AmazeDirect customer service team. This
service enhances the existing range of
accessibility options for Metro Bank customers
including Relay UK to help customers with
hearing and speech difficulties communicate
with us over the phone, and the ability to
request certain documents in braille, large
print, or on audio CD.
In line with our AMAZEING values, if things go
wrong we strive to put them right again and
deliver a positive customer experience. We
publish customer complaints data on our
website here: www.metrobankonline.co.uk/
helpand-support/forms/give-us-feedback/
complaints-data
5k+hours of colleagues time dedicated to
volunteering in the communities we serve
As a community bank, Metro Bank gives every
colleague a paid day dedicated to volunteering,
we call it a ‘Day to Amaze’: it’s a great way to
support local good causes practically. In 2023,
colleagues dedicated more than 5,000 hours
of their time to volunteering, an increase of
60% compared to 2022, with the number of
colleagues using their Day to Amaze
increasing from last year. Alongside this, our
colleagues and local communities raised
£72,800 for local, national and international
good causes via collections, sponsored
activities and events and via the Magic Money
Machines in our stores.
This year, Metro Bank announced a new
partnership with the England and Wales
Cricket Board (ECB), recognising our shared
commitment to diversity, inclusion, and
making a meaningful impact in our
communities. We’re very proud to be:
• First ever Champion of Women’s
and Girls’ Cricket
• Title Partner of the Women’s Ashes
• Title Partner of the International and
Domestic One Day Series for Women
and Men
• Official Banking Partner of the ECB.
At the heart of the partnership is the Women’s
and Girls’ Fund, co-developed and co-funded
by Metro Bank and the ECB to help transform
grassroots cricket. Our mission is to triple the
number of girls’ teams by 2026, by empowering
more female coaches and volunteers to inspire
girls on and off the pitch.
We’re proud of our culture, and colleagues are
telling us they like working here too. Our Voice
of the Colleague survey saw our best ever
colleague engagement scores this year with
all scores above or equal to the global
benchmark. Our engagement question “How
happy are you working at Metro Bank?”
(eSAT) increased by 3 points compared with
October 2022 (+4 points above benchmark).
We want every colleague to feel included and
valued, and therefore diversity and inclusion
(D&I) has always been an important part of
our AMAZEING culture. Our commitment to
being a D&I leader helps us bring out the best
in our colleagues, attract new talent, thrive as
a business and ultimately create more FANS in
our communities.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
Our 5 colleague inclusion networks
Mbody: promotes health and wellbeing in
both mind and body, including those with
both visible and non-visible barriers.
Mbrace: embraces our diverse people and
fosters an environment where everybody
can be themselves.
Mfamily: a network for all those in a family
environment to share experiences and
provide support for those who want or
need it.
Mpride: helps create an environment of
inclusion where everyone can be themselves
and at their very best. Open to all
colleagues who identify themselves as
LGBTQIA+ or consider themselves an ally.
Women on Work (WoW): supports all
colleagues, regardless of gender, who are
interested in engaging, inspiring and
collaborating with female colleagues at
Metro Bank.
body
family
pride
WoW
brace
Our colleague networks have had an impactful
year: our MPride network had 50 colleagues join
Pride marches in Birmingham and London in
the summer, demonstrating solidarity with the
LGBTQ+ community. In September, colleagues
celebrated National Inclusion week with a variety
of events, both in-person and virtual events at
contact centre sites, team huddles at stores
and webinars in head office. Cross-network
Mentoring Circles were launched with 82
colleagues taking part promoting intersectional
inclusion, and we launched 52 Safe Spaces
across our stores in conjunction with a domestic
abuse charity by WoW.
Our Mbrace network hosted their annual
Black History Month event on 12 October where
86 colleagues attended in person at our Holborn
office to hear from guest speakers, learn about
mentoring and hear from the Sickle Cell Society.
£5,400 was raised as part of a raffle and auction
for the Sickle Cell Society. Our Mfamily network
championed the achievement of Metro Bank
becoming a Fostering Friendly organisation,
whilst Mbody have dedicated time to educate
our colleagues about disabilities and
neurodiversity.
Gender pay gap
As a community bank, we believe it is important
that our team reflects the diverse communities
we serve; we have a range of initiatives focused
on encouraging and supporting talented women
into leadership and specialist roles, and we are
working hard on initiatives to close the gap. Our
median gender pay gap of 16.7% compares with
a national average gender pay gap of 14.3%
across all industries, calculated by the Office for
National Statistics in November 2023.
Whilst the gender split amongst our colleagues
at Metro Bank is broadly balanced, our gender
pay gap exists mainly because of an imbalance
when we look at diversity by seniority. This means
that we have more colleagues in junior roles than
at senior levels, and within this balance we have
more female colleagues in our junior roles, and
more male colleagues in our senior roles.
Gender pay gap
As at April 2023
16.7%
median pay agp
20.5%
mean pay gap
Read more on our gender pay at
metrobankonline.co.uk
Female Directors on
the Board
2022
2023
Female colleagues as
% of the workforce
2022
2023
Industry
% Females in
SLT (Exco -1)
2022
2023
Industry
26
36%
36%
46%
46%
47%
39%
38%
33%
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
Strategic report
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Additional information
27
Governance
and resilience
Maintaining a strong governance
framework allows us to operate
effectively.
Alignment to
UN SDGs:
We have always had zero-tolerance for bribery
and corruption. We deliver regular training
to all colleagues on our Anti-Bribery and
Corruption Policy and they are encouraged
to raise any concerns about the conduct of
others or the way the business is run, without
fear of unfair treatment under our
Whistleblowing Policy.
We comply with all applicable sanctions
regimes. We also comply with UK anti-money
laundering and anti-terrorist financing
legislation and have an implementation
framework in place. We do not give or receive
improper financial or other benefits in our
business operations, nor do we help facilitate
tax evasion in any way. We do not tolerate any
deliberate breach of financial crime laws and
regulations that apply to our business and the
transactions we undertake, and we continue
to invest in our processes and systems
and monitoring.
Data privacy and security
Keeping our customers safe from fraud and
scams is naturally one of our highest priorities.
Our ‘scam of the month’ series informs people
how to spot and protect against the latest
tricks used by fraudsters. We joined the BBC
Be Scam Safe awareness week in October. We
are active supporters of the Take Five fraud
awareness campaign and last year we joined
Stop Scams UK’s 159 service, which connects
our FANS safely and securely to our contact
centre if they receive a suspicious call about a
financial matter.
Recognising the ever-evolving nature of
cyber risk, we run a continuous improvement
programme to ensure that our capability
keeps pace. We constantly monitor for
emerging threats and new attack methods
and regularly conduct simulation exercises
to fine tune our capability. We have a rigorous
and mature vulnerability management
process in place, our comprehensive policies
and minimum standards align to ISO 7001
best practice, and we benchmark ourselves
against the National Institute of Standards
and Technology framework. We are active
members of a number of industry forums
and we provide regular briefings to colleagues
in addition to annual mandatory cyber
security training.
Safe management of personal data is taken
seriously and remains a priority for us. We
continued to make improvements to our
operations and records management team, to
ensure effective governance of our data, in
particular where records contain special
categories of data.
Our suppliers
It is important to us that we work with
suppliers who uphold our values. We take this
seriously – starting from when we select a
supplier during our procurement processes,
then throughout the entire life-cycle of our
business relationships.
In 2022, we launched our first Supplier Code
of Conduct, setting out the expectations we
have of our suppliers. The next version of our
Code will launch in 2024 and will place more
obligations on our suppliers, for example, to
inform us of their progress towards lowering
carbon emissions.
We are gathering more and more information
on our suppliers’ approach to ESG and we are
doing that proactively through our tendering
and contracting activities. In our quarterly
business reviews with our most important
suppliers, we gather data on, and discuss,
topics such as: ISO 14001 certification, use of
renewable energy, compliance with Modern
Slavery legislation and gender pay gap data.
We regularly review the controls put in place
by our suppliers to prevent and detect data
security breaches, bribery, corruption, modern
slavery, child trafficking, unfair wages,
unacceptable working conditions and labour
rights abuses. We expect our suppliers to
adhere to the UN Guiding Principles on
Business and Human Rights.
We remain committed to using the Financial
Services Supplier Qualification System (FSQS)
for our suppliers to share information with us
and we encourage all our suppliers to become
members. FSQS helps our suppliers by
reducing duplication of effort in responding to
buyer due diligence requests, and benefits us
by sharing resources.
Our biggest ever
Money Zone event
In July, colleagues from our stores in
Hemel Hempstead, St Albans, Enfield,
Luton and Borehamwood joined forces
at the Hertfordshire Agricultural Society
Food and Farming Day to deliver part of
our financial education programme –
Money Zone – to 1,100 eleven year olds
from 26 local schools.
Money Zone is a series of financial
education lessons that we offer to
school children – either virtually or in
store. Money Zone usually comprises of
four sessions – budgeting, saving,
banking and the last session which takes
place in store giving children a look
behind the scenes. Given the time
constraints, the pupils enjoyed an
abridged lesson on the day with an
invitation to take up the full course at
their schools at a later date.
To date, we have delivered our Money
Zone programme to over 250,000
children. Across the UK, adult financial
literacy remains at less than 70 per cent.
As a community bank we are committed
to encouraging children of all ages to
learn more about the finances they will
need to understand as they grow older
and start earning money.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
Human rights
As a community bank, we are committed to
maintaining positive relationships with our
stakeholders including conducting our
business in a way that respects human rights.
Our policies and practices reflect this,
including our Whistleblowing Policy which
applies to any information relating to
suspected wrongdoing or dangers, and our
detailed Modern Slavery Policy.
Slavery, servitude, forced labour and human
trafficking (modern slavery) is a crime and
violation of fundamental human rights. We
have zero tolerance of modern slavery and
remain committed to conducting all our
business professionally, fairly and with
integrity across all our relationships, including
enforcing appropriate systems and controls
to ensure, on a risk basis, that modern
slavery is not taking place in our business
or supply chains.
During 2023 we:
• Published our seventh Modern Slavery
Statement, approved by the Board and
signed by the CEO (available on our website
at: metrobankonline.co.uk/ about-us/
modern-slavery/).
• Delivered the sixth report of the Modern
Slavery Champion to the Board. The report
included the annual review of our Modern
Slavery Policy; an update on progress
against the Modern Slavery Statement and
Action Plan; and an update on our internal
Modern Slavery Working Group.
• As part of our Modern Slavery Policy, we
undertake increased due diligence in
respect of our business and supply chains
on a risk basis.
We continue to leverage the FSQS to support
due diligence on suppliers before contracting
and ongoing during the relationship, on a
risk basis.
1,440
suppliers engaged as part of our due
diligence process
In 2023, we engaged 1,440 active third
parties. Thirty-eight (2.64%) were either
based in riskier countries (where the 2023
Measurement Action Freedom score, an
independent assessment of government
progress towards UN Sustainable Development
Goal 8.7, is less than 50) or were more likely to
be exposed to modern slavery risk due to the
nature of the services.
In accordance with our Modern Slavery Policy,
further investigation was conducted, following
which all 38 suppliers demonstrated adequate
controls to mitigate modern slavery risk.
We continue to support our suppliers in
relation to the risk of modern slavery, to clearly
explain our approach to modern slavery and
our expectations of our suppliers.
All colleagues were required to undertake
modern slavery computer-based training
during 2023.
Political neutrality
Metro Bank is and will remain politically
neutral and it is not our policy to open or close
an account due to the political or personal
beliefs of an individual or organisation.
Taxation
As a community bank, we recognise the
benefits to society from our full participation
in the tax system. As with everything we do,
we are committed to acting with integrity and
honesty in our tax strategy, policies
and practices.
During 2023, our total tax contribution was
£139.3 million, made up of £72.9 million taxes
paid and £66.4 million of taxes we collected
on behalf of the UK government. Taxes paid
in the period were charged to our income
statement or capitalised as part of an asset’s
cost. Taxes collected are generated by our
business activity, including the taxes of
employees and customers collected in the
usual course of business and administered
on behalf of the UK government.
Further information can be found in our Tax
Strategy document available on our website
at: metrobankonline.co.uk/globalassets/
documents/customer_documents/
intermediaries/2022-tax-strategy.pdf.
ESG ratings
In 2023, we commenced engagement with
specialist ESG rating agencies to ensure our
data and activities are understood and
appropriately reflected in our ratings.
28
Taxes paid (2023)
54
3
£72.9m
1
2
1. Irrecoverable VAT
and customs duty
2. Employer NICs
3. Business rates
4. Corporation Tax
5. Other taxes
£m
%
39.2
23.6
8.6
0.8
0.7
53.77
32.37
11.80
1.10
0.96
Taxes collected (2023)
3
2
£66.4m
1
1. PAYE
2. Employee NICs
3. Net VAT
£m
%
43.0
64.76
13.0
10.4
19.58
15.66
Metro Bank Holdings PLC Annual Report and Accounts 2023
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29
Operational emissions road map
tCO2e
Offsetting/
sequestration of
residual emissions
to be developed
to reach 2030
net zero
Our planet
Being good to our planet goes hand
in hand with our ambition to be the
number one community bank.
Alignment to
UN SDGs:
We are working to reduce the impact of our
operations on the environment. Climate
change is also a risk to us and the communities
we serve – managing this risk, and helping our
colleagues, suppliers, customers and
communities to do so too is a key part of
being a responsible community bank. As we
grow and expand into new communities, we
are building environmental considerations into
the plans for our new stores.
In recognition of this, we have committed
to two headline pledges to reduce our
carbon footprint:
• To make our operations net zero by 2030.
• To make our operations and value chain net
zero by 2050.
In summer 2023, we submitted a full
disclosure to the Carbon Disclosure Project – a
widely-recognised reviewer of corporate
environmental data. The outcome is expected
in early 2024.
4000
3500
3000
2500
2000
1500
1000
500
0
2019
2020
2021
2022
2023
2026
2030
Scope 1
Scope 2
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
30
Bishopsgate
office furniture
reuse
In June 2023, we vacated our office at
55 Bishopsgate in London in advance
of the building being redeveloped. All
colleagues were relocated to other
central London locations. In line with
our commitments to support the
community, to recycle and reduce
waste, we partnered with Collecteco
to donate the office furniture and
equipment to good causes. £128,000 of
furniture and equipment was donated to
13 causes across London including NHS
trusts, the YMCA, Scouts, schools and
charities. Overall, 31 tonnes were saved
from landfill, and the equivalent of
177,500kg of carbon emissions were
saved, compared to purchasing the
same equipment from new.
In autumn 2022, we completed the transition
to purchasing 100% electricity from renewable
sources across all our stores and offices,
certified by the Renewable Energy Guarantee
of Origin (REGO) scheme. This important
milestone has driven a significant reduction in
our operational emissions and has taken our
market-based Scope 2 emissions to zero. We
do not have any operations based in high
biodiversity habitats.
100%of electricity used in our stores and offices
comes from renewable sources
To continue the progress towards our
operational net zero pledge, our next steps
are to identify and measure our residual
operational emissions and eliminate them
where possible. The remainder will be offset
by purchasing high quality carbon removals.
Since 2020, we have sent zero waste to
landfill. We source supplies from renewable
sources and recycle where possible. We
donate surplus office furniture to local
charities, saving tonnes of material from
landfill in addition to the carbon emissions
that would arise from purchasing equivalent
new equipment.
This year, we rolled out a new sustainable pen
made from recycled plastic and designed to
be accessible for everyone, including people
with arthritis, carpal tunnel syndrome, or a
prosthetic limb. Our pen caddies are made
from recycled plastic and can be repurposed
as a plant pot – we even provide strawberry
seeds as a symbol of supporting our
communities grow!
As an ethical community bank, we do not lend
directly to businesses that undertake:
• Metal ore mining, coal mining; peat, oil or
gas extraction.
• Fossil fuel power generation.
• Activities that cause deforestation.
• Arms manufacture or military activities.
We were founded to be a different kind of
bank – a bank with the community at its heart,
built around colleagues delivering fantastic
customer service.
As we have grown, we have incorporated
environmental, social and governance (ESG)
priorities into our business to ensure we
continue to build it in the right way. In doing
this, we are committed to being open and
transparent about what we are doing and why.
This approach has seen us become known as a
bank that embraces diversity and champions
inclusivity; a bank that values sustainability
and acts responsibly towards the environment;
a bank that makes a positive difference
through the local colleagues we employ, the
local businesses we work with and the local
causes we support. A bank that simply aims
to do the right thing by our stakeholders.
The table below sets out our GHG emissions.
Scope 1 emissions
Scope 2 emissions (location based)
Scope 2 emissions (market based)
Scope 3 emissions (core)1
Scope 3 emissions (all)
Total GHG emissions (location based)
Total GHG emissions (market based)
Full-time equivalent colleagues (FTE)
Total emissions per FTE
2023
469
2022
179
2,705
2,855
–
–
1,335
1,397
2021
336
3,327
1,194
n/a
2020
67
3,799
729
n/a
2019
319
4,247
3,256
n/a
111,205
129,363
155,182
190,333
248,979
114,379
132,397
158,845
194,199
253,545
111,674
129,542
156,712
4,281
26.1
4,040
32.8
4,184
38.0
n/a
3,850
50.4
n/a
3,555
71.3
1.
This measure covers emissions arising from purchased paper (Cat. 1), Fuel and energy related activities (Cat.3), Waste Generated in Operations (Cat.5) and Business Travel
(Cat. 6).
Quoted emissions figures are quoted in tCO2e.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
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Additional information
31
Non-financial information and sustainability information statement
This statement is prepared in compliance with sections 414CA and 414CB of the Companies Act 2006 and explains where you can find further information about how we do the right thing in
relation to our customers, communities, colleagues and the environment. A description of our business model and strategy, as well as the non-financial KPIs relevant to our business can be found
on pages 11 to 15.
Reporting
requirement
Where to find further information for an understanding of our business and our
impacts, including outcomes of our activities
Relevant policies and standards that govern our approach (please see policy
list on pages 32 to 33 for a description of each policy)
Environmental
matters
Page 29 – Our planet.
Page 35 – Task Force on Climate-related Financial Disclosures.
Colleagues
Page 22 – Our colleagues.
Page 26 – Gender pay gap.
Page 62 – Letter from the Designated
Non-Executive Director for Colleague Engagement.
Page 105 – Annual report on remuneration.
Social matters
Page 22 – Our customers and communities.
Page 27 – Data privacy and security.
Page 27 – Governance and resilience.
Page 29 – Our planet.
Human rights
Page 27 – Our suppliers.
Anti-bribery
and corruption
Page 27 – Governance and resilience.
Page 151 – Financial crime risk.
• Climate pledges.
• Supplier management.
• Business and commercial lending.
• Diversity and inclusion.
• Recruitment and selection.
• Health and safety.
• Whistleblowing.
• Conflicts of interest.
• Climate pledges.
• Supplier management.
• Business and commercial lending.
• Vulnerable customers.
• Data protection.
• Anti-tax evasion.
• Anti-money laundering/counter terrorist financing.
• Business continuity.
• Complaints.
• Modern slavery.
• Outsourcing.
• Diversity and inclusion.
• Anti-bribery and corruption.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
32
Policy list
Key
1 Our customers and communities
3 Data privacy and security
5 Governance and resilience
2 Our colleagues
4 Our suppliers
6 Our planet
Policy
Description
ESG priorities
Anti-bribery and Corruption
The policy outlines our approach to managing the risk of bribery and corruption and to ensure we conduct business in an honest and
ethical way, with a zero-tolerance approach to bribery and corruption.
Anti-Money Laundering/
Counter Terrorist Financing
The policy sets out the systems and controls to identify, assess, monitor and manage financial crime risks and the procedures in place to
assess their effectiveness.
Anti-Tax Evasion
The policy sets out our zero-tolerance approach to tax evasion.
2 5
1
2 5
1 5
Business Continuity
The policy makes sure we are able to continue delivering services to our customers at acceptable levels if something unexpected were to
happen. It addresses impacts to the continuity of critical business activities in the case of man-made disasters, natural disasters or other
material events.
1
2 3 4 5
Complaints
The policy is in place to ensure customer complaints are handled promptly and effectively, with a focus on fair outcomes for our
customers and meeting our regulatory obligations when things go wrong.
Conflicts of Interest
The policy provides consistent practical guidance to all relevant parties in relation to the identification, recording and maintenance of
actual and perceived conflicts of interest.
Data Management
The policy sets out our objectives and expectations in managing data and data governance practices. It makes sure that data is managed,
governed, accessed, protected, utilised and disclosed appropriately. It also focuses on the quality of key data elements and their ongoing
maintenance.
Data Protection
The Policy is in place to ensure we comply with our data protection obligations and have the adequate level of data protection as
prescribed by the General Data Protection Regulation.
Diversity, Equity and Inclusion
The policy means that we treat our colleagues fairly. It sets out our commitment to having a diverse workforce which reflects our customer
base and to employment policies which follow best practice, based on equal opportunities for all colleagues.
Fraud
The policy sets a consistent approach to the deterrence, detection and prevention of internal and external fraud.
Health and Safety
The policy protects our customers and colleagues. It recognises our statutory duties and responsibilities under the relevant Health and
Safety and Welfare legislation.
Information Security
The policy sets objectives, expectations, roles and responsibilities and requirements for protecting both our and customer information.
1
2
2 4 5
1
2 3 5
1
2 3 5
1
2
1
2 5
1
2
3 5
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Additional information
33
Policy
Description
ESG priorities
Lending and Arrears Management
Policies (including Retail, Business
& Commercial Lending)
These policies set our approach to making lending decisions in a structured, consistent and fair way that is compliant with all relevant
regulatory requirements. They define the way we safeguard both ourselves and our customers in pursuit of our goals and how we support
our customers during periods of financial difficulty.
Modern Slavery
Physical Security
Procurement and
Supplier Management
Product governance
The policy describes our approach towards preventing slavery, servitude, forced and compulsory labour and human trafficking in any of
our operations or at any of our suppliers and, through them, our supply chains.
The policy protects our customers and colleagues. It defines the measures to protect our premises from security threats and to ensure
the personal safety and security of all customers, colleagues and visitors.
The policy ensures that when we rely on an external supplier for key processes and activities, we take the reasonable steps to identify,
monitor and mitigate the external supplier risks.
The policy sets requirements to ensure products and services are developed to address customer needs, have a defined target market,
are designed to deliver good customer outcomes and are understood by customers.
1
1 5
1 2
1 4 5 6
1 5
Records Management
The policy sets out Metro Bank’s objectives and expectations for managing records responsibly and efficiently from creation to disposal,
complying with legal and regulatory obligations.
1 2 3 5
Recruitment and Selection
The policy relates to all recruitment-related activities and is relevant for all colleagues and any third-party recruitment partners. The policy
outlines responsibilities for hiring aligned to our Company objectives/ethos and in accordance with the relevant legislation and regulation.
Sanctions
Technology
The policy sets the requirements and approach to managing financial sanctions risks in compliance with applicable sanctions regimes
including the prevention, detection and investigation of potential sanctions evasion.
The policy sets our approach to the management of technology and associated risks across each of the delivery channels, to support our
strategic objectives and deliver good customer outcomes.
1 2 3 5
Vulnerable Customer
The Vulnerable Customer Policy sets out our approach to identifying and interacting with vulnerable customers to ensure we deliver good
customer outcomes.
Whistleblowing
The policy encourages colleagues to disclose information, in good faith and without fear of unfair treatment, when they suspect any
illegal or unethical conduct or wrongdoing affecting us.
1 2
2 5
Metro Bank Holdings PLC Annual Report and Accounts 2023
2
1 5
Section 172 Statement
34
Stakeholder engagement is essential to the execution of
our purpose to be the number one community bank.
Our six key stakeholders:
Our customers
Our colleagues
Our communities
Our investors
Our regulators
Our suppliers
Our business model
depends upon attracting
customers and turning them
into FANS. Our reputation
and creating FANS is at the
core of our values.
As a growing business, we
need to attract new talent.
We also want to ensure our
colleagues are happy and
engaged so that they
provide excellent service to
each and every customer.
We are proud to be an
integral part of the
communities we serve.
We engage openly and
transparently with our
investors who help us
to grow.
Following our regulators’
principles, rules and
guidance helps us to put
customers at the heart of
everything we do.
We pride ourselves on
doing the right thing, and
maintaining the highest
values in everything we
do, and this extends to the
suppliers we work with.
The Board must act in accordance with the
duties set out in the Companies Act 2006
(‘the Act’). Under section 172 of the Act, the
Board has a duty to promote the success of
the Company for the benefit of its members
as a whole. When making decisions, the Board
ensures that it acts in the way it considers, in
good faith, would most likely promote success
for the benefit of our members, and in doing
so have regard to the matters set out in
Section 172(1) of the Act.
The different needs of stakeholders are
considered throughout the whole decision-
making process. The Board at all times has
regard to the impact of material decisions on
the different stakeholder groups. However, it
is not always feasible to provide pragmatic
outcomes for all stakeholders and the Board
at times has to make decisions based on the
competing priorities of stakeholders and the
needs of the Bank. More information on the
key decisions made by the Board in the year
and how stakeholders were considered can be
found on page 58.
S.172 factor
Relevant disclosures
(a) the likely consequences of any
decision in the long-term
• Our purpose and strategy framework.
• Business model.
• Strategic priorities.
• Risk report.
(b) the interests of the Company’s
employees
• Non-financial information statement.
• Our colleagues.
• Board activity and stakeholder engagement.
• Letter from the Designated Non-Executive Director for Colleague Engagement.
(c) the need to foster the Company’s
business relationships with suppliers,
customers, and others
• Board activity and stakeholder engagement.
• Environmental, social and governance review.
• Our suppliers.
(d) the impact of the Company’s
operations on the community and
the environment
• Board activity and stakeholder engagement.
• Task Force on Climate-related Financial Disclosures.
• Environmental, social and governance review.
(e) the desirability of the Company
maintaining a reputation for high
standards of business conduct
• Whistleblowing.
• Anti-bribery and corruption.
• Audit Committee report.
• Modern slavery.
(f) the need to act fairly between
members of the Company
• Board activity and stakeholder engagement.
• 2023 AGM.
• Share capital.
Pages
2–3
11–13
3
124–157
31
59
57–61
62–63
57–61
20–33
61
57–61
35–43
20–33
74
27 and 151
70–74
27–28
57–61
60
120
Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related
Financial Disclosures
Strategic report
Governance
Risk report
Financial statements
Additional information
35
We are committed to reporting on the impact of climate
change on our business in a transparent manner and
taking responsibility for the actions required to drive
positive changes in our approach to climate-related risks
and opportunities.
In compliance with the FCA’s Listing Rules,
the Group has made disclosures consistent
with the TCFD 2021 Recommendations and
Recommended Disclosures, including the
appropriate annexes and supporting
guidance. Additionally, following the
amendment of sections 414C, 414CA and
414CB of the Companies Act 2006, the
Group has indicated in the below table which
of the climate-related disclosures, outlined in
Section 414CB, are addressed by the TCFD
recommended disclosures, alongside the
pages of the 2023 Annual Report and
Accounts where these are located.
Key points
Governance
Future developments
Describe the Board’s oversight of climate-related risks and opportunities.
• The Board retains oversight for all climate-related risks and opportunities and has
• The Board will continue its regular oversight, engagement and challenge on
received half-yearly updates on our progress in this regard in 2023.
climate-related strategy and activity.
• The Risk Oversight Committee has oversight of the framework for managing and
reporting on climate-related risks in line with our Enterprise Risk Management
Framework.
• Ongoing review of governance framework to ensure continued alignment with
regulation and industry-recognised best practice and ensure that an appropriate
level of focus on climate-related risks and opportunities is in place.
Page
20 and
38
Describe management’s role in assessing and managing climate-related risks and opportunities.
• Overall responsibility for our approach to climate-related risks and opportunity sits
with the CEO and is devolved to relevant members of the Executive Committee.
• Focus on enhancing our data and reporting on climate-related risks via key risk
indicators to facilitate improved management assessment of these risks.
20 and
38
• Senior Management Function responsibility under the Senior Managers and
Certification Regime sits with the Chief Risk Officer for climate-related risk.
• Our Environmental Working Group, reporting into the ESG Steering Committee,
discusses our approach to monitoring, measuring and mitigating climate-related
risks on a regular basis.
Strategy
• Further embed climate-related considerations within our approach to product
governance to ensure that climate-related risks and opportunities are being
consistently considered within this process.
Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term.
• Climate-related risks have been identified and assessed as part of a wider review of
• Continue to evolve our climate-related strategy with new aspirations aligned to our
39–42
top and emerging risks and embedded in the Enterprise Risk Management
Framework.
overall strategy.
• Expand dialogue with customers on climate-related risks and opportunities to
• Considerations covering risks, our internal operations and our engagement with
ensure we can best support their transition to a low-carbon economy.
stakeholders are embedded in the ESG materiality assessment for the organisation.
• Opportunities to support our customers in achieving their climate-related aspirations
are considered in the strategy review and product development process.
• Enhance data capture and quality to support identification, assessment and
mitigation of climate-related risks and opportunities and evolve risk capabilities,
origination strategy and product suite accordingly.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related Financial Disclosures
Continued
36
Key points
Strategy continued
Future developments
Page
Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning.
• The potential impact of climate-related risks and opportunities on our strategy and
financial position continues to be considered on an ongoing basis.
• Further embedding of climate consideration in our strategic and financial planning,
with consideration of the necessary tools and methodologies to support delivery of
the climate-related strategy.
39–42
Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.
• Climate-related stress testing is in place and continues to evolve in maturity. There is
• Continued enhancement of our modelling capabilities.
42
an impairment overlay process established to cover climate-related risks.
• Scenario analysis insights are used to inform the Internal Capital Adequacy
Assessment Process and in financial reporting.
Risk management
Describe the organisation’s processes for identifying and assessing climate-related risks.
• Climate change has been embedded as a cause into the Enterprise Risk
• Continue to develop methodologies to identify and assess climate-related risks.
40–42
Management Framework, together with frameworks, policies and standards for the
relevant principal risks.
• To form a view on materiality and assess impacts across different time horizons, we
assess each principal risk to identify how climate change could manifest.
• Internal modelling capabilities are in place to assess the exposure of our lending
portfolios to climate-related risks.
Describe the organisation’s processes for managing climate-related risks.
• We have integrated climate-related controls into our credit processes across both
retail and commercial lending, with credit assessments for in-scope commercial
clients including qualitative climate risk considerations.
• We engage closely with our material suppliers to ensure climate-related risks are
identified and appropriate controls put in place.
• Further development and embedding of climate-related controls.
• Enhancement of climate-related data and monitoring across risk types and
processes.
• Extend climate scenario analysis to additional portfolios.
40–42
• Enhance capabilities for EPC data capture to enable regular portfolio monitoring.
Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management.
• Climate-related risks are fully embedded in our Enterprise Risk Management
Framework and Three Lines of Defence model, with associated governance
structures and defined roles and responsibilities.
• Continue to keep pace with evolving industry requirements around risk
40–42
management, reporting and governance.
Metro Bank Holdings PLC Annual Report and Accounts 2023
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Additional information
37
Key points
Metrics and targets
Future developments
Page
Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process.
• Climate-related metrics across our operations, supply chain and financed emissions
are reported on an annual basis via our climate-related disclosures.
• The properties securing our lending portfolios are assessed for flood and subsidence
risk, as well as EPC distribution.
• Continued review and enhancement of our calculation methodologies for Scope 3
emissions in line with industry best practice. Includes development of roadmap to
enhance PCAF data quality level for financed emissions and engagement with
suppliers to improve Category 1 measurement.
29–30
and
42–43
• Development of climate-related key risk indicators for intra-year monitoring.
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas emissions, and the related risks.
• Scope 1, 2 and 3 emissions are disclosed within the wider TCFD disclosure, with full
• Continued enhancement of emissions calculation methodologies in line with industry
disclosure across all applicable Scope 3 categories.
best practices.
Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets.
• We have two overarching net zero targets in place – to achieve net zero emissions
• Continued monitoring of performance against these targets and development of
across Scope 1 and Scope 2 by 2030 and across Scope 3 by 2050.
interim milestones for sub-categories across all Scopes.
30 and
42
29 and
42–43
We have highlighted some key milestones which have been achieved to date and those we believe will help us to meet our 2030 and 2050 Net Zero pledges.
Short-Term
Medium-Term
Long-Term
100% of electricity procured from
certified renewable sources
No waste delivered to landfill
Procurement of certified renewable gas
Review of origination strategy, product proposition and asset mix
to support mitigation of financed emissions
Procurement of quality carbon credits to offset fugitive
emissions
Ongoing identification of new physical and transition risks
impacting our portfolio through scenario analysis
Vehicle fleet is fully hybrid
Transition vehicle fleet to electric vehicles
Maintained travel emissions below
70% of pre-COVID levels
Inclusion of climate-related KRIs
within Risk Appetite
Key
Completed
Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related Financial Disclosures
Continued
This section of our annual report
includes our climate-related
financial disclosures, consistent
with the recommendations of the
Task Force on Climate-related
Financial Disclosures, providing an
update on our current progress and
areas of future focus.
We have made strong progress during 2023,
successfully embedding enhancements to
our approach to the management of climate-
related risks across both our governance
structure and the wider risk management
framework. There remains work to do to
enhance our assessment of the impact of
climate-related risks and opportunities on our
businesses, strategy, and financial planning,
and to refine and enhance coverage and
application of climate-related metrics as our
capabilities and methodologies mature.
Governance
Board oversight of climate-related risks and
opportunities
The Board has ultimate accountability for all
climate change risk-related matters. During
2023, the Board has been engaged in the
development of our approach, receiving
half-yearly updates on climate risk and an
annual ESG update. The Board continues
to consider climate-related risks and
opportunities as part of the annual strategic
and financial planning process to ensure our
approach to these matters evolves in line with
emerging developments. The Risk Oversight
Committee has oversight of the framework for
managing and reporting the risks from climate
change, as set out in the Enterprise Risk
Management Framework. The Committee can
escalate any climate-related risk matter to the
Board. The Audit Committee approved the
approach to disclosures and the TCFD
requirements, and reviews climate-related
financial disclosures as part of its wider role in
reviewing our Annual Report and Accounts.
Management’s role in assessing and
managing climate-related risks and
opportunities
Responsibilities for the management of
climate-related risks extend across the
organisation and its ‘Three Lines of Defence’.
As climate risk impacts all of our principal risks
it requires integration with existing control
frameworks, policies and strategies.
The accountability for our approach to ESG
sits with the CEO and is devolved to relevant
members of ExCo. The Chief Risk Officer has
Senior Management Function responsibility
under the Senior Managers and Certification
Regime for our approach to managing both
financial and non-financial risks arising from
climate change, including:
• Embedding the consideration of climate-
related risks into the governance structures.
• Incorporating the risks from climate change
into risk management practices.
• Using long-term scenario analysis to inform
strategy setting, risk identification and
assessment.
• Ensuring that climate-related risks are
appropriately disclosed in line with the
recommendations of the TCFD.
Executive Risk Committee
The Executive Risk Committee (ERC) has
delegated authority from ROC for overseeing
our exposures and approach to managing
climate-related risks. In 2023, the Committee
received half-yearly updates on the progress
of our approach to managing climate-related
risks, including assessment of our position
against the requirements of Supervisory
Statement 3/19, the ongoing evolution of our
approach to managing climate-related risks
driven by third-party relationships and
enhancements to the credit-related aspects
of climate risk management.
Credit Risk Oversight Committee
The Credit Risk Oversight Committee (CROC)
has specific responsibility for oversight of
climate-related aspects of credit risk including
recommending strategies to adjust the credit
risk portfolio to react to changes in the
prevailing market or physical environmental
conditions. During the year, the Committee
received updates on the credit risk aspects of
climate change, including climate risk-specific
analysis relating to lending portfolios.
38
Asset and Liability Committee
The Asset and Liability Committee (ALCO)
focuses on our financial risks including capital,
funding, liquidity and interest rate risk to
ensure that the activity complies with
regulatory and corporate governance
requirements and also delivers our policy
objectives. Where appropriate, this includes
the impact of climate change on aspects
under its remit.
Environment Working Group
The Environment Working Group continued to
bring together key stakeholders from across
the first and second lines of defence in 2023
to support work to help embed climate risk
into the ERMF and support our wider climate-
related goals and ambitions.
The Environment Working Group is
accountable for delivering our net zero
strategy and objectives across three strategic
focus areas:
• Managing the impact of climate change on
the business.
• Supporting our customers’ transition to a
low-carbon economy.
• Reducing the impact that the business has
on the environment.
The Environment Working Group has
focused on building out the foundations of
a multi-year roadmap across core business
areas and risk management disciplines. It will
continue to update as our analysis of risks and
opportunities from climate change evolve.
This will help to accelerate progress and
prioritisation, particularly in relation to our
climate change response.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related Financial Disclosures
Continued
Strategic report
Governance
Risk report
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Additional information
39
Strategy
While the changes associated with the
transition to a lower-carbon economy
pose risks, they also present significant
opportunities for organisations focused on
climate change mitigation and adaptation
solutions. In line with our ambition to be the
number one community bank, we have an
important role to play in facilitating the
transition to a low-carbon economy,
leveraging the opportunities, and managing
the risks we are exposed to from
climate change.
We are committed to supporting our
customers along the journey as they make the
transition towards a low-carbon economy, and
to continuing to build our own capabilities by
identifying and managing the potential impact
of climate change on the business, as well as
exploring ways to reduce the impact that the
business has on the environment.
We recognise that climate change presents
both risks and opportunities to our business
model and strategy over short, medium and
long-term horizons:
• Short-term (0-1 years): The time horizon for
annual financial planning.
• Medium-term (1-5 years): The time horizon
for strategic and financial planning cycles.
• Long-term (>5 years): This timeframe is
considered using scenario analysis.
Identifying and managing the impact of
climate change on the business
The ability to identify, understand and manage
risk is critical to our long-term strength and
stability and climate risk is no different in this
regard. Climate risk does however require us
to address risks that may manifest over a
significantly greater period of time than that
covered by more traditional approaches to
risk management. We broadly categorise
climate risks into two types: transition risk and
physical risk. Within these broad categories
we have identified a number of factors arising
from climate change which we monitor over
the short, medium and long term. Our initial
focus has been to identify and assess risks
to the business. We have continued to
progressively embed climate risk into our key
risk processes throughout 2023, developing
control processes across our lending activity
and internal operations. We continue to
develop our own internal climate scenario
analysis and stress testing capability in line
with emerging industry methodologies and
have used outputs from initial methodology
developments to formulate an initial impact
assessment to inform considerations in
developing our strategic response. The risks
we face in the medium term primarily relate
to transition risks, predominantly arising
from developing regulatory and legislative
expectations. For example, tightening
minimum energy efficiency standards for
domestic buildings may lead to transition risks
which could impact the value of mortgaged
properties or the ability of borrowers to
service debt.
Physical risks represent a longer-term risk
(primarily from changes in climate patterns
impacting the physical property securing our
mortgage portfolio) and the most material
risks are expected to crystallise over the
long term. Changes in extreme variability in
weather patterns are forecast to lead to
increased incidence and severity of physical
risks which, in addition to the disruption felt
by customers, can lead to a decrease in the
valuations of property taken as collateral to
mitigate credit risk.
Exposures to physical and transition risks may
also arise through our commercial lending
portfolio due to changes in policy, consumer
preferences or technology. As a retail bank,
we are not heavily exposed to certain carbon-
intensive industries.
Operational risk exposures arise from physical
damage to key office locations and physical
and transition risks via key suppliers,
which could result in business disruption or
increased costs.
In 2024, we will continue to review and
assess the risks and opportunities that could
have a material impact on the business and
environment, and refine our approach to
climate change scenario analysis, taking into
account what we have learned in our initial
development work. As these methodologies
continue to develop, we will be progressively
drawing on our scenario analysis to inform
strategic planning; providing insight into/
for our strategy, business model and
financial plans. At present we do not believe
risk arising from climate change to have had
material impact on the financial statements.
Operations
We continue to make positive progress in
reducing the impact of our direct operations
on the environment. We have maintained our
position of generating no market-based
Scope 2 emissions by continuing to procure
100% renewable electricity with full backing
by Renewal Energy Guarantee of Origin
(REGO) certificates. We have continued to
reduce waste as far as possible and
maximise recycling rates (see the case study
on the move from our Bishopsgate office for a
great example of how we’re truly living this
ethos!). We continue to deliver zero waste to
landfills, which we have achieved consistently
since 2020.
These actions have helped us to achieve an
overall reduction of 90% across our Scope 1
and 2 emissions from the 2019 baseline, and
this keeps us strongly positioned to meet our
stated commitment of being net zero across
Scope 1 and 2 by 2030. We have identified
what continues to drive our remaining Scope 1
and 2 emissions and have identified the
necessary actions required to eliminate
them. Once these steps have been taken,
we will determine the level of residual
emissions generated and deliver our full net
zero pledge through the purchase of high-
quality carbon removals.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related Financial Disclosures
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40
Risk Management
Identification and assessment
We classify climate-related risks as either
physical risks or transition risks. We are
exposed to both physical and transition risks
arising from climate change. Risks arising
from climate change materialise through
various channels:
1)
Through the financial services and support
we provide to customers who may
themselves be exposed to the climate
change.
2) The operation of our own infrastructure,
business and premises which may
be exposed to both transition and
physical risks.
3) Through a deteriorated perception of our
brand if we do not adequately support a
transition to a low-carbon economy.
To form a view on materiality, and to
understand the broad financial impacts across
different time horizons, the Enterprise Risk
Management Framework was assessed
through a climate change lens to identify how
climate change could manifest in each of our
principal risks. Due to the longer timeframes
associated with climate impacts, short,
medium and long-term horizons are being
applied to the consideration of impacts. This
assessment has been included in the 2023
Internal Capital Adequacy Assessment
Process (ICAAP) and identified our top three
climate change risks as: credit, capital and
operational. Credit risk is the most material
climate change risk due to our mortgage
portfolio exposures.
Credit risk
Physical risk examples
Transition risk examples
Time horizon
Repayment challenges from obligors due to
reduced profitability or asset devaluation
because of climatic shifts.
Failure to adapt to changes in policy,
regulation, and technology resulting in
negative impact to customers.
Medium term to long term.
Mortgages
We have controls in place to mitigate against flood risk,
subsidence, and landslip in our residential mortgage portfolio.
Where it is identified that a property is situated on a flood plain,
borrowing is only permitted where a suitable insurance policy is in
place. Specific requirements are in place in relation to lending to
buy-to-let properties which have an Energy Performance
Certificate (EPC) rating below E. In accordance with the Minimum
Energy Efficiency Standards Regulations, all buy-to-let properties
must have a minimum EPC rating of E.
All physical valuations must be completed by registered valuers to
utilise their local knowledge and expertise, including the
assessment of physical risks and climate-related information.
We continue to receive open-source property data for our
mortgage portfolio to enhance our portfolio risk identification and
monitoring processes. Our secured lending policies and standards
will continue to evolve in response to the external environment,
increasing regulation and investor and other stakeholder interest.
Work is underway to plan how climate risks will be incorporated
into credit decisioning in the future.
Commercial lending
Our approach to commercial lending and collateral management
incorporates environmental risk considerations. We have additional
credit risk assessment requirements for customers operating in
carbon-intensive industries. Our Commercial Lending Policy also
outlines the prohibited and restricted industries where we have
either no or limited appetite to lend.
A large proportion of our business lending customers are privately
owned and/or SMEs. Very few lending customers therefore report
against voluntary disclosure initiatives such as Carbon Disclosure
Project, Sustainability Accounting Standards Board or TCFD.
A top-down assessment of sectors (and sub-sectors) which may
have a higher likelihood of being impacted by transition risks has
been performed. It highlighted that our direct exposure to
commercial lending segments with high emissions is relatively low.
We continue to enhance and refine this work at both counterparty
and sector level, considering both risks and opportunities as we
look to support our customers’ responses to climate change. The
output will be used to inform the evolution of our credit policies
and risk appetite measures to monitor the portfolio transition risk.
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Capital and liquidity risk
Operational risk
Risk examples
Time horizon
Physical risk examples
• Our capital position is indirectly subject to climate risk
through Bank-wide exposures across all risk types.
• Longer-term climate change risks may adversely
impact our future revenue through customer
behaviour, balance sheet or strategy changes over the
longer term in response to climate change risk factors.
• Market dislocation could also impact the value or the
ability to monetise liquidity buffers or incremental
client deposits run-off resulting from transition
risk drivers.
Medium term to long term.
Business interruptions due to extreme weather events
and damage to facilities. Disruptions in supply chain.
Transition risk examples
Increased operating costs for facilities and higher
capital expenditures for resiliency and carbon reduction
measures capital expenditures for resiliency and carbon
reduction measures.
Time horizon
Medium term.
Climate change risk has been considered as part of the 2023 ICAAP. This includes a
qualitative assessment of the potential financial implications of climate-related risk,
namely transition and physical risks. The ICAAP is a key planning process and facilitates
the Board and senior management in identifying, measuring and monitoring our risks
and ensures that we hold adequate capital to support our risk profile. Based on our
current assessment the capital requirement is not considered to have a material impact
over the planning horizon at this time. Consideration of climate risk will continue to be
further embedded in key processes where investment decisions are made and the level
of climate risk being taken is material. The output of the climate scenario analysis and
stress testing is used to inform the understanding of how capital management may be
impacted.
Climate risk and broader ESG considerations are now reflected in our treasury portfolio
investment strategy, with implications for securities that can be included in the Liquidity
Pool. The 2023 Internal Liquidity Adequacy Assessment Process (ILAAP) outlined the
potential funding and liquidity risks that may arise as a result of physical risks or
transition risks.
The impacts of climate change will continue to be assessed within our prudential
statements, namely the ICAAP and ILAAP.
Climate change is embedded as a cause within the Enterprise Risk Management
Framework and our principal risks are assessed through a climate lens. All loss events
are recorded in our incident management system, enabling the identification of
climate-related risk events.
Scenario analysis is performed to assess the potential effects of climate-driven events
including disruption to business services, damage to physical assets, and health and
safety. Physical risk data has been obtained in relation to key data centres and office/
store locations to support our assessment of future risk. The results of the scenario
analysis are used to plan, prepare and respond to potential disruptions. There are also
plans in place to help resume business operations as quickly as possible in the
aftermath of an extreme climate event to minimise operational disruptions.
We continue to take steps to embed climate change considerations into our
procurement and supply chain management processes, including exploring different
methods to collect environmental performance data from third parties. More broadly,
the Operational Resilience programme outlines the requirements (including
requirements of suppliers) to respond to business disruption.
We will continue to identify, manage and disclose material climate-related risks and
their impacts on our strategy and financial planning, in line with the TCFD framework.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related Financial Disclosures
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42
Our Risk Appetite Statement includes a
qualitative statement in relation to climate risk.
In support of this appetite, complementary
quantitative key risk indicators are being
developed and will be assessed with a view
to integrating them into risk appetite metrics,
where appropriate. Metrics will be further
enhanced as data and capability evolves and
will leverage scenario analysis outputs.
Response
Climate change has been embedded as a
cause into the Enterprise Risk Management
Framework, together with the frameworks,
policies and standards for these principal risks.
For Credit risk, we have also integrated climate
risk considerations into both the Business and
Commercial Lending Policy and the Collateral
Management Policy to aid the embedding,
management and monitoring of climate
change risk as a cause to our credit risks.
Scenario analysis
As the understanding and importance of
climate risk progresses, climate scenario
analysis is becoming an essential capability
and risk management tool. Scenario analysis
assists the identification, measurement and
ongoing assessment of climate risks over the
longer term, and the potential threats to our
strategic objectives. Throughout 2023, we
have continued to use the analysis from the
Biennial Exploratory Scenario work conducted
in 2021, leveraging the results of that analysis
in the corresponding period and using this to
inform a PMO which is incorporated within our
IFRS 9 ECL calculation. In addition, a Climate
Risk scenario was formally assessed as part of
the 2023 ICAAP, reviewing the potential
impact of an extreme weather event causing
prolonged physical damage to our stores and
a breakdown in the transport infrastructure
servicing the stores. Outcomes from these
pieces of analysis have indicated that we are
considered to have sufficient capital to
withstand the losses associated with the
climate scenarios that have been assessed.
As this capability is established and further
developed, the assessment will be run on an
ongoing basis to inform scenario planning and
monitoring of the portfolio composition to
ensure no undue concentrations. The results
of the scenario analysis will be used to support
the evolution of origination strategies in line
with our overarching strategic objectives and
risk appetite to factor in climate change risks
and opportunities. It will also inform product
opportunity assessment and help to identify
areas where we could best support customers’
transition to improved energy efficiency or
reduction in exposure to physical risks.
financing activity and value chain by 2050.
Recognising that there is more to do to fully
understand the impact of climate change
across our business, we will continue to work
on developing further metrics in line with
evolving industry practices.
Metrics and targets
Our climate change metrics are anchored to
our commitment to make our own operations
net zero by 2030, and to drive material
reductions in the climate impact of our
Our emissions data for 2023 is disclosed in the
below table, outlining year-on-year changes as
well as overall progress from our 2019 baseline.
Emissions summary by Scope and Category
Emission Scope
Category
Scope 1
Fuels (transport)
Gas
Fugitive
Total
Scope 2
Electricity (market)
Total Scope 1 & 2
% change from 2019 baseline
Scope 3
Cat 1: Purchased goods & services
Cat 2: Capital goods
Cat 3: Fuel & energy activities
Cat 4: Upstream transportation
Cat 5: Waste
Cat 6: Business travel
Cat 7: Employee commuting
Cat 9: Downstream transportation
Cat 15: Investments
Total Scope 3
% change from 2019 baseline
Total GHG emissions
% change from 2019 baseline
2023
% change PY
2022
20
71
378
469
0
469
-90
54,986
2,155
903
371
9
423
4,495
114
47,749
111,205
-55
111,674
-56
-13
18
294
162
–
162
–
-17
-69
-11
-22
0
23
-1
-3
-4
-14
–
-14
–
23
60
96
179
0
179
–
65,933
7,057
1,015
477
9
343
4,550
117
49,862
129,363
-48
129,542
-48
Quoted emissions figures are quoted in tCO2e
For Scope 3 emissions, categories 8 and 10-14 are assessed not to apply to our operations at this time and are therefore excluded from our analysis
Metro Bank Holdings PLC Annual Report and Accounts 2023
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Operational emissions
Greenhouse gas reporting is undertaken in
line with our obligations under the Companies
Act 2006 (Strategic Report and Directors’
Report) Regulations 2013, and the Streamlined
Energy and Carbon Reporting regulations.
GHG emissions are reported in accordance
with the GHG Protocol, which sets a global
standard for how to measure, manage and
report emissions.
We report GHG emissions in accordance with
the operational control approach, The only
material data limitation in the emission data
relates to employee commuting, where data
for all individuals was not available; to account
for this, average population values were used
to perform the calculation.
We have seen an increase in our Scope 1
emissions this year as detailed in the table
above, primarily driven by an increase in
refrigerant and coolant leaks (known as
fugitive emissions). By their nature, these will
be subject to variance year on year and as we
progress towards our 2030 commitment we
will seek to offset these fugitive emissions via
high-quality carbon credits. Overall, we have
achieved a reduction of 90% in Scope 1 and 2
emissions from our baseline year of 2019 and
are well positioned to achieve our 2030 net
zero commitment for Scopes 1 and 2. We
continue to procure 100% renewable-backed
electricity across our operations and therefore
produce no market-based emissions from our
electricity procurement.
We recognise that the climate impact of
our operations goes beyond carbon emissions
from fuel consumption and electricity and
that we have a responsibility to understand
and address emissions across our wider
value chain. Therefore, we have measured
our Scope 3 emissions from our own
operations in 2023 as set out in the table
above. To enhance our reporting, we have
broken down our Scope 3 emissions into
their underlying categories.
In addition to tracking the emissions for
buildings, water and waste consumption are
measured across our sites. We continue to
divert 100% of our waste from landfill. We
have continued to see a reduction in emissions
from these sources both year on year and
from our baseline in 2019. We have also seen
concurrent reductions in paper usage. These
reductions can be reasonably attributed in
part to our continued operation of a hybrid
working model.
Financed emissions
We remain fully committed to our pledge to
make our financing activity and value chain
net zero by 2050 to achieve alignment with
the 2015 Paris Agreement.
Financed emissions are absolute GHG
emissions that we finance through our lending
and investment activity. We continue to
develop the data and technology required to
enhance the accuracy of our assessment and
management of our carbon-related assets
and exposures.
For 2023, we have calculated financed
emissions from our residential mortgage
portfolio (both organic and acquired) and
residential and commercial buy-to-let
portfolios. PCAF guidance has been followed
when determining the attribution factor
associated with the lending book, based on
outstanding amount and property value at
origination. To support calculation of the
emissions arising from the portfolio of
properties, typical annual energy consumption
data for the average UK property was
obtained from UK Government statistical
databases, as were emissions conversion
factors for gas and electricity usage.
The use of EPC data has informed our
understanding of the impact of transition risk
on our mortgage portfolio. EPC ratings of the
mortgage portfolio are monitored to provide a
view on the energy efficiency of the housing
stock securing our lending. The table below
shows a summary of EPC ratings on our
mortgage book as at the start of 2023,
covering both residential and professional
buy-to-let. Approximately 75% of mortgaged
properties in the portfolios have been
matched to an EPC rating, with the most
common EPC rating in our mortgage book
being D, which is slightly lower than the UK
average. Approximately 39% of the book
currently rated EPC C or better on an
interpolated basis, which represents a 3%
improvement over the previous year.
EPC rating
A
B
C
D
1 to < 3 months in arrears) have increased
to 0.97% at 31 December 2023 (31 December 2022: 0.63%). Accounts that are 3 or more months
in arrears have increased from 0.73% at 31 December 2022 to 1.08% at 31 December 2023.
Increases in arrears have been seen to a greater extent in the legacy acquired portfolios that are
in run-off and have greater sensitivity to interest rate rises.
Retail Mortgage new lending has continued to be of good quality during 2023. The average
LTV was 63% (2022: 69%) and the proportion of lending with an LTV over 90% was only 1%
due to restrictions on this lending. The proportion of new lending that is buy-to-let reduced in
2023 to 7% from 34% in 2022. Credit quality measured through credit score has remained stable
over the last 3 years. Near Prime lending has continued to make up a small proportion of new
lending (December 2023: 1.5%) and contributes a small proportion of the portfolio (December
2023: 0.6%).
27% of loans at December 2023 are on interest rates ≥4%, and 8% of loans are on variable
rates; the remaining 65% remain on existing fixed rate mortgages and will migrate to higher
rate products at the end of the fixed period. We expect that owner-occupied customers have
a degree of protection against increasing interest rates as a result of origination credit criteria
and underwriting approach; all of our organically originated owner-occupied loans were
underwritten at a stressed interest rate allowing for at least a 2% increase, and in the majority
of cases (88%) customers did not borrow the maximum lending amount that was available
creating an additional buffer against interest rate and inflationary rises. Rental coverage for
buy-to-let lending is strong, providing capacity to absorb increases in mortgage payments.
All organic buy-to-let mortgages have been underwritten at a minimum 140% rental cover and
at a stressed interest rate.
The buy-to-let portfolio consists of simple retail loans on prime residential housing stock; there
is no cross-collateralisation and there are no houses in multiple occupation. Landlord portfolios
are a small proportion of lending.
Metro Bank Holdings PLC Annual Report and Accounts 2023
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Impairment
There has been an increase in coverage ratio for Stage 1 (Stage 1: 0.10% in 2022 to 0.11% in 2023)
driven by new business lending and improvements in macroeconomic scenarios resulting in
fewer customers with higher PDs triggering SICR into Stage 2. There has been a decrease in
coverage ratio in Stage 2 (0.82% in 2022 to 0.72% in 2023) driven by improvements in
macroeconomic scenarios, and improvements made in the measurement of SICR in the IFRS 9
lifetime PD model (introduced as an overlay in 2022), resulting in an overall reduction in
modelled ECL. There has been an increase in Stage 3 coverage ratio (Stage 3: 2.70% in 2022
to 4.05% in 2023) due to one single name case that triggered default.
Payment performance
Portfolio arrears have increased from a low base during 2023 due to the impact of the cost of
living and interest rate rises. The proportion of the portfolio with >1 and >3 months in arrears has
increased from 0.63% to 0.97% of the total retail mortgage portfolio, and the proportion of the
portfolio with three or more missed payments has increased from 0.73% to 1.06%. A greater
increase in arrears has been observed on the legacy acquired portfolios due to the portfolios
being in run-off and there being a larger proportion of mortgages with variable rates in these
portfolios. The acquired portfolios were not written under Metro Bank credit criteria and do not
represent similar arrears profiles to organic lending. We also observe a higher increase in arrears
in the buy-to-let portfolio due to this containing a larger proportion of interest only mortgages
that are more sensitive to interest rate rises. Forbearance levels also remain low with 0.19% of
our non-arrears portfolio subject to forbearance measures, increasing from 0.02% at December
2022.
Interest-only lending
Interest-only lending holds the additional risk of balance repayment at the end of the mortgage
term. This risk arises principally in the mortgage book where the exposure to interest-only loans
stands at £3.8 billion (31 December 2022: £4.1 billion).
All borrowers of interest-only facilities are assessed as being able to refinance the lending at
the end of the term or have an appropriate repayment plan in place. These loans are also
appropriately collateralised with lower LTV thresholds compared to capital and interest
mortgage lending. The table below shows the amounts of the retail mortgage that are subject
to either interest only, or capital and interest payments.
Table 8: Retail mortgage lending by repayment type (audited)
Repayment type
Interest only
Capital and interest
Total
31 December 2023 (£’million)
31 December 2022 (£’million)
Retail Owner
Occupied
Retail BTL
1,933
3,918
5,851
1,878
88
1,966
Total
3,811
4,006
7,817
Retail Owner
Occupied
Retail BTL
Total
2,005
3,502
5,507
2,047
95
2,142
4,052
3,597
7,649
Geographic exposure
The geographic distribution of our retail mortgages customer balances is set out below. All
of our loan exposures which are secured on property are secured on UK-based assets. Our
current retail mortgages portfolio is concentrated within London and the South-East, which is
representative of our customer base and store footprint. We are expanding our footprint which
will reduce the geographical concentration of lending over time.
Table 9: Retail mortgage lending by geographic exposure (audited)
31 December 2023 (£’million)
31 December 2022 (£’million)
Region
Greater London
South east
South west
East of England
North west
West Midlands
Yorkshire and the
Humber
East Midlands
Wales
North east
Northern Ireland
Scotland
Total
Retail Owner
Occupied
2,040
1,564
487
590
268
240
185
180
111
60
–
126
Retail BTL
1,091
381
87
150
65
71
32
53
17
8
–
11
Total
3,131
1,945
574
740
333
311
217
233
128
68
–
137
Retail Owner
Occupied
Retail BTL
1,937
1,435
476
531
263
226
184
168
109
63
–
115
1,201
408
99
163
68
76
34
54
18
10
–
11
Total
3,138
1,843
575
694
331
302
218
222
127
73
–
126
5,851
1,966
7,817
5,507
2,142
7,649
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Collateral
Table 10 shows the distribution of the retail mortgage portfolio by DTV. The portfolio DTV profile
has increased slightly during 2023 as a result of falling house prices.
Table 10: Retail mortgage lending by DTV (audited)
Impairment
The total ECL coverage position for consumer has increased to 8.3% as a result of the continued
maturation of the portfolio and a post model overlay to reflect the uncertainty due to high
inflation not fully captured in the IFRS 9 model (31 December 2022: 5.1%).
Portfolio level analysis – Commercial
Table 12 summarises key credit performance metrics for the commercial portfolio.
Table 12: Commercial credit performance
DTV ratio
Less than 50%
51–60%
61–70%
71–80%
81–90%
91–100%
More than 100%
Total
31 December 2023 (£’million)
31 December 2022 (£’million)
Retail Owner
Occupied
Retail BTL
Total
Retail Owner
Occupied
Retail BTL
Total
1,994
1,069
1,044
1,100
550
89
5
439
375
642
493
16
–
1
2,433
1,444
1,686
1,593
566
89
6
2.007
961
1,088
990
374
87
–
568
463
660
434
13
–
4
2.575
1,424
1,748
1,424
387
87
4
5,851
1,966
7,817
5,507
2,142
7,649
Loans and advances
Loss allowance
Coverage ratio
% loans in Stage 2
% loans in Stage 3
90+ days past due
Portfolio level analysis – Consumer
Table 11 summarises key credit performance metrics for the consumer lending portfolio.
Table 13: Summary of Commercial lending
Table 11: Consumer credit performance
31 December 2023
£’million
31 December 2022
£’million
Professional buy-to-let
Bounce back loans
Loans and advances
Loss allowance
Coverage ratio
% loans in Stage 2
% loans in Stage 3
90+ days past due
1,297
108
8.33%
24%
6%
5%
1,480
75
5.07%
17%
3%
3%
Portfolio and credit risk profile
Consumer balances have reduced to £1.3 billion as at 31 December 2023 (31 December 2022:
£1.5 billion) following a reduction in, and subsequent cessation of lending through the
RateSetter brand. The portfolio is now composed of 96% lending through the RateSetter brand.
The performance of this portfolio is aligned with expectations; increases in arrears and non-
performing loans are in line with the growth of the book and normal portfolio maturation, and as
a result of very low levels of write-offs causing an accumulation of cases in arrears. A batch
write-off planned for 2024 is expected to reduce arrears levels. New lending in 2023 remained
strong across fixed term and revolving products with average income and application scores
remaining stable. Continual enhancements have been performed in relation to the affordability
in light of the economic environment.
Coronavirus business interruption loans
Recovery Loan Scheme
Other term loans
Total commercial term loans
Overdrafts and revolving credit facilities
Credit cards
Asset and invoice finance
Total commercial lending
31 December 2023
£’million
31 December 2022
£’million
3,382
72
2.13%
12%
5%
2%
4,160
92
2.21%
12%
5%
2%
31 December 2023
£’million
31 December 2022
£’million
465
524
86
328
1,341
2,744
172
4
462
3,382
731
801
127
385
1,578
3,622
122
4
412
4,160
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Geographic exposure
The below table summarises the geographic distribution of the commercial term loans portfolio.
72% of commercial term loans are to companies in London and the South East (31 December
2022: 73%), which reflects the historical concentration of our store network.
The following table reflects the geographic distribution of the commercial term loans portfolio
excluding BBLS.
Table 15: Commercial term lending – excluding BBLS by geographic exposure (audited)
31 December 2023 (£’million)
31 December 2022 (£’million)
Region
Greater London
South east
South west
East of England
North west
West Midlands
Yorkshire and the
Humber
East Midlands
Wales
North east
Northern Ireland
Scotland
Total
Professional
buy-to-let
Other –
term loans
298
88
15
31
11
4
2
9
3
3
1
–
880
340
111
122
106
101
17
44
8
19
2
5
Total
1,178
428
126
153
117
105
19
53
11
22
3
5
Professional
buy-to-let
Other –
term loans
472
149
22
45
13
8
3
12
3
3
1
–
1,052
377
143
147
153
112
23
43
11
19
3
7
Total
1,524
526
165
192
166
120
26
55
14
22
4
7
465
1,755
2,220
731
2,090
2,821
Portfolio and credit risk profile
Our commercial lending remains largely composed of term loans secured against property and
Government-supported lending. In addition, commercial lending includes facilities secured by
other forms of collateral (such as debentures and guarantees), and Asset Finance and Invoice
Finance.
Our commercial balances have decreased from £4,160 million to £3,382 million during 2023
reflecting the reduction in our portfolio of buy-to-let and Real Estate lending, and run-offs in
Government-supported lending.
Commercial customers are managed through an early warning categorisation where there
are early signs of financial difficulty, thereby allowing timely engagement and appropriate
corrective action to be taken. Early warning categories support our IFRS 9 stage classification.
The percentage of the portfolio in Early warning categories has remained broadly flat
since December 2022, however, some deterioration within early warning categories has
been observed. Close customer management is key to identifying issues and supporting
our customers.
Impairment
The ECL allowance has reduced to £72 million in 2023 (31 December 2022: £92 million) with
coverage reducing to 2.13% (31 December 2022: 2.21%). The proportion of commercial lending
in Stage 2 has remained flat at 12% (FY 2022: 12%) as a percentage of total balances. Reduced
coverage reflects repayments received and reduction of cases with higher coverage,
including conclusion of some larger single name cases as well as improvements in
macroeconomic scenarios.
Our commercial book consists predominately of SME lending which is reflected in the coverage.
The operating environment continues to be challenging and Commercial customers may be
impacted by interest rates which remain higher than observed in recent years, and the impact
of inflationary increases on discretionary spending and business expenses. We continue to hold
appropriate levels of ECL to reflect the higher risk of default.
Interest-only lending
Interest-only lending in our commercial loans is concentrated towards professional buy-to-let
where interest-only lending makes up 94% of professional buy-to-let lending (31 December
2022: 95%).
Table 14: Commercial term lending – excluding BBLS by repayment type (audited)
Repayment Type
Interest only
Capital and interest
Total
31 December 2023 (£’million)
31 December 2022 (£’million)
Professional
buy-to-let
Other
term loans
438
27
465
222
1,533
1,755
Total
660
1,560
2,220
Professional
buy-to-let
Other
term loans
691
40
731
253
1,837
2,090
Total
944
1,877
2,821
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
138
Sector exposure
We manage credit risk concentration to individual borrowing entities and sector. Our credit
risk appetite includes limits for individual sectors where we have higher levels of exposure.
The sector profile for commercial term lending is broadly consistent with the position as at
31 December 2022. There has been an overall reduction in commercial real estate and
professional buy-to-let. The following table shows the distribution of the commercial portfolio
across business sectors.
Table 16: Commercial term lending – excluding BBLS by sector exposure (audited)
Collateral
DTV is calculated for property and cash backed lending in commercial. As of 31 December
2023, 76% of this secured lending had a DTV of 80% or less, reflecting the prudent risk appetite
historically applied. Lending with DTV >100% includes loans which benefit from additional
forms of collateral, such as debentures. The value of this additional collateral is not included in
the DTV but does provide an additional level of credit risk mitigation. DTV >100% also includes
government-backed lending where the facility does not also benefit from property collateral.
The decrease in DTV >100% in 2023 reflects a reduction in government-backed lending. The
following table shows the distribution of the commercial portfolio DTV.
Region
Real estate
(rent, buy and sell)
Hospitality
Health & social work
Legal, accountancy
& consultancy
Retail
Real estate (develop)
Recreation, cultural
& sport
Construction
Education
Real estate
(management of)
Investment
& unit trusts
Other
Total commercial term
lending
31 December 2023 (£’million)
31 December 2022 (£’million)
Professional
buy-to-let
Other –
term loans
Total
commercial
term loans
Professional
buy-to-let
Other –
term loans
Total
commercial
term loans
465
–
–
–
–
–
–
–
–
–
–
–
509
368
298
150
136
14
72
48
19
7
7
974
368
298
150
136
14
72
48
19
7
7
127
127
731
–
–
–
–
–
–
–
–
–
–
–
681
372
334
196
161
6
87
62
17
9
11
1,412
372
334
196
161
6
87
62
17
9
11
154
154
465
1,755
2,220
731
2,090
2,821
Table 17: Commercial term lending – excluding BBLS by DTV (audited)
DTV ratio
Less than 50%
51 to 60%
61 to 70%
71 to 80%
81 to 90%
91 to 100%
More than 100%
Total
31 December 2023 (£’million)
31 December 2022 (£’million)
Professional
buy-to-let
Other
term loans
160
59
105
76
60
2
3
465
707
319
185
79
21
11
433
1,755
Total
867
378
290
155
81
13
436
2,220
Professional
buy-to-let
Other
term loans
278
158
219
62
3
5
6
731
817
433
112
76
53
12
587
2,090
Total
1,095
591
331
138
56
17
593
2,821
Metro Bank Holdings PLC Annual Report and Accounts 2023
Strategic report
Governance
Risk report
Financial statements
Additional information
139
Financial risks
Continued
Government-backed lending
The table below summarises government-backed lending.
Table 18: Government-backed lending
Bounce Back Loan Scheme
Coronavirus Business Interruption
Loan Scheme
Coronavirus Large Business
Interruption Loan Scheme
Recovery Loan Scheme1
Total government-backed lending
Bounce Back Loan Scheme
Coronavirus Business Interruption
Loan Scheme
Coronavirus Large Business
Interruption Loan Scheme
Recovery Loan Scheme1
Total government-backed lending
No. of loans
22,062
240
2
1,304
23,608
No. of loans
26,824
279
4
1,349
28,456
31 December 2023
Drawn balance
£’million
Average loan
amount
£’000
524
86
8
328
946
24
358
3,920
252
40
31 December 2022
Average loan
amount
£’000
30
Drawn balance
£’million
801
127
26
385
1,339
455
3.4%
6,580
285
47
0.7%
10.4%
36.2%
% of total
business
lending
18.8%
3.0%
0.3%
11.6%
33.7%
% of total
business
lending
21.7%
1.
Recovery loan scheme includes £71 million acquired from third parties under forward flow arrangements
(31 December 2022: £97 million). The loans are held in a trust arrangement in which we hold 99% of the beneficial
interest, with the issuer retaining the remaining 1% (the trust retains the legal title loans).
Undrawn commitments
At 31 December 2023, we had undrawn facilities granted to retail and commercial customers of
£718 million (2022: £1,120 million).
As part of our retail and commercial operations, this includes commitments of £327 million
(2022: £250 million) for credit card and overdraft facilities. These commitments represent
agreements to lend in the future, subject to certain conditions. Such commitments are
cancellable, subject to notice requirements, and given their nature are not expected to be
drawn down to the full level of exposure.
Investment securities
As well as our loans and advances, the other main area where we are exposed to credit risk is
within our Treasury portfolio. At 31 December 2023 we held £4.9 billion (31 December 2022:
£5.9 billion) of investment securities, which are used for balance sheet and liquidity
management purposes.
We hold investment securities at amortised cost or fair value through other comprehensive
income (FVOCI) depending on our intentions regarding each asset. We do not hold investment
securities at fair value through profit and loss.
Table 19: Investment securities by credit rating (audited)
31 December 2023 £’milion
31 December 2022 £’milion
Group
AAA
AA- to AA+
Total
Investment
Securities held at
amortised cost
Investment
Securities held
at FVOCI
3,400
1,003
4,403
256
220
476
Investment
Securities held at
amortised cost
Investment
Securities held
at FVOCI
3,649
1,694
5,343
356
215
571
Total
3,656
1,223
4,879
Total
4,005
1,909
5,914
We have a robust securities investment policy which requires us to invest in high-quality liquid
debt instruments. At 31 December 2023, 75% of our investment securities were rated as AAA
(31 December 2022: 68%) with the remainder rated AA- or higher, the majority of which
comprises of UK gilts.
Additionally, we hold £3.9 billion (31 December 2022: £2.0 billion) in cash balances, which is
either held by ourselves or at the Bank of England.
Response
We have a strong credit risk framework in place that manages lending within risk appetite limits,
provides a comprehensive set of policies and lending standards, and sets out a clear set of
procedures for managing our portfolios and customers in financial difficulty.
We control credit risk through a set of quantitative limits that measure the aggregate level and
type of credit risk that we are willing to accept in order to support our business objectives.
These limits, which are set at total portfolio and product level, are supported by a suite of
product-level policies and lending criteria which define the parameters within which individual
exposures can be approved and which manage new lending within the risk appetite. Credit risk
is further controlled through the use of automated decision tools, underwriter approval and
monitoring of individual transactions. Independent oversight is provided by the Credit risk
function, and includes independent underwriting of commercial lending, monitoring of
performance against limits, ongoing portfolio monitoring and regular portfolio reviews.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
The 2023 credit risk appetite limits were set with reference to the appetite for credit
impairments as well as analysis of past performance, peer comparisons and qualitative
approaches using expert judgement. These limits reflect the Bank’s strategy as well as the
macroeconomic outlook.
We continue to maintain our climate change risk management capabilities and have policies
that outline prohibited commercial sectors which are of particular concern for climate change.
In addition, our policies provide for enhanced borrower assessment where borrowers operate
in other carbon-intensive industries. In retail mortgages, there are policies in place to mitigate
property risk, including the risks that could result from climate change. These include
requirements concerning the durability of the property for the lifetime of the loan, the
requirement that properties must be insurable, and limits for lending on certain products
where the property has received a low EPC rating.
Individual credit decisions are controlled through both quantitative models and review under
delegated lending authority depending on the product, materiality, and complexity of the
exposure. These assessments take into account the potential for future stress in customers’
financial positions. We mitigate credit risk through holding collateral against our retail mortgage
and commercial term loan portfolios.
This robust framework continues to support underlying portfolio resilience as cost-of-living and
interest rate pressures have materialised.
Mitigation
We mitigate risk through regular monitoring and analysis of our customers and their ability
to maintain contractual obligations, as well as the external factors that can impact customer
credit risk. We have established Credit Risk policies and lending criteria, and assess customer
affordability under different scenarios where appropriate. We employ specialist expert
underwriters in our assessments of our commercial customers, and categorise customer risk
as part of our Closer Monitoring and Early Warning List as described above. This allows for the
early identification of customers who may develop financial difficulties, which have not yet fully
materialised. Monthly analysis and reporting provide insight into portfolio credit performance
and highlight where deterioration is taking place or is likely to occur.
In addition to active management and monitoring of our portfolios and customer affordability,
we mitigate credit risk through holding collateral against our retail mortgage and commercial
term loan portfolios. Collateral is usually held in the form of real estate, guarantees, debentures
and other liens that we can call upon in the event of the borrower defaulting. The management
of this is governed by our collateral management policy. At 31 December 2023, 80%
(31 December 2022: 78%) of our loans consisted of retail mortgages and commercial term loans,
with average debt to value of 58% (31 December 2022: 56%) and 55% (31 December 2022: 55%)
respectively.
Subject matter experts further mitigate the risk of credit losses through regular review and
assessment of cases at an individual level. Specialist teams provide customers with support
where financial difficulties are identified, and the use of automated and manual credit
assessments help to ensure good customer outcomes and to maximise the likelihood that
customers maintain the ability to meet their contractual obligations.
140
Supporting our customers
We work with our customers who are in arrears, have payment shortfalls or are in financial
difficulties to obtain the most appropriate outcome for both the Bank and the customer. The
primary objectives of our policy are to ensure that appropriate mechanisms and tools are in
place to support customers during periods of financial difficulty, and to minimise the duration
of the difficulty and the consequence, costs and other impacts arising.
We will always seek to understand the customer’s individual circumstances and ensure a
considered, measured, and consistent approach is taken which is, to the best of our knowledge,
appropriate for their individual circumstances. Where a customer’s financial difficulty is due to
them being impacted by a vulnerable situation, we will seek to provide tailored and flexible
solutions and services appropriate to the circumstances of the vulnerability. As part of this
process, we have a range of treatments that may be considered to support the customer
through the period of financial difficulty, alongside working with them to understand and agree
how to return their account to good standing where possible. This includes the forbearance
options outlined below.
Commercial customers who are showing signs of potential financial difficulty are supported
through our relationship teams, and where appropriate, our Business & Credit Support team.
Each situation is individually assessed, and our preference is to provide flexibility where possible
to help a customer avoid financial difficulty and to resume normal contractual obligations.
Forbearance may be offered where this is sustainable and appropriate to the nature of the
customer’s financial distress.
Forbearance
When our customers show signs of financial difficulties, we may seek to continue our support
through the provision of a concession such as a modification of the terms and conditions of the
loan, or a total or partial refinancing of an existing loan. Concessions can often result in more
favourable terms than those offered or available under normal circumstances. Such events are
considered to be acts of forbearance and are dealt with and monitored in accordance with our
forbearance policies and regulatory guidelines.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
141
Monitoring/reporting
Governance
Credit risk is managed within our Enterprise Risk Management Framework, as part of our
overarching three lines of defence model. Management of credit risk is split primarily into the
firsrt and second lines of defence. The first and second lines are operationally independent and
have separate reporting lines.
The first line management of credit risk is shared across the Bank’s functions that design,
distribute, approve and service credit facilities, referred to in this document as the ‘lending
functions’. These are the functions under the management of the Managing Director, Corporate
and Commercial Banking, Managing Director, Retail and Business Banking, and the Chief
Commercial Officer. The first line lending functions are responsible for proposing and
implementing lending propositions and are responsible for conducting lending activity in
accordance with Credit Risk Appetite and Credit Policies and Standards.
The second line Credit Risk function reports to the Chief Credit Officer (CCO) who, in turn,
reports to the Chief Risk Officer. The CCO, supported by the Credit Risk team, is responsible for:
• Recommending and overseeing Credit Risk Appetite limits
• Developing and overseeing credit risk policies and standards
• Overseeing credit risk strategies in accordance with policies and risk appetite
• Developing and monitoring credit risk models
• Providing an independent review and approval of individual commercial credit proposals and
renewals of loan facilities
• Developing and overseeing retail arrears management strategies
• Managing commercial and Business Support strategy and activities
• Ensuring appropriate IFRS 9 credit provisions are held, and
• Monitoring and reporting credit risk performance.
Monitoring
The credit risk function monitors the risk profile using a broad range of risk metrics, reporting
against risk appetite limits and regular portfolio reviews. This includes oversight of credit risk
performance indicators such as arrears levels, modelled risk measures, such as probability of
default and loss given default, and measures of concentration risk. Stress testing is conducted
to assess the impact on ECL and RWAs.
Credit risk appetite metrics are measured and reported regularly to oversight committees to
ensure we remain within risk appetite and continue to support our strategic objectives. These
metrics include a focus on particular segments of the portfolio which may be susceptible to or
indicative of increased levels of risk, and which are crucial to our strategy. These include
modelled risk parameters and performance metrics such as probability of default and loss given
default, as well as concentration metrics such as sector or geographical concentration. More
granular performance metrics are also tracked to assess the likelihood of potential breaches and
their drivers. The limit framework includes early warning thresholds which identify where action
may need to be taken to avoid a breach of appetite limits. If necessary, a plan is presented to
bring the measurements back to approved levels.
A monthly portfolio insight report is presented to ERC and ROC to provide oversight of key
indicators and performance trends. This is supplemented by a detailed suite of portfolio-level
reports which are reviewed by the Credit Risk Oversight Committee. In addition, we perform
regular portfolio asset quality reviews as well as monitoring and reporting on our credit
decisioning. We have developed statistical models that utilise both internal and external data for
the purposes of estimating ECL under IFRS 9, as well as Internal Ratings Based (IRB) models as
part of our journey to seek permission to use the IRB approach to calculate risk-weighted
exposure amounts for credit risk.
Commercial customers are also monitored through our Closer Monitoring and Early Warning
List. The objective is to identify the potential risks at an individual level before they materialise
and mature. Customers are categorised into one of four categories. The first is ‘closer
monitoring’, followed by early warning list categories one to three. Closer Monitoring and Early
Warning List categories support IFRS9 stage classification.
We monitor the effectiveness of our policies and management framework through the various
credit risk committees outlined above. These committees provide oversight of portfolio quality
and help inform on where changes to our strategy or policies are required in response to
ongoing developments in the external environment. In addition, we assess and estimate the risks
associated with climate change through developed models and we continue to develop our
quantitative capabilities to further support our longer-term objectives and increased focus in
this area.
Future focus
Our overall approach to credit risk management, level of provisions and portfolio shape has put
us in a strong position to remain resilient throughout 2024.
We remain focused on monitoring emerging trends and the impact of high inflation and interest
rate pressures on our customers. We have taken a number of steps to further enhance our
support for customers that may be facing financial difficulty through this period, and will
continue to work with our customers to support them where needed.
As we develop our future product offering, we will continue to update our credit risk policies
and processes to ensure that these remain appropriate for the developing balance sheet.
Metro Bank Holdings PLC Annual Report and Accounts 2023
142
Table 20: Key regulatory metrics and ratios
CET1 ratio
Tier 1 ratio
Total capital ratio
MREL ratio
Leverage ratio
31 December 2023
31 December 2022
13.1%
13.1%
15.1%
22.0%
5.3%
10.3%
10.3%
13.4%
17.7%
4.2%
Capital resources
The capital raise completed in November saw the Bank issue £150 million of new equity and
£175 million in new MREL eligible debt. We ended the year with CET1, Tier 1 and total capital plus
MREL ratios of 13.1%, 13.1% and 22.0% respectively (31 December 2022: 10.3%, 10.3% and 17.7%).
In addition to raising new capital, we also refinanced all of our existing regulatory debt.
This consisted of £350 million of MREL, which now has a call date of 30 April 2028, providing
additional runway for us to deliver our strategy. Alongside this, we replaced our existing
£250 million of Tier 2 debt with £150 million of new instruments.
Financial risks
Continued
Capital risk
Risk definition
The risk that financial resources are not adequate in terms of capital, in order to ensure that
these resources can cover the nature and level of the risks to which the Bank is or might be
exposed.
Risk appetite statement
The Bank has a cautious appetite for Capital Risk. The Board has determined that the Bank shall
be able to maintain a surplus of regulatory capital resources above its total regulatory capital
requirement plus public buffers, as communicated by the regulator, with a buffer to include the
amount of capital identified as required through the Bank’s ICAAP, utilising an appropriate mix
of regulatory capital.
Exposure and assessment
Capital risk exposures arise from the depletion of our capital resources which may result from:
• Increased risk-weighted assets (RWAs).
• Losses.
• Unfavourable changes to regulatory minima or other regulatory rule changes.
Our capital risk management approach is centred around ensuring we can maintain appropriate
levels of capital to meet regulatory minima and support our strategic objectives under both
normal and stressed conditions.
Capitalisation is a core component of our annual planning process, involving the creation of our
budget and Long Term Plan. This sets the forecast of our capital position through the planning
horizon and is further assessed through our ICAAP scenarios, where the scale of risks to capital
is fully considered, and allows the Bank to make informed judgements on risks, the adequacy of
capital carried to support them and the overall robustness of our capital risk management
approach. Management actions to preserve capital are identified and applied, where relevant to
those scenarios. Further details on this process are set out in our Viability statement on pages
49 and 50.
Capital risk is a core focus and our current and forecast capital position is regularly monitored
by the ALCO and ExCo and reported to ROC and the Board. This involves the production of
reports including capital forecasts for the Board and management, which are compared to our
risk appetite and limits for acceptable capitalisation.
The regulatory environment in which we operate continues to evolve. Consequently, a core
component of our capital risk thinking involves horizon scanning of prudential developments
to ensure we continue to monitor potential future capital impacts and anticipate appropriate
capital resources.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Strategic report
Governance
Risk report
Financial statements
Additional information
143
Financial risks
Continued
Our capital resources as at 31 December 2023 are summarised below:
Table 21: Regulatory capital
Share capital
Share premium
Retained earnings
Other reserves
Intangible assets
Other regulatory adjustments
Total Tier 1 capital (CET1)
Debt securities (Tier2)
Total Tier 2 capital
Total regulatory capital
31 December 2023
£’million
31 December 2022
£’million
–
144
978
12
(193)
44
985
150
150
1,135
–
1,964
(1,015)
7
(216)
79
819
250
250
1,069
Capital requirement
We calculate our capital requirement in line with the regulatory requirements set out in the PRA
Rulebook. This consists of a Pillar 1 calculation of RWAs and a Pillar 2A assessment that captures
point in time risks not covered by the Pillar 1 calculation. The Pillar 2A assessment is conducted
through the ICAAP process, which is documented and approved by the Board on an annual
basis and discussed with the PRA as part of the Supervisory Review and Evaluation Process.
Table 22: Capital requirements
Pillar 1
Pillar 2A
Total capital requirement
Capital conservation buffer
UK countercyclical buffer
Total (excluding PRA buffer, if applicable)
31 December 2023
31 December 2022
CET1
Total capital
CET1
Total capital
4.5%
0.2%
4.7%
2.5%
2.0%
9.2%
8.0%
0.4%
8.4%
2.5%
2.0%
12.9%
4.5%
0.3%
4.8%
2.5%
1.0%
8.3%
8.0%
0.5%
8.5%
2.5%
1.0%
12.0%
Capital landscape
Basel 3.1
The PRA has published the first of two near-final policy statements covering the implementation
of the Basel 3.1 standards for market risk, credit valuation adjustment risk, counterparty credit
risk, and operational risk, with the remaining elements of the standards expected to be
published in Q2 2024. Discovery sessions are ongoing to develop more precise estimates of the
likely impact on the Bank.
Resolvability regime
Financial institutions, with total assets greater than £15-25 billion, are subject to stringent MREL
‘bail-in’ requirements meaning that we will need to continue to hold and issue MREL eligible
debt. In order to give further effect to the resolvability regime, the Bank has established a
holding company.
Resolvability assessment framework
The Bank of England (BoE) introduced its Resolvability Assessment Framework (RAF), with
implementation for UK mid tier-firms from 1 January 2023. We fall into this category.
In light of the proportionate requirements for mid-tier firms, we conducted an internal resolution
readiness assessment during 2023. The assessment concluded that we have put in place
capabilities to facilitate the management of a potential resolution event, if required, acknowledging
that the firm’s capabilities will continue to be enhanced as the Resolvability Assessment
Framework is embedded into our business-as-usual activities. Following a review of our RAF
and the successful issuance of MREL, the BoE confirmed that the Bank is resolvable.
Ring-fencing
In 2019, legislation came into force for banks with greater than £25 billion of ‘core deposits’,
requiring them to separate their retail banking from other parts of their business including
investment and international activities. Given our current level of deposits we are not subject to
this separation (referred to as ‘ring-fencing’), although our planned level of growth could see us
become subject to it in the future. As we are purely a UK-focused retail bank the impacts of
ring-fencing should have limited consequences, beyond the costs of ensuring compliance.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Risk-weighted assets
Our RWAs decreased over the course of 2023 to £7,533 million (31 December 2021:
£7,990 million).
144
Response
Capital risk management is focused on three key components:
• A return to sustainable profitability that will allow us to generate organic capital growth.
• The continued optimisation of our balance sheet to both ensure we are maximising our return
Table 23: RWAs
Loans and advances
Treasury portfolio
Other assets
Total Assets
Off-balance sheet
Credit risk (exc. CCR)
CCR, Market risk and
Operational risk
Total RWAs
31 December 2023
31 December 2022
on regulatory capital and managing our RWAs.
Exposure
Risk density
12,297
8,770
1,181
22,248
46%
3%
75%
30%
RWAs
5,597
242
886
6,725
79
6,804
729
7,533
Exposure
Risk density
RWAs
13,102
7,870
1,147
22,119
45%
3%
75%
32%
5,949
265
859
7,073
169
7,242
748
7,990
• Continuing to assess the raising of external regulatory debt capital, as and when market
conditions and opportunities allow.
Sustainable profit growth
The main long-term management approach to capital is the sustainable generation of additional
capital through the accumulation of profits. The Board and ExCo are focused on ensuring the
successful delivery of a return to sustainable profitability.
Balance sheet optimisation
Another key mitigation used to manage capital risk is efficient deployment of our existing
capital resources. One of our strategic priorities is ensuring we continue to optimise our balance
sheet to ensure we maximise our risk-adjusted returns, while remaining above regulatory
requirements. This approach saw us take active measures during the year to enhance our capital
ratios by matching originations to the level of asset run-off.
Raising of additional capital
The ability to raise additional capital, as well as the associated cost, is dependent upon market
conditions and perceptions and is monitored closely..
Monitoring/reporting
We measure our capital resources in line with regulatory requirements in order to appropriately
manage our capital resources. The PRA expects prudential reporting, which includes capital
reporting, to be as rigorous as that for financial reporting. Over the past few years we have
invested in our regulatory reporting systems as well as making enhancements to our control
environment to ensure we are continuing to produce accurate and reliable capital reporting and
deliver against these expectations.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
145
Liquidity and funding risk
Risk definition
Liquidity risk is the risk that we fail to meet our obligations as they fall due. Funding risk is the
risk that we cannot fund assets that are difficult to monetise at short notice (i.e. illiquid assets)
with funding that is behaviourally or contractually long-term (i.e. stable funding).
Risk appetite statement
Liquidity – The Bank has a cautious appetite for Liquidity risk. The Board has determined that
the Bank shall be able to survive a combined name-specific and market-wide liquidity stress
event for at least three months, at a level of severity determined by the Bank’s internal risk
appetite stress test, utilising the Bank’s Liquidity Pool, having identified the Bank’s material
liquidity risks.
In order to appropriately manage our liquidity and funding resources, we run an ILAAP exercise
which considers the risks that we are exposed to in both normal and stressed conditions. The
ILAAP process also sets appropriate limits and determines the Bank’s liquidity risk appetite, and
internal liquidity stress scenario. We produce regular reports on the current and forecast level of
liquidity and capital, which are tracked against limits both at the operational level in Treasury
and at the Executive level at ALCO.
Response
Our liquidity and funding risk management is focused on three key components:
• We retain a deposit-funded approach, with a broad customer deposit base covering both
retail and commercial customers. This means we are not reliant on wholesale funding,
although we continue to utilise the Bank of England’s TFSME as an additional stable source of
funding.
Funding – The Bank has a cautious appetite for Funding risk. The Board has determined that
the Bank shall maintain a prudent funding profile by using stable funding to fund illiquid assets,
without undue reliance on wholesale funding markets, whilst ensuring that funding is not
inappropriately concentrated by customer, sector or term, as identified during the Bank’s
liquidity stress testing.
• We continue to maintain prudent liquidity levels through the holding of high-quality liquid
assets in the form of investment securities with strong credit ratings as well as cash balances
held at the Bank of England.
• We monitor and manage the behavioural maturity of our assets and liabilities on an ongoing
basis to ensure we are not taking undue risk.
Encumbrance – The Bank has a cautious appetite for Encumbrance risk. The Board has
determined that encumbrance of its balance sheet should be no greater than 30% of the Bank’s
total assets in business-as-usual conditions, and unlimited in relation to any encumbrance
relating to repo or use of Bank of England facilities in order to manage through a liquidity stress
situation – and to test the adequacy of those facilities from time to time.
Exposure and assessment
Liquidity risk concerns our ability to meet short-term obligations as they fall due. This requires
liquidity management to maintain investor and market confidence in both business-as-usual and
stressed environments. Funding risk concerns any mismatch between asset liquidity and how
the assets are funded. The primary aim is to ensure assets that are slow to monetise are
supported by funding which is behaviourally or contractually stable.
At the start of October 2023, speculative media reports contributed to uncertainty around the
Bank’s capital negotiations and led to an increased outflow of customer deposits. Our strong
levels of liquidity and prudent approach meant these outflows were manageable and, as at
31 December 2023 we had returned to broadly the same customer deposit levels as we reported
for the third quarter, with strong liquidity and funding regulatory ratios. This was largely
achieved by a successful targeted deposit campaign. As at 31 December 2023, our liquidity
coverage ratio was 332% (31 December 2022: 213%) and our net stable funding ratio was 145%
(31 December 2022: 134%).
We measure our liquidity and funding resources in line with regulatory requirements, with the
key metric for liquidity being the liquidity coverage ratio and for funding, the net stable funding
requirement where we remain above our minimum regulatory requirements. This is supported
by monitoring of the encumbrance ratio and other balance sheet metrics.
• We monitor encumbrance levels and contingent funding capacity.
Deposit-funded approach
We aim to attract service-led core deposits which are less sensitive to competition within the
deposit market. At 31 December 2023, 43% of our deposits came from commercial customers
(31 December 2022: 51%) with the remaining 57% (31 December 2022: 49%) coming from retail
customers. Additionally, 36% of deposits at year end 31 December 2022: 49%) were in the form
of current accounts, with the remainder split between a combination of instant access and
fixed-term savings products.
Liquidity management (audited)
We continue to hold a prudent level of liquidity to cover unexpected outflows, ensuring that we
are able to meet financial commitments for an extended period. We recognise the potential
difficulties in monetising certain assets, so set higher quality targets for liquid assets for the
earlier part of a stress period. We have assessed the level of liquidity necessary to cover both
systemic and idiosyncratic risks and maintain an appropriate liquidity buffer at all times. Our
internal liquidity stress test ensures that we comply with our own risk appetite as well as
regulatory requirements.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
146
Table 24: Contractual maturity (audited)
Table 24 sets out the maturity structure of our assets and liabilities, by their earliest possible contractual maturity date. The contractual maturity will differ from the behavioural maturity
characteristics in both normal and stressed conditions. The behavioural maturity of customer deposits is much longer than their contractual maturity. On a contractual basis, such deposits are
repayable on demand or at short notice. In reality, they are static in nature and provide long-term stable funding for our operations and liquidity. Equally, our loans and advances to customers,
specifically mortgages, are lent on longer contractual terms, but may be redeemed or remortgaged earlier. The total balances set out in the analysis do not reconcile with the carrying amounts
as disclosed in the consolidated balance sheet. The difference arises from the maturity analysis incorporating all the expected future cash flows (including interest), on an undiscounted basis.
Group
Cash and balances with the Bank of England
Loans and advances to customers
Investment securities
Other assets
Total assets
Deposits from customers
Deposits from central banks and repurchase agreements
Debt securities
Other liabilities
Total liabilities
Equity
Total equity and liabilities
Derivative cashflows
Cumulative liquidity gap
Carrying
value
3,891
12,297
4,879
1,178
22,245
Repayable
on demand
£’million
3,891
–
–
–
3,891
(15,623)
(13,430)
(4,241)
(694)
(553)
(21,111)
(1,134)
–
–
–
(13,430)
–
(22,245)
(13,430)
–
Up to
3 months
£’million
–
562
454
–
1,016
(391)
(347)
–
(6)
(744)
–
(744)
2
31 December 2023
3–6 months
£’million
6–12 months
£’million
1–5 years
£’million
Over 5 years
£’million
No contractual
maturity
£’million
–
486
117
–
603
(398)
(551)
(35)
(6)
(990)
–
–
911
397
–
1,308
(931)
(67)
(42)
(11)
–
5,078
4,110
–
9,188
(484)
(3,621)
(829)
(107)
(1,051)
(5,041)
–
–
(990)
(1,051)
(5,041)
–
(3)
37
–
15,811
52
–
15,863
–
–
(160)
(238)
(398)
–
(398)
1
–
381
57
1,178
1,616
(67)
–
–
(319)
(386)
(1,134)
(1,520)
–
Total
£’million
3,891
23,229
5,187
1,178
33,485
(15,701)
(4,586)
(1,066)
(687)
(22,040)
(1,134)
(23,174)
37
(9,539)
(9,265)
(9,652)
(9,398)
(5,214)
10,252
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Table 24: Contractual maturity (audited) Continued
Group
Cash and balances with the Bank of England
Loans and advances to customers
Investment securities
Other assets
Total assets
Deposits from customers
Deposits from central banks and repurchase agreements
Debt securities
Other liabilities
Total liabilities
Equity
Total equity and liabilities
Derivative cashflows
Cumulative liquidity gap
Strategic report
Governance
Risk report
Financial statements
Additional information
147
Carrying
value £’million
1,956
13,102
5,914
1,147
22,119
(16,014)
(4,038)
(571)
(540)
Repayable
on demand
£’million
1,956
–
–
–
1,956
(15,310)
–
–
–
Up to
3 months
£’million
–
573
576
–
1,149
(139)
(215)
–
(6)
(21,163)
(15,310)
(360)
(956)
–
(22,119)
(15,310)
–
–
(360)
(2)
31 December 2022
3 to 6 months
£’million
6 to 12 months
£’million
1 to 5 years
£’million
Over 5 years
£’million
No contractual
maturity
£’million
–
507
206
–
713
(136)
(41)
(272)
(6)
(455)
–
(455)
(1)
–
942
951
–
1,893
(201)
(147)
(17)
(12)
–
5,472
4,312
–
9,784
(162)
(4,147)
(383)
(111)
(377)
(4,803)
–
–
(377)
(3)
–
17,525
164
–
17,689
–
–
–
(263)
(263)
–
Total
£’million
1,956
25,360
6,268
1,147
34,731
–
341
59
1,147
1,547
(75)
(16,023)
–
–
(292)
(367)
(956)
(4,550)
(672)
(690)
(21,935)
(956)
(13,354)
(12,567)
(12,310)
(10,797)
(5,816)
11,610
(4,803)
(263)
(1,323)
(22,891)
–
–
–
(6)
Monitoring/reporting
We consider the effective and prudent management of liquidity to be fundamental to our ongoing resilience and viability. The Board has overall responsibility for establishing and maintaining an
adequate risk management framework, including risk appetites that enable the management of our liquidity and funding risks. We are committed to ensuring that at all times we have sufficient
liquidity resources – in terms of both quantity and quality – to ensure we can meet payments as they fall due.
The Treasury function has responsibility for our compliance with liquidity policy and strategy. We have a dedicated prudential risk team who independently monitor our liquidity and funding risk
daily including ensuring compliance with the policies we have developed. A regulatory reporting team also monitors compliance with relevant metrics.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Market risk
Risk definition
The risk of loss arising from movements in market prices. Market risk is the risk posed to
earnings, economic value or capital that arises from changes in interest rates, market prices or
foreign exchange rates.
Risk appetite statement
Our market risk appetite is determined by reference to a number of sub-risk appetites:
Earning sensitivity – We have a low appetite for earnings risk, with the Board determining a limit
calibrated to ensure net interest income does not exceed an amount recommended and
scrutinised by the ALCO and approved by ROC. The limit is calibrated using a 2% instantaneous
shock in both directions.
Economic value sensitivity – We have a low appetite for economic value risk, with the Board
determining a limit calibrated to ensure that a change to the present value of our balance sheet
does not exceed an amount as recommended and scrutinised by ALCO and approved by ROC.
The limit is calibrated by calculating the impact of a 2% instantaneous shock in both directions.
Revaluation risk – We have a low appetite for revaluation risk, with the Board prescribing that
we should avoid situations where the potential losses caused by changes in market prices shall
not exceed capital held under standard risk weights, taking account of any offsets, determined
by our Revaluation Risk stress scenario.
Foreign exchange risk – We have no appetite for foreign exchange risk, with the Board
determining that exposures in foreign currencies should not represent a material portion of our
capital resources.
Exposure and assessment
We do not have a trading book and we do not actively seek to create value through taking
interest rate positions. While we support our customers in making payments or hold accounts in
foreign currency, we actively avoid exposing our own balance sheet to foreign exchange risk.
The primary source of our market risk exposure is structural interest rate risk in the banking
book mismatch between the fixed rate assets and liabilities and any differences in bases. Interest
rate risk in the banking book crystallises in, and is measured through, the sensitivity of our
current and future net interest income and our economic value to movements in market interest
rates. During 2023, we reached the peak of the current interest rate cycle and at year end
remain well within our risk appetite and supervisory outlier tests.
The Board is responsible for setting market risk appetite. Market risk is mitigated through a risk
management framework that allows it to be monitored and managed by first line management
and second line risk, with oversight from ALCO. Accordingly, ALCO ensures that steps are taken
to identify, measure, monitor and control the interest rate risk in the banking book in line with
the approved strategies and policies.
Management limits are set at the ALCO for economic value and net interest income sensitivity to
ensure prompt action and escalation. Limits and the relevant metrics are also reported to ROC
and the Board.
148
The Teasury function has responsibility for managing market risk within our market risk policy
and strategy. We have a dedicated prudential risk team who independently monitor our market
risk daily including ensuring compliance with the policies we have developed. The Prudential risk
function runs additional interest rate risk simulations monthly to assess other threats that may
not be evident in the standard parallel shock metrics or supervisory outlier tests.
Response
We have a low appetite for those market risks which we do take, with clear limits set for net
interest income and economic value. These limits are sufficient to allow proper management of
operational and financial hedging, but low enough to prevent active use of open positions.
Interest rate risk
We benefit from natural offsetting between certain assets and liabilities, which may be based
on both the contractual and behavioural characteristics of these positions. Where natural
hedging is insufficient, we hedge net interest rate risk exposures appropriately, including,
where necessary, with the use of derivatives. We enter into derivatives only for hedging
purposes and not as part of customer transactions or for speculative purposes. Our treasury
and prudential risk teams work closely together to ensure that risks are identified and managed
appropriately – and that we are well-positioned to avoid losses outside our appetite, in the event
of unexpected market moves.
Foreign exchange exposure
We have very limited exposure to foreign exchange risk. Foreign currency denominated assets
and liabilities are matched off closely in each of the currencies we operate, and we eliminate our
foreign exchange exposure as far as is practical on a daily basis. In any event the risk is strictly
capped at 2% of our capital base. We offer business current accounts in foreign currency and
foreign exchange facilities to facilitate customer requirements only.
Monitoring/reporting
We measure interest rate risk exposure using methods including the following:
• Interest rate gaps: calculating the net difference between total assets and total liabilities
across a range of time buckets.
• Economic value sensitivity: calculating repricing mismatches across our assets and liabilities
over the horizon of our balance sheet and then evaluating the change in value arising from an
instantaneous 2% change in the yield curve in both directions, taking into consideration any
embedded customer optionality. Our economic value sensitivity risk appetite scenario is
based on an instantaneous parallel rate movement of 2% at all maturities, which is widely
considered severe but plausible. Additionally, we evaluate the PRA’s outlier test in line with
regulatory requirements.
• Net interest income sensitivity: calculating repricing mismatches across our assets and
liabilities over a one-year horizon and then evaluating the change in net income arising from
an instantaneous 2% change in the yield curve in both directions. Our net interest income risk
appetite scenario is based on an instantaneous parallel rate movement of 2% at all maturities,
which is widely considered severe but plausible. We also assess basis risk by considering
divergences between the Bank of England base rate and the Sterling Overnight Index Average
(SONIA), which replaced the London Inter-Bank Offered Rate (LIBOR) from January 2022.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
149
Interest rate risk
Table 25 sets out the interest rate risk repricing gaps of our balance sheet in the specified time buckets, indicating how much of each type of asset and liability reprices in the indicated periods,
after applying expected prepayments in line with our policy.
A positive interest rate sensitivity gap exists when more assets than liabilities reprice during a given period. A positive gap tends to benefit net interest income in an environment where interest
rates are rising; however, the actual effect will depend on multiple factors, including actual repayment dates and interest rate sensitivities within the periods. The converse is true for a negative
interest rate sensitivity gap.
Table 25: Repricing analysis (audited)
31 December 2023
Cash and balances at central banks
Loans and advances to customers
Investment securities
Other assets
Total assets
Deposits from customers
Deposits from central banks and repurchase agreements
Debt securities
Other liabilities
Total liabilities
Equity
Total equity and liabilities
Interest rate derivatives
Interest rate sensitivity gap
Cumulative gap
Up to
3 months
£’million
3,817
3,803
2,029
–
9,649
(6,829)
(4,241)
–
–
(11,070)
(23)
(11,093)
(145)
(1,589)
(1,589)
3 to 6 months
£’million
6 to 12 months
£’million
1 to 5 years
£’million
Over 5 years
£’million
Non-interest
bearing
£’million
–
860
3
–
863
(734)
–
–
–
(734)
(23)
(757)
(2)
104
–
1,499
154
–
1,653
(1,607)
–
–
–
(1,607)
(47)
(1,654)
–
(1)
(1,485)
(1,486)
–
6,063
2,642
–
8,705
(5,897)
–
(544)
–
(6,441)
(374)
(6,815)
(3)
1,887
401
–
71
51
–
122
(556)
–
(150)
–
(706)
–
(706)
150
(434)
(33)
Total
£’million
3,891
12,297
4,879
1,178
22,245
(15,623)
(4,241)
(694)
(553)
(21,111)
(1,134)
74
1
–
1,178
1,253
–
–
–
(553)
(553)
(667)
(1,220)
(22,245)
–
33
–
–
–
(4,192)
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Table 25: Repricing analysis (audited) Continued
31 December 2022
Cash and balances at central banks
Loans and advances to customers
Investment securities (AC & FVOCI)
Other assets
Total assets
Deposits from customers
Deposits from BoE and repos
Debt
Other liabilities
Total liabilities
Equity
Total equity and liabilities
Interest rate derivatives
Interest rate sensitivity gap
Cumulative gap
Up to
3 months
£’million
1,881
4,154
2,163
–
8,198
(6,186)
(3,978)
–
–
(10,164)
(760)
(10,924)
(68)
(2,794)
(2,794)
3 to 6 months
£’million
6 to 12 months
£’million
1 to 5 years
£’million
Over 5 years
£’million
Non-interest
bearing
£’million
–
915
–
–
915
(613)
–
(249)
–
(862)
(10)
(872)
40
83
(2,711)
–
2,010
539
–
2,549
(1,154)
(60)
–
–
(1,214)
(21)
(1,235)
(62)
1,252
(1,459)
–
5,850
3,052
–
8,902
(7,456)
–
(322)
–
(7,778)
(165)
(7,943)
105
1,064
(395)
–
173
160
–
333
(605)
–
–
–
(605)
–
(605)
(15)
(287)
(682)
75
–
–
1,147
1,222
–
–
–
(540)
(540)
–
(540)
–
682
–
150
Total
£’million
1,956
13,102
5,914
1,147
22,119
(16,014)
(4,038)
(571)
(540)
(21,163)
(956)
(22,119)
–
–
(8,041)
Table 26 shows the sensitivity arising from the standard scenario of a +200bps and -200bps parallel interest rate shock upon projected net interest income for a one year forecasting period.
This is a hypothetical scenario based on a constant balance sheet as well as a full pass through of the increase to all of our variable rate assets and liabilities.
Table 26: Interest rate sensitivity (audited)
At 31 December 2023
At 31 December 2022
200bps increase
£’million
200bps decrease
£’million
(13.8)
(8.3)
14.3
8.4
Metro Bank Holdings PLC Annual Report and Accounts 2023
Non-financial risks
Strategic report
Governance
Risk report
Financial statements
Additional information
151
Non-financial risk covers the remaining categories of risk
which have the potential to impact the Bank’s operations,
service quality and ability to operate in a safe and
compliant way. Non-financial risks include Financial crime
risk, Operational risk, Conduct risk, Regulatory risk, Legal
risk, Model risk and Strategic risk.
Financial crime
Risk definition
Financial crime risk is the risk that Metro Bank’s products and service offerings will be used to
facilitate financial crime. Financial crime risks include money laundering, violations of sanctions,
bribery and corruption, facilitation of tax evasion and terrorist financing.
Risk appetite statement
We have a low appetite for customer relationships or activity that pose a high financial crime risk
and have no appetite for customer relationships or activity that violate our sanctions obligations.
The nature of our business model as a UK retail bank inherently exposes us to financial crime risk
and as a result of this exposure, strong and effective controls are required to mitigate this. We
have defined a set of quantitative and qualitative key risk appetite metrics against which we
monitor performance. We do not accept customers outside of our financial crime risk appetite
and likewise where customers are reassessed and found to be outside of appetite (i.e. where the
risks are too great to manage effectively) they are exited.
Exposure and assessment
Failure to prevent financial crime may result in harm to our customers, the Bank and third
parties. In addition, non-compliance with regulatory and legal requirements may result in
enforcement action which will have an adverse effect on Metro Bank from a financial and
reputational perspective.
Our overall inherent financial crime risk remains the same as last year and continues to be
medium based on our 2023 risk assessment (anti-money laundering/combating terrorist
financing, anti-tax evasion facilitation and sanctions inherent risks are rated medium, anti-
bribery and corruption inherent risk is rated low).
Response
We continue to deliver enhancements to our financial crime control framework to ensure that it
remains fit for purpose, identifying and mitigating financial crime risk as well as delivering our
financial crime strategy.
Investment in our systems and controls
We continued to deliver strategic enhancements to our financial crime systems throughout
2023 with equal focus on embedding previously implemented controls, as well as introducing
new controls to strengthen our control framework.
Horizon scanning
We continue to identify emerging trends and typologies through conducting horizon scanning
activity, through information obtained from investigative and intelligence teams and through
attending key industry forums (or associations) such as those hosted by UK Finance. As
required, we continue to update our control framework to ensure emerging risks are identified
and mitigated.
Resourcing and training
Resourcing continues to be a significant focus to ensure our Financial Crime Framework
is implemented effectively. All colleagues have a key role to play in the detection and
management of financial crime risk. To this extent, all colleagues receive financial crime training,
ensuring they are able to meet their personal obligations as well performing effectively in role.
For colleagues in specialist financial crime roles, we continue to invest in their development to
improve capabilities through industry-recognised financial crime qualifications.
Sanctions compliance
We comply with all applicable sanctions regimes. We continue to invest in our sanctions control
framework and keep under review the effectiveness of controls we have in place in order to
ensure that sanctions risk is managed in line with risk appetite. We will not tolerate any
deliberate breach of financial crime laws and regulations (including sanctions) that apply to our
business and the activity we undertake.
Anti-money laundering and combating terrorist financing prevention
We comply with all relevant UK anti-money laundering and combating terrorist financing
legislation and have a framework in place to support the implementation and ongoing
monitoring of these requirements into our systems and controls.
Anti-bribery and corruption and anti-tax evasion compliance
We are committed to acting professionally, fairly and with integrity in all our business dealings
and relationships and comply fully with the UK Bribery Act 2010 and Criminal Finances Act 2017.
We do not give or receive improper financial or other benefits in our business operations, nor do
we help facilitate tax evasion.
Monitoring/reporting
We monitor compliance with policies and standards through a range of activities completed by
specialist colleagues. These include quality checking and assurance within operational and first
line risk teams, supported by assurance and internal audit reviews of key financial crime controls
carried out by second and third line teams. The results of these reviews and the status of follow
up actions are escalated through our governance bodies.
Our financial crime risk appetite is reflected in key risk appetite metrics – a set of quantitative
metrics, reported monthly through our governance. Where control performance is assessed as
outside of our risk appetite, the issue and remediation activity is escalated and tracked through
our risk committees.
Future focus
We are committed to safeguarding the Bank and our customers from financial crime. The FCA is
currently undertaking enquiries regarding our financial crime systems and controls. We continue
to engage and co-operate fully with the FCA in relation to these matters, and the FCA’s
enquiries remain ongoing.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Non-financial risks
Continued
Operational risk
Risk definition
The risk that events arising from inadequate or failed internal processes, people and systems, or
from external events cause regulatory censure, reputational damage, financial loss, service
disruption and/or detriment to our FANS.
Risk appetite statement
We maintain a cautious appetite for operational risk and aim to minimise incidents, losses and
adverse customer impacts arising from operational risk issues. We do this by maintaining a
resilient infrastructure, including robust systems, employing and training the right colleagues,
minimising the impact of external events and having a framework in place to ensure that
operational risks are identified, assessed, responded to and monitored. Operational risk
events and losses are recorded and assessed, corrective actions completed and steps taken to
avoid recurrence.
Exposure and assessment
We operate with both a physical and a digital presence and are exposed to a broad range of
operational risks across our distribution channels, businesses and functions. Operational
incidents and other risk events have the potential to cause service disruption and outages,
impacting internal processes, customers, as well as leading to financial losses.
Operational risks arise from day-to-day business activities and the Bank’s operational resilience
is an outcome that we actively monitor and oversee, including through the identification of
important business services and setting of impact tolerances. Our business model, activities and
processes have remained broadly consistent with those of last year and as such our material
operational risk exposures are largely unchanged.
Our Operational Risk Management Framework sets the approach we take to the management
of operational risks including the performance of Risk and Control Self-Assessments,
consideration of a variety of disruption scenarios and recording and management of incidents
and resultant operational risk losses. Operational risk is overseen by the Chief Risk Officer and
teams in the first and second lines of defence, monitored via reporting to Business Risk
Committees, the Non-Financial Risk Oversight Committee run by the second line, ERC and ROC.
Top operational risk exposures through the course of 2023 have included:
Information Security and Cyber – The risk that the confidentiality, integrity or availability of our
information, data and / or systems are compromised or not compliant with regulatory
requirements.
Technology – The risk of inadequate performance of IT infrastructure.
Data – The risk of the inability to identify and maintain data within agreed data standards.
Fraud – The risk of loss due to colleagues, customers or third parties carrying out fraud.
152
Third Party – The risk that reliance on third parties impairs the bank’s performance/operational
resilience, including the ability to provide excellent customer service and to manage risk
effectively.
People – The risk of the inability to attract, retain or engage colleagues who have the right
capabilities to carry out the required roles within the Bank.
Response
We aim to minimise incidents and losses arising from operational risk events by maintaining a
resilient infrastructure, including robust systems and employing and training the right
colleagues. We consider and prepare for a range of potential disruption events and when they
do occur, we respond effectively and ensure that operational risk incidents and losses are
recorded and assessed, and corrective steps taken to avoid recurrence. In accordance with
regulatory requirements, we hold capital appropriate to potential severe yet plausible
operational risk exposures, informed by an assessment of a range of operational risk scenarios.
We have put in place detailed policies, standards and controls to mitigate the variety of
operational risks to which we are exposed. These are designed to both minimise impacts
suffered in the normal course of business (expected losses) and to avoid or reduce the likelihood
of suffering a large extreme (or unexpected) loss.
Responses to our top operational risk exposures have included:
Information Security and Cyber
Refreshed this year, our Information Security Policy sets out that all colleagues have an
important responsibility to safeguard the systems and sensitive information we hold. We
continuously invest in our cyber and information security infrastructure to identify and respond
to threats, protect customer data and minimise the risk of disruption. We recognise the dynamic
cyber threat landscape in which we operate and the risks that come from increased digitisation,
responding by continuing to enhance the control environment and operating advanced tools to
identify and resolve potential vulnerabilities.
Technology
We continue to invest and improve our key technology capabilities that underpin the Bank’s
customer service proposition and maintain our operational resilience. The Bank’s technology
estate is continuously reviewed to ensure it remains fit for purpose and work has been
progressed to deliver required and strategic updates, risk and performance reviews of our
material third-party technology providers and independent assessment of our technology
resilience. We continue to patch and upgrade our systems and platforms and keep an open
dialogue with our regulators on actual or potential disruption events.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Non-financial risks
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Data
The effective use and maintenance of our data underpins the success of our strategy as well as
our ability to deliver good customer outcomes. This year our Data Management Policy has been
comprehensively refreshed, reflective of good practice and designed in line with regulatory
requirements concerning the creation, storage, distribution, usage and deletion of data.
Ownership and accountability for data is defined and controls are in place to safeguard its access
and use. A dedicated Data Governance forum is in place to oversee adherence to standards and
data management maturity, with representatives from across the three lines of defence.
Fraud
The safety and security of our customers and their money is of the highest importance. Our
dedicated teams monitor the rapidly evolving threats posed to both ourselves and our customers
and quickly respond by deploying a range of preventative and detective measures. Authorised
push payment fraud remains an increasing threat across the banking industry and we
continuously review and enhance our prevention and detection capabilities in response, notably
implementing Confirmation of Payee for our customers in 2023. We share fraud prevention
trends and best practice via our various communication channels and pay close attention to
supporting customers that fall victims of fraud to ensure they receive a good outcome.
Third Party
We operate in close collaboration with numerous third parties, with those relationships
underpinning many of our operational processes and customer service offering. Our
Procurement and Supplier Risk Policy sets out our robust approach for safely managing our
third-party relationships, including the potential impacts to our important business processes.
Our supplier risk team provides ongoing oversight and monitoring of our material third parties in
line with regulatory requirements and undertakes independent assurance as required.
People
Our people are central to our community banking strategy, building strong relationships by
living our AMAZEING values, meeting and exceeding customer expectations. Our dedicated
people team provides business support in resource management, talent identification and
training and the Bank has continued to actively manage its resource mix to ensure we have the
right colleagues, in the right place, at the right time.
Monitoring/reporting
Material operational risk events are identified, reviewed and escalated in line with criteria set out
in the Enterprise and Operational Risk Management Frameworks. Incidents and losses are
recorded and root-cause analysis is undertaken with action plans implemented to prevent
recurrence and continually improve our processes. Quantitative metrics are used to measure our
material operational risks and assess our exposure against our stated risk appetite. We conduct
regular operational risk scenario workshops to identify severe yet plausible events which could
impact us. This enables us to quantify the potential losses that such events could cause and hold
sufficient capital against them, as well as highlighting potential areas for ongoing enhancements
to our operational risk capabilities.
Business Risk Committees manage operational risks at business area level, supported by forums
and working groups. Key risk indicators are in place to monitor our operational risk exposures
against stated risk appetite and these are reported to the Non-Financial Risk Oversight
Committee which further escalates to ERC and ROC where appropriate.
Future focus
Work to further mature our management of operational risk will continue in 2024. Making use of
tooling introduced and embedded over the course of the year, increased use of data driven
insights will empower business teams to further refine their risk assessments and enhance and
streamline the control environment. Our operational risk profile will remain under close review as
the Bank implements its strategy, with particular focus on increased use of technology and
automation.
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• Consideration of customer profiles, target markets, fair value, and customer needs and
vulnerability in the context of product and proposition development, ongoing review, and
associated appropriate governance.
• Ongoing quality assurance and review measures to assess delivery of good customer
outcomes, supported and embedded through training.
• A risk-based assurance framework, designed to monitor compliance with regulation and
assess customer outcomes.
Monitoring/reporting
Conduct risk is measured on a quantitative and qualitative basis, which includes a progress
review of top risks and issues under management against key conduct priorities set by the
regulators, as well as a defined set of Board-approved risk appetite metrics relating to
complaints, arrears management, product performance, colleague training and customer
outcome delivery.
A clear governance structure is in place which enables escalation of conduct risks from the first
line risk committees through to the relevant second line oversight committees, including
tracking and challenging adherence to our risk appetite through our Bank Risk Report. ERC,
ROC and the Board in turn monitor and oversee our focus on managing appetite against this
risk. As well as the Bank Risk Report, this also includes periodic reporting on key conduct
themes, alongside supporting key risk appetite measures and frameworks.
Future focus
In line with the requirements of Consumer Duty, we will continue to ensure our products and
services meet customer expectations and can deliver good outcomes, enabling customers to
pursue their financial objectives. We will continually assess our internal processes in line with
regulatory changes, ensuring we meet our regulatory requirements and can reasonably prevent
customer harm and avoid foreseeable harm.
Non-financial risks
Continued
Conduct risk
Risk definition
The risk that our behaviours or actions result in poor outcomes or detriment to customers and/
or undermines market integrity.
Risk appetite statement
We are built around a culture of supporting our customers, offering them a range of relatively
simple retail products. We have a low appetite for conduct risk and seek to minimise risks which
may result in poor outcomes or lead to customer detriment. Where poor outcomes are
identified they must be remediated effectively to minimise risk, prevent recurrence, reduce
customer harm, and reasonably avoid foreseeable harm.
Exposure and assessment
We are built on a people-focused culture of supporting our customers, offering them a range of
relatively simple retail products. We remain exposed to conduct risk resulting from of our
normal day-to-day business activities and the provision of services and products to customers.
Our key focus remains on those customers with additional support needs who may be
increasingly vulnerable following specific life events, or facing financial difficulties due to the
cost-of-living pressures, or who may be the victim of fraudulent activity.
Conduct risk is considered by all three lines of defence as part of their oversight and assurance
activities. A combined Risk Assurance plan, approved by the Audit Committee on an annual
basis, independently assesses our ability to appropriately mitigate this risk.
Response
We have enhanced our conduct risk management framework to improve oversight of the
conduct agenda and have implemented programmes to address the key drivers of potential
customer harm to further support the delivery of good customer outcomes in line with the
requirements of Consumer Duty.
• A Conduct Risk Framework (with supporting policy and standards) sets out our Conduct Risk
Appetite Statement, key regulatory requirements, principles and expectations including
drivers of customer harm, defined governance and approach to risk identification and
monitoring.
• Ongoing development, maintenance and reporting of conduct risk appetite measures (aligned
to the risk taxonomy) inclusive of customer outcome measures, to ERC, ROC and the Board.
• Oversight and ongoing review of conduct risks and issues in relevant business risk and
oversight risk committees, including progress against key customer remediation projects,
conduct-related regulatory change initiatives, complaints, vulnerable customers and arrears
management.
• Maintenance of proactive and coordinated engagement with our regulators around key
customer initiatives.
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Non-financial risks
Continued
Regulatory risk
Risk definition
The risk of regulatory sanction, financial loss and reputational damage as a result of failing to
comply with relevant regulatory requirements.
Risk appetite statement
We have a low appetite for regulatory risk and seek to minimise this risk by maintaining robust
systems and controls that are designed to meet existing regulatory requirements and to ensure
we comply with future changes to the regulatory landscape.
Exposure and assessment
We remain exposed to regulatory risk arising from our normal day-to-day business activities, as
well as significant ongoing and new regulatory changes. We manage regulatory risk through a
combination of clearly defined risk frameworks covering our principal risks, and a comprehensive
set of risk appetite measures and limits, together with appropriate compliance policies and
standards. We undertake a range of mitigating actions to manage regulatory risk, including a
risk-based assurance programme designed to assess areas of the control framework
underpinning regulatory compliance, oversight of key regulatory developments and proactive
and coordinated engagement with our key regulators. Our risk oversight committees monitor
and assess compliance with our regulatory requirements.
Regulatory risk is measured on a quantitative and qualitative basis, which includes a progress
review of top risks and issues under management against material regulatory initiatives and our
relationship with our regulators, as well as a defined set of Board-approved risk appetite metrics
relating to our principal risks. This includes measures around major/critical regulatory, financial
crime and operational impacts, impairment provisioning, credit, model and capital risk exposure,
regulatory breaches, high risk assurance and audit findings, incidents and implementation of
material regulatory change.
Response
Investment in our systems and controls
We continue to invest in and develop our core systems and controls to enable us to meet
existing and new regulatory requirements. Key areas of focus in 2023 included:
• Financial crime.
• Outsourcing and third-party management.
• Operational resilience.
• Open banking.
• Implementation of the Holding Company.
• Consumer Duty.
• New Payment requirements (confirmation of payee).
Monitoring/reporting
Horizon scanning
We undertake ongoing horizon scanning to identify and address upcoming regulatory change.
As part of this process, we engage proactively with our regulatory authorities as well as industry
bodies in respect of any proposed changes. Additionally, a clear governance structure is in place
which enables escalation of regulatory risks from the first line risk committees through to the
relevant second line oversight committees, including track and challenge of adherence to our
risk appetite through our Risk Report. ERC, ROC and the Board in turn monitor and oversee our
focus on maintaining regulatory compliance. As well as our Risk Report, this also includes
periodic reporting on regulatory themes and key focus areas aligned to the regulator’s strategic
priorities, regulatory changes on the horizon and the regulatory environment, alongside
supporting key risk appetite measures and Board-approved frameworks.
Future focus
We continue to place significant focus on overseeing and ensuring compliance with regulatory
requirements. We undertake regular reviews of our risk frameworks, appetite limits and
monitoring processes to ensure that these remain up to date and reflect current regulatory
priorities. During 2024, we will focus on key developments such as Basel 3.1, enhancements
to internal control requirements under the revised UK Corporate Governance Code and
Consumer Duty.
Metro Bank Holdings PLC Annual Report and Accounts 2023
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156
Legal risk
Model risk
Risk definition
The risk of loss, including to reputation, that can result from lack of awareness or
misunderstanding of, ambiguity in or reckless indifference to, the way the law applies to the
Directors, the business, and its relationships, processes, products and services.
Risk definition
The risk of potential loss and regulatory non-compliance due to decisions that could be
principally based on the output of models, due to errors in the development, implementation,
or use of such models.
Risk appetite statement
We have a low appetite for legal risk, limited to those events where there is a minimal chance of
material financial, reputational or commercial negative consequences.
Assessment and exposure
We remain exposed to a range of legal risks in relation to our normal business activities. These
risks may arise from:
• Defective contracts.
• Claims and litigation against us.
• Failure or inability to take appropriate measures to protect intellectual property.
• Failure to comply with specific legislation (e.g. Market Abuse).
Given the pervasive and fundamental nature of legal risk, rather than having a separate
framework, the methodology for the robust management of legal risk is set out in reporting to
ERC and ROC.
Response
We minimise legal risk via a range of mitigants, including:
• In house legal expertise, maintained via appropriate training and development and specialist
recruitment.
• Selective use of expert external legal advice via an approved panel of lawyers.
• Appropriate policy documentation and training related to specific legal requirements.
• Monthly reporting of metrics to measure compliance with our legal risk appetite.
Risk appetite statement
We adopt a cautious appetite for risk due to errors in the development, implementation or use
of models, which we mitigate via effective governance over the specification and design,
implementation and running of our models and over model input data.
Assessment and exposure
We use models to support a broad range of business and risk management activities,
including informing business decisions and strategies, measuring, and mitigating risk, valuing
exposures (including the calculation of impairment), conducting stress testing, and assessing
capital adequacy.
Model risk is assessed via our Model Risk Index and underlying key risk indicators, which include
monitoring of the materiality and complexity of our models.
Model risk remains stable, while closely managed, with ongoing enhancements to risk
governance, risk appetite metrics and scope having been implemented. This has in turn helped
to mitigate potential increased risk from the impacts and uncertainties arising from
macroeconomic challenges.
Response
The main mitigant to model risk is the robust governance process, including two dedicated
model committees, the Model Oversight Committee, and the Model Governance Committee.
There is also an expert panel to opine on contentious issues. The committees monitor the
effectiveness of the Model Risk Management Framework. This includes a review of findings in
relation to specific modelling processes, escalating to ERC and ROC as appropriate.
We have in place a well-qualified independent model validation function that performs model
validations prior to model implementation, when a model is changed and on a periodic basis.
Monitoring/reporting
A range of key risk indicators are used to measure our exposure to legal risk, including the risk of
defective contracts and claims made against us. Details of our material legal and regulatory
matters can be found in note 32 to the financial statements on page 213.
Monitoring/reporting
Our Model Risk Management Framework sets out the roles and responsibilities of the various
stakeholders, underpinned by robust governance of model risk supported by model
development, monitoring, validation, implementation and risk appetite standards.
Future focus
We will continue to ensure that we work within legal parameters for all aspects of our activities
and measure compliance with risk appetite. Further to the enhancements made to the
Enterprise Risk Management Framework in respect of legal risk, further refinement to the suite
of key risk indicators is planned in 2024.
Exposure against the key risk indicators is reported to the model risk committees, ERC and ROC
on a monthly basis and periodic, more detailed assessments are also reported through the risk
governance structure.
Future focus
We continue to enhance and evolve governance of model risk. Whilst we are a standardised
bank and do not need to comply by the regulatory deadline, we are working towards complying
with the principles of the Bank of England Supervisory Statement SS1/23 ‘Model risk
management principles for banks’.
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Non-financial risks
Continued
Strategic risk
Risk definition
The risk of having an insufficiently defined, flawed or poorly implemented strategy, a strategy
that does not adapt to political, environmental, business and other developments and/or a
strategy that does not meet the requirements and expectations of our stakeholders.
Risk appetite statement
We have not set a separate risk appetite for strategic risk and instead monitor it via the full
range of reporting via our governance structure and direct risk input into the formulation of
our strategy and Long Term Plan, including providing a risk review to support Board approval.
Assessment and exposure
During 2023, we remained focused on the execution of our strategy with the return to
profitability in the first half of the year demonstrating the strengths of our community banking
strategy. The second half of the year saw a combination of increased capital requirements
together with a setback in our ambition to achieve AIRB accreditation for residential mortgages.
These factors put pressure on our capital position and restrained the levels to which we were
able to grow capital organically. Despite challenging market conditions, we were successful in
delivering a £925 million capital package which included the raising of new capital as well as the
refinancing of our existing regulatory debt. We now need to successfully execute on the
opportunities the capital affords us and meet stakeholder expectations.
Response
Strategic risk is considered in everything we do, as having a clear and successful strategy is
key to the Bank achieving its goals. This includes reporting our success in relation to our
competitors, our monitoring and governance of ESG-related issues and requirements and an
ongoing assessment of the geopolitical and macroeconomic landscape we operate within.
We continue to oversee the development and execution of our strategy on an ongoing basis
through regular in-depth management reviews of business performance and change delivery,
oversight of strategic risks through risk governance and regular updates presented to the Board.
The Board undertakes an annual review of the Bank’s strategy and Long Term Plan which is
supported by risk assessment reviewed at the Risk Oversight Committee. During 2023, we have
continued to strengthen our cost management discipline including prioritisation and delivery of
technology change through further embedding and optimising Agile ways of working.
Monitoring/reporting
Strategic risk is addressed through the Board-approved strategy and long-term financial plan.
We consider strategic risk as part of ongoing risk reporting and an annual review of our strategy
and Long Term Plan, as well as ongoing monitoring and management via our risk governance
structure and ExCo oversight of execution, including oversight and challenge by the second line
of defence. In addition, the emerging risks the Bank faces are assessed on at least a six-monthly
basis, including strategic risks.
Future focus
We continue to see a high level of volatility in the external environment, with political and
economic turbulence in the UK and beyond. The likelihood of a general election, ongoing
cost-of-living pressures and a subdued UK economy, as well as continuing conflicts in both
Ukraine and the Middle East, provide a challenging backdrop for the execution of strategy.
Monitoring of performance will remain heightened with close Board oversight of the efficacy
of the strategy and its implementation. This will be supported by ongoing risk assessment to
support active management of the evolving risk profile, with oversight from the Risk Oversight
Committee. The Bank continues to conduct horizon scanning against emerging risks which may
have a severe impact and will adjust its approach accordingly.
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In this section
159
Independent auditors’ report to the members of
Metro Bank Holdings PLC
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
167
168 Consolidated balance sheet
169
170 Consolidated cash flow statements
171 Notes to the consolidated financial statements
219 Company balance sheet
220 Company statement of changes in equity
221 Company cash flow statements
222 Notes to the company financial statements
Metro Bank Holdings PLC Annual Report and Accounts 2023
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Report on the audit of the financial statements
Overview
Audit scope
Opinion
In our opinion, Metro Bank Holdings PLC’s group financial statements and company financial
statements (the “financial statements”):
• give a true and fair view of the state of the group’s and of the company’s affairs as at
31 December 2023 and of the group’s profit and the group’s and company’s cash flows
for the year then ended;
• have been properly prepared in accordance with UK-adopted international accounting
standards as applied in accordance with the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise:
the Consolidated and Company balance sheets as at 31 December 2023; the Consolidated
statement of comprehensive income; the Consolidated and Company statements of changes
in equity; the Consolidated and Company cash flow statements for the year then ended; and
the notes to the financial statements, which include a description of the significant
accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the
FRC’s Ethical Standard were not provided.
• The scope of our audit and the nature, timing and extent of audit procedures performed
were determined by our risk assessment, the financial significance of components and other
qualitative factors (including history of misstatement through fraud or error).
• We performed audit procedures over components considered financially significant in the
context of the group. For our group audit, we identified two financially significant
components, which are Metro Bank Holdings PLC (the company) and Metro Bank PLC.
We performed other procedures including testing information technology general controls,
analytical procedures and tests of detail over loans and advances to mitigate the risk of
material misstatement in the non-financially significant components.
Key audit matters
• Determination of allowance for expected credit losses on loans and advances to
customers (group).
• Carrying values of non-financial assets (group).
• Carrying value of investment in subsidiary (parent).
Materiality
• Overall group materiality: £11.4m based on 1% of total equity.
• Overall company materiality: £10.0m based on 1% of total equity.
• Performance materiality: £8.5m (group) and £7.5m (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most
significance in the audit of the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) identified by
the auditors, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These
matters, and any comments we make on the results of our procedures thereon, were addressed
in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Other than those disclosed in note 8, we have provided no non-audit services to the company or
its controlled undertakings in the period under audit.
This is not a complete list of all risks identified by our audit.
Our audit approach
Context
The company was incorporated on 29 September 2022. On 19 May 2023, the company listed on
the London Stock Exchange and acquired 100% of the ordinary share capital of Metro Bank PLC.
The acquisition has been accounted for using merger accounting and therefore this is our first
audit of the new group. The comparative numbers in the financial statements were audited as
part of our audit of Metro Bank PLC for the year ended 31 December 2022.
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Key audit matter
How our audit addressed the key audit matter
Determination of allowance for Expected Credit Losses on loans and
advances to customers (group)
Refer to page 70 (Audit Committee report), Note 12: Loans and advances to
customers and Note 30: Expected credit losses.
We evaluated the design and implementation of key controls but did not test the operating effectiveness of controls as
we did not plan to rely on them. We performed a fully substantive audit.
The calculation of the allowance for expected credit losses (ECL) requires
management to make a number of significant judgements and estimates. In
2023, the level of estimation uncertainty and judgement remained high as the
UK experienced continued high levels of inflation and increases in interest rates.
The uncertainty driven by forecast weak economic growth in 2024 and 2025 has
increased the amount of judgement required in determining ECL.
Management determines the amount of ECL using a number of complex models.
In addition, a number of post model overlays are required where the models do
not capture all relevant risks. The overlays included adjustments in relation to the
impact of inflation on customer affordability and commercial borrowers which
was determined either not to be fully reflected in the economic forecasts or where
the modelled output did not fully reflect the impact on credit risk.
Across the in-scope portfolios, we identified heightened audit risk in determining
the ECL for the following portfolios: Retail Mortgages, Consumer unsecured
(specifically for RateSetter loans) and Commercial (excluding the small asset
finance and invoice finance portfolios, and government backed loans).
Our work focused on the following key assumptions and judgements:
• Forward-looking economic assumptions used in the models, and the weighting
selected by management. Management uses a third party expert to determine
the economic assumptions;
• Judgements involved in creating post model overlays to change modelled
outputs and the application of those adjustments in response to heightened
economic uncertainty and the impact of inflation and higher interest rates;
• Judgements exercised in determining whether a significant increase in credit
risk (‘SICR’) should be recognised for Commercial loans where staging is based
on a qualitative assessment of credit risk; and
• Judgements applied by management in estimating stage 3 individual
impairment allowances, specifically in relation to the valuation of collateral.
We engaged the support of our credit modelling specialists and performed the following substantive audit
procedures in order to assess the performance, methodology and accuracy of the ECL models. We also assessed
the appropriateness of management’s key judgements and assumptions in the context of the current economic
environment and our wider industry experience.
Forward looking information and multiple economic scenarios
We used our economic analysis tool developed by our economic and modelling experts utilising data from the Bank of
England, HM Treasury and Consensus Economics. This tool assessed the reasonableness of management’s economic
scenarios and associated weightings, giving specific consideration to the current economic environment.
Where economic inputs fell outside of a reasonable range, we ensured that a suitable post model overlay was recorded.
Management kept their scenario weightings consistent with 2022 in response to the current economic risks and slow
recovery of the UK economy.
We evaluated whether the scenario weights appropriately captured the economic uncertainty created by the economic
risks, high inflation and interest rates, and the weak growth of the UK economy.
Model methodology and post model overlays
We critically assessed the methodology used in the in- scope impairment models and evaluated compliance with IFRS
9 requirements. We also tested the key assumptions and judgements which comprise the PDs/LGDs/EADs used in the
calculation of provisions.
We tested the input of certain data elements into impairment models and management judgemental adjustments,
including credit reviews that determine credit risk ratings for commercial customers. Our credit modelling specialists
independently rebuilt the commercial loans, retail mortgages and the RateSetter ECL models. This was performed
using management’s methodology and we compared the output to management’s modelled ECL output. For the other
in-scope portfolios our modelling specialists performed an independent code review to validate that the models were
implemented in line with the group’s methodology. Our credit modelling specialists also assessed the results of model
monitoring performed by management, and independently re-performed the key tests.
We critically assessed and tested the expert judgements applied by management to address the credit risk in the
portfolio that was not reflected in modelled outputs. We evaluated and challenged the methodologies, the accuracy of
application and the completeness of overlays. Where appropriate, we ran a series of independent scenarios based on
alternative assumptions, and compared the results to the ECL results produced by management.
Significant increase in credit risk (SICR) – Commercial loans
To test the judgements in determining whether SICR events have occurred, we evaluated the appropriateness of the
SICR criteria being used. For a sample of loans across the Commercial stage 1 and 2 populations and independently
assessed the stage allocation against SICR criteria.
Individually assessed stage 3 loans
For a sample of stage 3 credit impaired loans, we critically evaluated the basis on which the allowance was determined,
and the evidence supporting the analysis performed by management. We also independently challenged whether the
key assumptions used, such as the recovery strategies and collateral valuations, and ranges of potential outcomes, were
appropriate given the borrowers’ circumstances.
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Key audit matter
How our audit addressed the key audit matter
Carrying values of non-financial assets (group)
Refer to page 70 (Audit Committee report), Note 14: Property, Plant and
Equipment and Note 15: Intangible assets.
To address the risk of impairment of the non-financial assets, we performed a number of audit procedures over
the assessment performed by management.
Our work included the following substantive tests:
• Tested the mathematical integrity of the impairment model and agreed the relevant inputs to the Board
approved LTP;
• Evaluated management’s accounting policy and impairment methodology with reference to IFRS
requirements;
• Reviewed the forecasts in the LTP and evaluated these for reasonableness. We made inquiries of management,
inspected business plans and critically assessed management’s growth assumptions, including those relating
to net interest income, using third party evidence where relevant;
• Evaluated compliance with regulatory capital requirements and the underlying assumptions during the period
of the plan using our regulatory experts. We tested forecast capital ratios, reviewed regulatory correspondence
and held discussions with the PRA; and
• Engaged our valuation specialists in assessing the reasonableness of the discount rate and terminal growth
rate.
The group’s tangible fixed assets mainly comprised leasehold improvements
and Right of Use assets. The group also capitalised as intangible assets certain
expenditure in the development of software to support its business strategy.
The market value of the group and the 2023 operating performance of the
Bank indicated that the investment might be impaired.
Management evaluated the above non-financial assets for impairment, and
estimated the recoverable amounts of those assets. As the assets do not
generate largely independent cash inflows, they have been incorporated into a
relevant cash generating unit (CGU) and the recoverable amount of that CGU
has been determined. The CGU relevant to the vast majority of non-financial
assets is the ‘retail bank CGU’ within Metro Bank PLC.
The determination of the recoverable amount requires management to
estimate the higher of value in use and fair value less costs to sell the retail
bank CGU. This assessment is complex and involves subjective judgements.
The recoverable amount is estimated using forecast cash flows included
in management’s 5 year Long Term Plan (‘LTP), a decreasing growth rate
from years 6 to 10, a terminal growth rate and a discount rate. There are
methodology judgements required in determining a value in use in compliance
with IAS 36 ‘Impairment of assets’. The LTP is also supported by various
assumptions relating to compliance with regulatory capital requirements.
Management concluded that no impairment existed as at 31 December
2023. The forecast cash flows in the LTP, in particular relating to net interest
income, the determination of the discount rate and the assumptions relating to
compliance with regulatory capital requirements are key judgements. Due to
the magnitude of the balance and the judgements involved in respect of the
retail bank CGU, the impairment assessment represents a key audit matter.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Independent auditors’ report
Continued
162
Key audit matter
How our audit addressed the key audit matter
Carrying value of investment in subsidiary (parent)
Refer to page 70 (Audit Committee report) and Note 3.
Management reviewed the equity investment in the subsidiary, Metro
Bank PLC, for indicators of impairment in accordance with IAS 36 as at
31 December 2023. The market value of the group and the 2023 operating
performance of the Bank indicated that the investment might be impaired.
Management estimated the recoverable amount using the higher of value
in use (‘ViU’) or fair value less cost to sell.
The methodology used to estimate the recoverable amount is dependent
on various assumptions, both short term and long term in nature. These
assumptions, which are subject to estimation uncertainty, are derived
from a combination of management’s judgement and third party data.
The significant assumptions that we focused our audit on were those with
greater levels of management judgement and for which variations had
the most significant impact on the recoverable amount. These included
the compliance of the chosen methodology with IAS 36, the bank’s Long
Term Plan (‘LTP’) for 2024 to 2028, in particular the net interest income
forecasts, regulatory capital requirements and the discount rate.
Management’s assessment resulted in an impairment charge. Due to
the magnitude of the investment and the impairment charge and the
judgements involved, the impairment assessment represents a key
audit matter.
We performed a number of audit procedures over the calculation of the impairment determined by
management. We challenged and tested the reasonableness of management’s methodology and key
assumptions.
Our work included the following substantive tests:
• Tested the mathematical integrity of the impairment model and agreed the relevant inputs to the Board
approved LTP relating to the subsidiary;
• Evaluated management’s accounting policy and impairment methodology with reference to IFRS
requirements, including adjustments made to the LTP to comply with IAS 36;
• Reviewed the forecasts in the LTP and evaluated these for reasonableness. We made inquiries of
management, inspected business plans and critically assessed management’s growth assumptions,
including those relating to net interest income, using third party evidence where relevant;
• Engaged our regulatory experts in assessing the reasonableness of the risk weighted asset and capital
requirements; and
• Engaged our valuation specialists in assessing the reasonableness of the discount rate and terminal
growth rate.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Independent auditors’ report
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
163
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to
give an opinion on the financial statements as a whole, taking into account the structure of
the group and the company, the accounting processes and controls, and the industry in which
they operate.
We performed a risk assessment, giving consideration to relevant external and internal factors,
including climate change, economic risks, relevant accounting and regulatory developments, as
well as the group’s strategy. We also considered our knowledge and experience obtained in
prior year audits of Metro Bank PLC. We continually assessed the risks and changed the scope
of our audit where necessary.
As part of considering the impact of climate change in our risk assessment, we evaluated
management’s assessment of the impact of climate risk, which is set out on page 42, including
their conclusion that there is no material impact on the financial statements. In particular, we
considered management’s assessment of the impact on ECL on loans and advances to
customers within Metro Bank PLC, which we determined to be most likely to be impacted by
climate risk. Management’s assessment gave consideration to a number of matters, including
the Biennial Exploratory Scenario climate stress testing performed in 2021. As a result of their
assessment, an immaterial model overlay was recognised in 2021, and continues to be held as
at 31 December 2023.
The group comprises four components. Any components which were considered individually
financially significant in the context of the group’s consolidated financial statements were
considered full scope components. We considered the individual financial significance of other
components in relation to primary statement account balances and the presence of any
significant audit risks and other qualitative factors (including history of misstatements through
fraud or error). For our group audit, we identified two financially significant components, which
are Metro Bank Holdings PLC (the company) and Metro Bank PLC.
We then considered the components in the group that had either financially significant or
unusual account balances which were required to be brought into scope. In relation to SME
Asset Finance Limited and SME Invoice Finance Limited, we performed audit procedures over
loans and advances. The remaining balances and components, in our judgement, did not
present a reasonable possibility of a risk of material misstatement either individually or in
aggregate and were eliminated from further consideration for specific audit procedures. We
performed other procedures such as tests of information technology controls and group level
analytical review procedures.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain
quantitative thresholds for materiality. These, together with qualitative considerations, helped us
to determine the scope of our audit and the nature, timing and extent of our audit procedures
on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as
a whole as follows:
Overall materiality
£11.4m.
£10.0m.
How we determined it
1% of total equity
1% of total equity
Financial statements – group
Financial statements – company
Rationale for benchmark applied The group’s total equity
is the most appropriate
benchmark as it is correlated
with the level of regulatory
capital which is a key metric
for management and users
of the financial statements.
It also provides a
stable benchmark.
The company’s total equity
(before the one-off
impairment of the
subsidiary) has been used as
the most appropriate
benchmark given its primary
purpose is to act as a holding
company, not to generate
operating profits and
therefore a profit based
measure is not relevant.
For each component in the scope of our group audit, we allocated a materiality that is less than
our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that
the aggregate of uncorrected and undetected misstatements exceeds overall materiality.
Specifically, we use performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of transactions and disclosures,
for example in determining sample sizes. Our performance materiality was 75% of overall
materiality, amounting to £8.5m for the group financial statements and £7.5m for the company
financial statements.
In determining the performance materiality, we considered a number of factors – the history of
misstatements, risk assessment and aggregation risk and the effectiveness of controls – and
concluded that an amount at the upper end of our normal range was appropriate.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Independent auditors’ report
Continued
164
We agreed with the Audit Committee that we would report to them misstatements identified
during our audit above £0.5m (group audit) and £0.5 (company audit) as well as misstatements
below those amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue
to adopt the going concern basis of accounting included:
• Understanding the Directors’ going concern assessment process, including the preparation
and approval of the budget. We obtained management’s Board approved forecast covering
the period of the going concern assessment to 30 June 2025. We evaluated the forecasting
method adopted by the Directors in assessing going concern;
• Evaluation of management’s financial and regulatory capital forecasts. We checked the
mathematical accuracy of the model and evaluated the key assumptions using our
understanding of the Group and external evidence where appropriate. We used our Prudential
Regulatory experts to review the Bank’s risk weighted assets and forecast capital requirement
assumptions. We also performed a comparison of the 2023 budget and the actual results to
assess the accuracy of the budgeting process;
• Evaluation of the appropriateness of management’s severe but plausible scenario using our
firm’s economics experts and our understanding of the bank and the external environment.
We evaluated management’s assumptions by performing an independent stress test to
determine whether a reasonable alternative stressed scenario would result in a breach of
minimum regulatory requirements;
• Considering the mitigating actions that management identified, including the reduction of
costs and slowing down the origination of new loans and advances, and assessing whether
these were in the control of management and possible in the going concern period of
assessment;
• Reviewing management’s stress testing of liquidity and evaluation of the impact on liquidity of
past stress events. We substantiated the liquid resources held, and liquidity facilities available
to the group, for example, with the Bank of England. We also reconciled Metro Bank Holdings
PLC’s liquidity position to its regulatory liquidity reporting returns;
• Reviewing correspondence between the Bank and its regulators and we met with the PRA
during the audit and understood the PRA’s perspectives on the Bank’s risks and its capital and
liquidity position; and
• Assessing the adequacy of disclosures in the Going Concern statement in note 1 of the
Consolidated and Company Financial Statements and within the Assessment of going
concern section of the Viability statement on page 50 and found these appropriately reflect
the key areas of uncertainty identified.
Based on the work we have performed, we have not identified any material uncertainties relating
to events or conditions that, individually or collectively, may cast significant doubt on the
group’s and the company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a
guarantee as to the group’s and the company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance
Code, we have nothing material to add or draw attention to in relation to the directors’
statement in the financial statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the
financial statements and our auditors’ report thereon. The directors are responsible for the other
information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly
stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement,
we are required to perform procedures to conclude whether there is a material misstatement of
the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether the
disclosures required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us
also to report certain opinions and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in
the Strategic report and Directors’ Report for the year ended 31 December 2023 is consistent
with the financial statements and has been prepared in accordance with applicable legal
requirements.
In light of the knowledge and understanding of the group and company and their environment
obtained in the course of the audit, we did not identify any material misstatements in the
Strategic report and Directors’ Report.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Independent auditors’ report
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
165
Directors’ Remuneration
In our opinion, the part of the Annual Report on remuneration to be audited has been properly
prepared in accordance with the Companies Act 2006.
• The section of the Annual Report that describes the review of effectiveness of risk
management and internal control systems; and
• The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’
statement relating to the company’s compliance with the Code does not properly disclose a
departure from a relevant provision of the Code specified under the Listing Rules for review by
the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the statement of Directors’ responsibilities in respect of the financial
statements, the directors are responsible for the preparation of the financial statements in
accordance with the applicable framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control as they determine is necessary
to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and
the company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the group or the company or to cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern,
longer-term viability and that part of the corporate governance statement relating to the
company’s compliance with the provisions of the UK Corporate Governance Code specified for
our review. Our additional responsibilities with respect to the corporate governance statement
as other information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the
following elements of the corporate governance statement is materially consistent with the
financial statements and our knowledge obtained during the audit, and we have nothing
material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging
and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are
in place to identify emerging risks and an explanation of how these are being managed or
mitigated;
• The directors’ statement in the financial statements about whether they considered it
appropriate to adopt the going concern basis of accounting in preparing them, and their
identification of any material uncertainties to the group’s and company’s ability to continue to
do so over a period of at least twelve months from the date of approval of the financial
statements;
• The directors’ explanation as to their assessment of the group’s and company’s prospects, the
period this assessment covers and why the period is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the company
will be able to continue in operation and meet its liabilities as they fall due over the period of
its assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group and
company was substantially less in scope than an audit and only consisted of making inquiries
and considering the directors’ process supporting their statement; checking that the statement
is in alignment with the relevant provisions of the UK Corporate Governance Code; and
considering whether the statement is consistent with the financial statements and our
knowledge and understanding of the group and company and their environment obtained in the
course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of
the following elements of the corporate governance statement is materially consistent with the
financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair,
balanced and understandable, and provides the information necessary for the members to
assess the group’s and company’s position, performance, business model and strategy;
Metro Bank Holdings PLC Annual Report and Accounts 2023
Independent auditors’ report
Continued
166
Irregularities, including fraud, are instances of non-compliance with laws and regulations.
We design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of
non-compliance with laws and regulations related to the Financial Conduct Authority (FCA) and
Prudential Regulatory Authority (PRA), and we considered the extent to which non-compliance
might have a material effect on the financial statements. We also considered those laws and
regulations that have a direct impact on the financial statements such as UK tax legislation and
the Companies Act 2006. We evaluated management’s incentives and opportunities for
fraudulent manipulation of the financial statements (including the risk of override of controls),
and determined that the principal risks were related to posting manual journal entries to
manipulate financial performance and management bias in accounting estimates. Audit
procedures performed by the engagement team included:
• Enquiries of the Audit Committee, management, internal audit and the group’s legal counsel,
including consideration of known or suspected instances of non-compliance with laws and
regulation and fraud;
• Evaluation of the design and implementation of controls designed to prevent and detect
irregularities relevant to financial reporting;
• Reviewing key correspondence and holding discussions with regulators, such as the FCA and
the PRA, in relation to the group’s compliance with banking regulations;
• Incorporating unpredictability into the nature, timing and/or extent of our testing;
• Challenging assumptions and judgements made by management in respect of the
determination of allowance for expected credit losses on loans and advances to customers,
the carrying value of non-financial assets and the carrying value of the investment in
subsidiary (see related key audit matters); and
• Identifying and testing journal entries including those posted by infrequent or unexpected
users, related to significant one off or unusual transactions, as well as year-end provisions or
write downs and those posted late in the financial reporting process.
There are inherent limitations in the audit procedures described above. We are less likely to
become aware of instances of non-compliance with laws and regulations that are not closely
related to events and transactions reflected in the financial statements. Also, the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the financial statements is located on
the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members
as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for
our audit have not been received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the company financial statements and the part of the Annual Report on remuneration to be
audited are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the directors
on 25 April 2023 to audit the financial statements for the year ended 31 December 2023 and
subsequent financial periods. Metro Bank Holdings PLC is the parent of Metro Bank PLC which
we have audited since the year ended 31 December 2010 with the period of total uninterrupted
engagement being 14 years, covering the years ended 31 December 2010 to 31 December 2023.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule
4.1.14R, these financial statements form part of the ESEF-prepared annual financial report filed
on the National Storage Mechanism of the Financial Conduct Authority in accordance with the
ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance
over whether the annual financial report has been prepared using the single electronic format
specified in the ESEF RTS.
Our audit testing might include testing complete populations of certain transactions and
balances, possibly using data auditing techniques. However, it typically involves selecting a
limited number of items for testing, rather than testing complete populations. We will often seek
to target particular items for testing based on their size or risk characteristics. In other cases, we
will use audit sampling to enable us to draw a conclusion about the population from which the
sample is selected.
Jonathan Holloway (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
16 April 2024
Metro Bank Holdings PLC Annual Report and Accounts 2023
Strategic report
Governance
Risk report
Financial statements
Additional information
167
Consolidated statement
of comprehensive income
For the year ended 31 December 2023
Interest income
Interest expense
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net gains on sale of assets
Other income¹
Total income
General operating expenses
Depreciation and amortisation
Impairment and write-offs of property, plant, equipment and intangible assets
Total operating expenses
Expected credit loss expense
Profit/(loss) before tax
Taxation
Profit/(loss) for the year
Other comprehensive income/(expense) 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
Total other comprehensive income/(expense)
Total comprehensive profit/(loss) for the year
Profit/(loss) per share
Basic (pence)
Diluted (pence)
1. Other income includes a £100m gain on debt extinguishment.
The accompanying notes form an integral part of these financial statements.
Years ended 31 December
Notes
2023
£’million
2022
£’million
2
2
3
3
4
5
6
14, 15
14, 15
855.7
563.7
(443.8)
(159.6)
411.9
95.0
(4.6)
90.4
2.7
404.1
84.4
(2.6)
81.8
–
143.9
37.6
648.9
523.5
(502.9)
(467.6)
(77.7)
(4.6)
(77.0)
(9.7)
(585.2)
(554.3)
30
(33.2)
30.5
(1.0)
29.5
(39.9)
(70.7)
(2.0)
(72.7)
9
28
36
36
2.4
2.4
(7.6)
(7.6)
31.9
(80.3)
13.8
13.4
(42.2)
(42.2)
Metro Bank Holdings PLC Annual Report and Accounts 2023
Consolidated balance sheet
As at 31 December 2023
Cash and balances with the Bank of England
Loans and advances to customers
Investment securities held at fair value through other comprehensive income
Investment securities held at amortised cost
Financial assets held at fair value through profit and loss
Derivative financial assets
Property, plant and equipment
Intangible assets
Prepayments and accrued income
Assets classified as held for sale
Other assets
Total assets
Deposits from customers
Deposits from central banks
Debt securities
Repurchase agreements
Derivative financial liabilities
Lease liabilities
Deferred grants
Provisions
Deferred tax liability
Other liabilities
Total liabilities
Called-up share capital
Share premium
Retained earnings
Other reserves
Total equity
Total equity and liabilities
168
Notes
11
12
13
13
21
14
15
16
14
17
18
19
20
10
21
22
23
24
9
25
26
26
27
28
Years ended 31 December
2023
£’million
3,891
12,297
476
2022
£’million
1,956
13,102
571
4,403
5,343
–
36
723
193
118
–
108
1
23
748
216
85
1
73
22,245
15,623
3,050
22,119
16,014
3,800
694
1,191
–
234
16
23
13
267
21,111
–
144
978
12
1,134
571
238
26
248
17
7
12
230
21,163
–
1,964
(1,015)
7
956
22,245
22,119
The accompanying notes form an integral part of these financial statements. They were approved by the Board of Directors on 16 April 2024 and signed on its behalf by:
Robert Sharpe
Chair
Daniel Frumkin
Chief Executive Officer
Metro Bank Holdings PLC Annual Report and Accounts 2023
Consolidated statement of changes in equity
For the year ended 31 December 2023
Strategic report
Governance
Risk report
Financial statements
Additional information
169
Balance as at 1 January 2023
Profit for the year
Other comprehensive income (net of tax) relating to investment securities designated at FVOCI
Total comprehensive income
Net share option movements
Cancellation of Metro Bank PLC share capital and share premium¹
Issuance of Metro Bank Holdings PLC share capital¹
Bonus issuance
Capital reduction of Metro Bank Holdings PLC share capital
Shares issued
Cost of shares issued
Balance as at 31 December 2023
Balance as at 1 January 2022
Loss for the year
Other comprehensive expense (net of tax) relating to investment securities designated at FVOCI
Total comprehensive loss
Net share option movements
Balance as at 31 December 2022
Notes
Share
premium
£’million
Retained
earnings
£’million
Merger
reserve
£’million
FVOCI
reserve
£’million
Called-up
share
capital
£’million
–
–
–
–
–
–
–
965
(965)
–
–
–
–
–
–
–
–
–
1,964
(1,015)
–
–
–
–
29
–
29
–
(1,964)
1,964
–
–
–
150
(6)
144
1,964
–
–
–
–
(965)
–
965
–
–
978
(942)
(73)
–
(73)
–
1,964
(1,015)
–
–
–
–
–
–
965
(965)
–
–
–
–
–
–
–
–
–
–
26
26
27
28
Share
option
reserve
£’million
20
–
–
–
3
–
–
–
–
–
–
23
18
–
–
–
2
20
28
Total
equity
£’million
956
29
2
31
3
–
–
–
–
150
(6)
1,134
1,035
(73)
(8)
(81)
2
956
(13)
–
2
2
–
–
–
–
–
–
–
(11)
(5)
–
(8)
(8)
–
(13)
28
1. The cancelled called up share capital of Metro Bank PLC and new share capital of Metro Bank Holdings PLC amount to £172 and as such have been rounded to £nil.
The accompanying notes form an integral part of these financial statements.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Consolidated cash flow statement
For the year ended 31 December 2023
Reconciliation of profit/(loss) before tax to net cash flows from operating activities:
Profit/(loss) before tax
Adjustments for non-cash items
Interest received
Interest paid
Changes in other operating assets
Changes in other operating liabilities
Net cash inflows/(outflows) from operating activities
Cash flows from investing activities
Sales, redemptions and paydowns of investment securities
Purchase of investment securities
Purchase of property, plant and equipment
Purchase and development of intangible assets
Net cash inflows/(outflows) from investing activities
Cash flows from financing activities
Repayment of capital element of leases
Issuance of new shares
Cost of share issuance
Issuance of debt securities
Cost of debt issuance
Net cash inflows/(outflows) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
The accompanying notes form an integral part of these financial statements.
170
Years ended 31 December
Notes
2023
£’million
2022
£’million
31
(376)
834
(370)
744
(235)
628
(71)
(273)
553
(124)
(852)
(418)
(1,185)
1,870
857
(816)
(1,206)
(12)
(26)
(29)
(24)
1,016
(402)
(23)
150
(6)
175
(5)
291
1,935
1,956
3,891
(25)
–
–
–
–
(25)
(1,612)
3,568
1,956
37
14
15
22
26
26
20
20
11
11
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated
financial statements
Strategic report
Governance
Risk report
Financial statements
Additional information
171
1. Basis of preparation and significant accounting policies
This section sets out the Group’s (‘our’ or ‘we’) accounting policies which relate to the financial
statements as a whole. Where an accounting policy relates specifically to a note then the related
accounting policy is set out within that note. All policies have been consistently applied to all the
years presented unless stated otherwise.
Basis of consolidation
Our consolidated financial statements include the results for all entities which we control (details
of our subsidiaries can be found in note 3 to the Company financial statements on page 223).
Controlled entities are all entities to which we are exposed, or have rights, to variable returns
from our involvement with the entity and have the ability to affect those returns through our
power over it. An assessment of control is performed on an ongoing basis.
1.1 General information
Metro Bank Holdings PLC (the ‘Company’) is the holding company of Metro Bank PLC, which
provides retail and commercial banking services in the UK. Metro Bank Holdings PLC is a
public limited liability company incorporated and domiciled in England and Wales under the
Companies Act 2006 (Company number 14387040) and is listed on the London Stock Exchange
(LON:MTRO). The address of its registered office is One Southampton Row, London, WC1B 5HA.
Our controlled entities are consolidated from the date on which we establish control until the
date that control ceases. The acquisition method of accounting is used to account for business
combinations other than those under common control.
Post-acquisition, income and expenses are included in the consolidated income statement on a
line-by-line basis in accordance with the accounting policies set out herein, adjusting for any
intra-group transactions which are eliminated in full upon consolidation.
1.2 Basis of preparation
The consolidated financial statements of the Company together with its subsidiaries (the
‘Group’) have been prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the UK, interpretations issued by the IFRS Interpretations Committee and
the Companies Act 2006 applicable to companies reporting under IFRSs.
The consolidated financial statements of the Group and Company were authorised by the Board
for issue on 16 April 2024.
The financial information has been prepared under the historical cost convention, as modified by
the revaluation of certain financial assets and liabilities at fair value through profit or loss and other
comprehensive income. Fair value is defined as the price that would be received or paid in an
orderly transaction between market participants at the measurement date.
Certain disclosures required under IFRS 7 ‘Financial instruments: disclosures’ and IAS 1
‘Presentation of financial statements’ have been included within the Risk report on pages 124 to
157. Where information is marked as audited, it is incorporated into these financial statements and
it is covered by the Independent auditor’s report.
The Directors consider that it is appropriate to continue to adopt the going concern basis of
accounting in preparing the financial statements. In reaching this assessment, the Directors have
considered projections for the Group’s capital and funding position as well as other principal risks.
As part of this process the Directors have considered and approved the Group’s most recent Long
Term Plan including severe but plausible downside scenarios. The Directors also considered the
key assumptions and uncertainties that feed into these plans alongside management actions and
mitigants that would be available if required. Under all scenarios considered, the Directors believe
the Group to remain a going concern on the basis that it maintains sufficient resources (including
liquidity and capital) to be able to continue to operate for the foreseeable future (considered to be
at least 15 months from the date of these financial statements). The Directors do not consider
there to be any material uncertainties with regards to the assessment on going concern. Further
details on the assessment undertaken by the Directors is set out in the Viability statement on
pages 49 to 50.
In publishing the Company financial statements here together with the Group financial
statements, we have adopted the exemption in section 408(3) of the Companies Act 2006.
This means we have chosen not to present a Company statement of comprehensive income
and related notes as part of these financial statements.
Insertion of Metro Bank Holdings PLC
To meet the Bank of England’s resolution requirements, on 19 May 2023, Metro Bank Holdings
PLC was inserted as the new ultimate holding company and listed entity of the Group. Prior to
this date Metro Bank PLC was both a banking entity and the ultimate parent company of the
Group, but has subsequently become a 100% subsidiary of Metro Bank Holdings PLC. In addition
to the insertion of a new holding company the Group undertook a reduction in capital to provide
the Group with distributable reserves.
The insertion of Metro Bank Holdings PLC has been treated as a business combination under
common control, with the Group controlled by the same parties both before and after the
insertion. Combinations under common control are outside the scope of IFRS 3 ‘Business
Combinations’ and accordingly, the insertion has not been recognised at fair value and no
goodwill or fair value acquisition adjustments have been recognised. The Group has instead
applied the predecessor accounting approach as this most faithfully represents the substance
of the facts and circumstances of the series of transactions that comprise the insertion of
Metro Bank Holdings PLC. This is on the basis that those transactions are not designed to deliver
economic benefits, but represent a rearrangement of the organisation of business activities
across legal entities in order to be compliant with the relevant regulations.
In applying this approach, the Group has used the carrying amounts in Metro Bank PLC’s
consolidated financial statements at the date of transfer to determine the value of the assets
and liabilities transferred. These financial statements are therefore prepared as if Metro Bank
Holdings PLC had been the parent company throughout the current and prior years, to treat
the new structure as if it has always been in place. The comparative numbers in these financial
statements were included in the financial statements of Metro Bank PLC for the year ended
31 December 2022. Hedge accounting continues to be applied to the transferred designated
hedge relationships as if they had originally been designated by the Group.
Further details on the insertion of Metro Bank Holdings PLC can be found in note 26.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
172
1.3 Functional and presentation currency
These financial statements are presented in pounds sterling (£), which is our functional currency.
All amounts have been rounded to the nearest £1 million and £0.1 million for balance sheet and
income statement line items respectively, except where otherwise indicated.
1.4 Cash flow statement
The cash flow statement shows the changes in cash and cash equivalents arising during the year
from operating activities, investing activities and financing activities.
The cash flows from operating activities are determined by using the indirect method. Under
that method, loss before tax is adjusted for non-cash items and changes in other assets and
liabilities to determine net cash inflows or outflows from operating activities. Cash flows from
investing and financing activities are determined using the direct method which directly reports
the cash effects of the transactions.
1.5 Changes in accounting policies and presentational amendments
During the period there have not been any changes in any accounting policies or disclosures
that have had a material impact on our financial statements.
1.6 Future accounting developments
At the year end there are no standards that were in issue but not yet effective, that would have a
material impact on the Group. We have not adopted any standards early within these financial
statements.
1.7 Segmental reporting
IFRS 8 ‘Operating Segments’ requires operating segments to be identified on the basis of
internal reports and components of the Group which are regularly reviewed by the Chief
Operating Decision Maker to allocate resources to segments and to assess their performance.
For this purpose, the Chief Operating Decision Maker of the Group is our Board of Directors.
The Board considers the results of the Group as a whole when assessing the performance of the
Group and allocating resources, owing to our simple structure. Accordingly, the Group has a
single operating segment. We operate solely within the UK and, as such, no geographical
analysis is required. We are not reliant on any single customer.
1.8 Foreign currency translation
Transactions in a foreign currency are translated into the functional currency using the exchange
rates prevailing at the date of the transaction.
Monetary items denominated in a foreign currency are translated using the closing rate as
at the reporting date. Non-monetary items measured at historical cost denominated in a
foreign currency are translated with the exchange rate as at the date of initial recognition;
non-monetary items in a foreign currency that are measured at fair value are translated using
the exchange rates at the date when the fair value was determined.
Foreign currency differences arising on translation are recognised in other income. Gains and
losses arising from foreign currency transactions offered to customers are also recognised in
other income.
1.9 Critical accounting judgements and estimates
The preparation of financial statements in conformity with IFRS requires us to make material
judgements as well as estimates which, although based on our best assessment, by definition
will seldom equal the actual results. Management believes that the underlying assumptions
applied at 31 December 2023 are appropriate and that these consolidated financial statements
therefore present our financial position and results fairly. The areas involving a higher degree of
complexity, judgement or where estimates have a significant risk of resulting in a material
adjustment to the carrying amounts within the next financial year are:
Area
Estimates
Judgements
Measurement of ECL Multiple
forward-looking
scenarios
Impairment of non-
financial assets
n/a
Significant increase
in credit risk
Further details
Note 30
Use of PMOs and PMAs
Key assumptions used for
VIU calculations
Note 15
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
173
2. Net interest income
3. Net fee and commission income
Accounting policy
We recognise interest income and expense for all interest–bearing financial instruments
within ‘interest income’ and ‘interest expense’ in the income statement using the effective
interest rate method. The effective interest rate method is a method of calculating the
amortised cost of a financial asset or a financial liability and of allocating the interest
income or interest expense over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash payments or receipts through the expected
life of the financial instrument to the net carrying amount of the financial asset or financial
liability. When calculating the effective interest rate we estimate cash flows considering all
contractual terms of the financial instrument (for example, prepayment options) but do not
consider future credit losses except for POCI assets. The calculation includes all fees paid
or received between parties to the contract that are an integral part of the effective interest
rate, transaction costs and all other premiums or discounts.
For loans that are credit impaired, interest income is calculated on the carrying amount of the
loan net of credit impairment.
Interest income
Cash and balances held with the Bank of England
Loans and advances to customers
Investment securities held at amortised cost
Investment securities held at FVOCI
Interest income calculated using the effective interest rate method
Derivatives in hedge relationships
Total interest income
Interest expense
Deposits from customers
Deposits from central banks
Debt securities
Lease liabilities
Repurchase agreements
Interest expense calculated using the effective interest rate method
Derivatives in hedge relationships
Total interest expense
2023
£’million
2022
£’million
120.9
33.0
599.9
462.2
118.6
62.9
6.8
4.7
846.2
562.8
9.5
0.9
855.7
563.7
2023
£’million
2022
£’million
147.8
161.3
55.7
13.1
50.1
32.9
55.5
48.7
14.4
3.4
428.0
154.9
15.8
4.7
443.8
159.6
Accounting policy
Fee and commission income is earned from a wide range of services we provide to our
customers. We account for fees and commissions as follows:
Product or service
Nature, timing and satisfaction of performance obligations and payment terms
Service charges and other
fee income
Safe deposit box
We levy a range of standard charges and fees for account maintenance
or specific account services. Where the fee is earned upon the
execution of a significant act at a point in time, for example CHAPS
payment charges, these are recognised as revenue when the act is
completed for the customer. Where the income is earned from the
provision of services, for example an account maintenance fee, this is
recognised as revenue over time when the service is delivered.
Revenue is recognised over the period the customer has access to the
box from the date possession is taken. Safe deposit box fees are billed
on either a monthly or annual basis with a standard set price payable
dependent on the size of the box.
ATM and
interchange fees
Where we earn fees from our ATMs or from interchange this is
recognised at the point the service is delivered.
Expenses that are directly related and incremental to the generation of fee and commission
income are presented within fee and commission expense.
As disclosed in note 1, we provide services solely within the UK and therefore revenues are
not presented on a geographic basis. Revenue is grouped solely by contract-type as we
believe this best depicts how the nature, amount and timing of our revenue and cash flows
are affected by economic factors.
Service charges and other fee income
Safe deposit box income
ATM and interchange fees
Fee and commission income
Fee and commission expense
Total net fee and commission income
2023
£’million
2022
£’million
36.8
18.2
40.0
95.0
(4.6)
90.4
30.9
16.5
37.0
84.4
(2.6)
81.8
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
174
4. Net gains on sale of assets
5. Other income
Investment securities held at amortised cost
Loan portfolios
Total net gains on sale of assets
2023
£’million
2022
£’million
2.9
(0.2)
2.7
–
–
–
Disposal of investment securities
During the year some of our investment securities held at amortised cost were called early by
the issuers resulting in a gain being recognised on these assets.
Foreign currency
transactions
Rental income
Loan portfolio sales
During the year we sold a small portfolio of non-performing unsecured loans, which resulted in
net losses of £0.2m being recognised.
Deferred grant income
Other income
Accounting policy
Other income is accounted for as follows:
Product or service
Nature, timing and satisfaction of performance obligations and payment terms
Gains on foreign currency transactions is the spread earned on foreign
currency transactions performed for our customers along with any
associated fees. It is recognised at the point in time that the exchange
is executed.
Rental income is primarily earned from the letting out of surplus space
in some of our properties. The revenue is recognised on a straight-line
basis over the life of the lease.
Deferred grant income relates to amounts recognised in relation to
the amounts drawn down against the Capability and Innovation Fund
(C&I) award (further details of which can be found in note 23). Income
is recognised in line with the delivery of the commitments we agreed to
as part of the bid.
Other income primarily consists of hedge ineffectiveness, foreign
currency differences arising on translation and movements in financial
assets and liabilities held at fair value through profit and loss.
Foreign currency transactions
Rental income
Deferred grant income
Gain on debt extinguishment
Other
Total other income
2023
£’million
2022
£’million
34.0
34.1
1.1
2.4
100.0
6.4
0.7
1.5
–
1.3
143.9
37.6
Gain on debt extinguishment
As part of the capital package (see note 20), which completed in November 2023, a 40% haircut
was agreed with bondholders on our Tier 2 debt securities, which saw their £250 million of
existing notes replaced with £150 million of new notes. This resulted in a gain of £100 million.
The acceleration of unamortised issuance costs as well as the impacts from the breaking of the
hedge relationships of the refinanced debt has been shown within costs associated with capital
raise and refinancing in note 6, to better reflect the nature of the transaction.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Strategic report
Governance
Risk report
Financial statements
Additional information
175
Notes to the consolidated financial statements
Continued
6. General operating expenses
People costs (note 7)
Information technology costs
Occupancy costs
Money transmission and other banking-related costs
Transformation costs
Remediation costs
Capability and Innovation Fund costs1
Legal and regulatory fees
Professional fees2
Printing, postage and stationery costs
Travel costs
Marketing costs
Costs associated with capital raise and refinancing
Holding company insertion costs
Other
Total general operating expenses
2023
£’million
241.2
59.7
31.7
49.2
20.2
–
2.4
7.0
2022
£’million
236.6
62.2
30.8
48.7
3.3
5.3
1.3
7.0
23.2
38.4
7.2
1.5
7.7
26.0
1.8
24.1
6.2
1.6
5.0
–
1.8
19.4
502.9
467.6
1. C&I costs represent the non-capitalisable costs of delivering the C&I digital commitments. It includes £1.9 million
(2022: £0.9 million) of people costs. These are included within C&I costs rather than people costs to better reflect
their nature. In addition to these costs the grant income recognised in note 5 is also used to offset property costs
relating to the store commitments delivered.
2. Professional fees are shown net of both amounts capitalised and amounts included within the transformation
costs, remediation costs and C&I costs lines.
Information technology costs
Information technology costs include costs expensed in relation to software licences, support
from third-party providers, back up costs and cloud computing costs.
Occupancy costs
Occupancy costs consist of the non-IFRS 16 property costs of occupying our stores and
offices, including rates, utilities and property maintenance costs as well as irrecoverable VAT
on lease payments.
Money transmission and other banking-related costs
Money transmission and other banking-related costs are made up of the overheads relating to
servicing our deposits and lending that do not constitute either part of the effective interest
rate, or fee and commission expense.
Professional fees
Professional costs includes £7.3 million (2022: £15.0 million) of R&D costs not capitalised. This
does not include any costs of colleagues working on these projects that are included in the
people costs line. Including these costs we spent £25.1 million (2022: £47.5 million) on R&D costs
not capitalised.
Included within legal and regulatory fees is £0.1 million (2022: £0.1 million) in respect of the
Financial Services Compensation Scheme (FSCS) levy.
Transformation, remediation, Capability and Innovation Fund, costs associated
with capital raise and holding company insertion costs
Further details on transformation, remediation, Capability and Innovation Fund, costs associated
with capital raise and holding company insertion costs can be found on page 233.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
176
7. People costs
8. Fees payable to our auditors
Wages and salaries1
Social security costs1
Pension costs1
Equity-settled share-based payments
Total people costs
During the year, the Group (including its subsidiaries) obtained the following services from our
auditors, PricewaterhouseCoopers LLP:
2023
£’million
2022
£’million
201.7
196.8
21.8
14.5
3.2
23.7
13.7
2.4
Audit of the Group and Company financial statements
Audit of the financial statements of the Company’s subsidiaries
241.2
236.6
Audit-related assurance services
2023
£’000
2022
£’000
54
2,553
2,309
144
555
73
203
115
3,062
2,944
1. Amounts are net of people costs which are capitalised as well as those relating to C&I (see note 6) as these costs
will be offset against the deferred grant income in note 5.
Other assurance services
Total fees payable to our auditors
During the year £10.0 million (2022: £5.3 million) of people costs were capitalised as part of our
intangible assets (further details can be found in note 15).
The average monthly number of persons employed during the year was 4,286 (2022: 4,040).
Other
Other assurance services undertaken during the year includes work performed on the capital
raise and restructure.
Customer-facing
Non-customer-facing
Total number of persons employed
2023
2022
1,985
1,886
2,301
2,154
4,286
4,040
Pension costs
We operate a defined contribution pension scheme for our colleagues. Contributions to
colleagues’ individual personal pension plans are made on a contractual basis, with no further
payment obligations once the contributions have been paid. These contributions are recognised
as an expense when they fall due.
Payments were made amounting to £15.4 million (2022: £14.0 million) to colleagues’ individual
personal pension plans during the year. This includes pension contributions that were capitalised
as well as those relating to colleagues working on C&I which are not included in the figures above.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
9. Taxation
Strategic report
Governance
Risk report
Financial statements
Additional information
177
Accounting policy
Current tax
Our current tax comprises the expected tax payable or receivable on the taxable profit for the year and any adjustment to the tax payable or receivable in respect of previous years. It is
measured using tax rates enacted or substantively enacted at the reporting date.
Where we have tax losses that can be relieved only by carry-forward against taxable profits of future periods, a deductible temporary difference arises. Those losses carried forward are set off
against deferred tax liabilities carried in the balance sheet.
Deferred tax
Deferred tax is recognised in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is
determined using tax rates (and laws) that have been enacted or substantively enacted by the date of the balance sheet and are expected to apply when the related deferred tax asset is realised
or the deferred tax liability is settled.
The principal differences arise from trading losses, depreciation of property, plant and equipment and relief on research and development expenditure.
We recognise a deferred tax asset to the extent that it is probable that future taxable profits will be available against which they can be used and deferred tax liabilities are provided on taxable
temporary differences. We consider the history of recent losses and the extent to which there is convincing other evidence that sufficient taxable profits will be available against which the
unused tax losses or unused tax credits can be utilised.
Deferred tax assets and liabilities are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised or the deferred tax
liability settled.
We offset deferred tax assets and liabilities where we have a legally enforceable right to offset and where the deferred tax assets and liabilities relate to taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where there is an intention to settle on a net basis.
Tax expense
The components of the tax expense for the year are:
Current tax
Current tax
Total current tax expense
Deferred tax
Origination and reversal of temporary differences
Effect of changes in tax rates
Adjustment in respect of prior years
Total deferred tax expense
Total tax expense
2023
£’million
2022
£’million
(0.1)
(0.1)
(0.5)
(0.4)
–
(0.9)
(1.0)
–
–
(1.5)
(0.7)
0.2
(2.0)
(2.0)
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
9. Taxation Continued
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 losses had been taxed at the UK corporation tax rate. A reconciliation between the
expense and the accounting profit/(loss) multiplied by the UK corporation tax rate is as follows:
178
Accounting profit/(loss) before tax
Tax expense at statutory tax rate of 23.5% (2022: 19%)
Tax effects of:
Non-deductible expenses – depreciation on non-qualifying fixed assets
Non-deductible expenses – investment property impairment
Non-deductible expenses – remediation
Non-deductible expenses – other
Impact of intangible asset write-off on research and development deferred tax liability
Share-based payments
Adjustment in respect of prior years
Current year losses for which no deferred tax asset has been recognised
Losses offset against current year profits
Movement in recognised DTA for unused tax losses
Effect of changes in tax rates
Income not taxable
Tax expense reported in the consolidated income statement
2023
£’million
30.5
Effective
tax rate
%
Effective
tax rate
%
2022
£’million
(70.7)
(7.2)
23.5%
13.4
19.0%
(2.5)
8.3%
(2.5)
(3.5%)
–
–
–
–
(0.1)
(0.1%)
(0.6)
(0.8%)
(0.8)
2.6%
(0.4)
(0.6%)
0.1
(0.3%)
(1.2)
3.9%
–
–
0.3
0.1
0.2
0.4%
0.1%
0.2%
(15.4)
50.5%
(11.7) (16.5%)
1.1
1.8
(3.6%)
(5.9%)
–
–
–
–
(0.4)
1.3%
(0.7)
(1.0%)
23.5
(77.0%)
–
–
(1.0)
3.3%
(2.0)
(2.8%)
The effective tax rate for the period is 3.3% (2022: -2.8%). The main reasons for this, in addition to the reported accounting loss before tax for the year, are set out below:
Non-deductible expenses – other
This mainly relates to costs in setting up the Holding Company and the termination of onerous contracts following a discontinuation of trade.
Share-based payments
During the period the Metro Bank share price decreased from £1.21 to £0.37. This had the impact of decreasing the deferred tax asset held resulting in a deferred tax expense.
Adjustment in respect of prior years
Following the filing of our 2022 corporation tax return we reduced our R&D deferred tax liability following a decrease in qualifying capital R&D expenditure. This was partly offset by an increase in
our PPE deferred tax liability resulting from an increase in qualifying additions.
Losses for which no deferred tax asset has been recognised
The tax effected value of current year losses for which no deferred tax asset has been recognised is £15.4 million (2022: £11.7 million).
Effect of changes in tax rates
This relates to the remeasurement of deferred tax rates following a change to the main UK corporation tax rate. An increase in the UK corporation tax rate from 19% to 25% for taxable profits over
£250,000 (effective 1 April 2023) was substantively enacted on 24 May 2021.
Income not taxable
The credit arising from the haircut on the Tier 2 Instrument issued by Metro Bank PLC meets the conditions set out in section 323A of CTA 2009 exempting the transaction from taxation.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
9. Taxation Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
179
Deferred tax assets
A deferred tax asset must be regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not there will be suitable tax
profits from which the future of the underlying timing differences can be deducted.
The following table shows deferred tax recorded in the statement of financial position and changes recorded in the tax expense:
Deferred tax assets
Deferred tax liabilities
Deferred tax liabilities (net)
1 January
Income statement
Other comprehensive income
31 December
Investment
securities
and
impairments
£’million
Unused
tax losses
£’million
31 December 2023
Share-
based
payments
£’million
Property,
plant and
equipment
£’million
Intangible
assets
£’million
Total
£’million
Unused
tax losses
£’million
31 December 2022
Investment
securities
and
impairments
£’million
Share-
based
payments
£’million
Property,
plant and
equipment
£’million
Intangible
assets
£’million
Total
£’million
14
–
14
12
2
–
14
2
4
6
7
(1)
–
6
1
–
1
1
–
–
1
–
(29)
(29)
(26)
(3)
–
(29)
–
(5)
(5)
(6)
1
–
(5)
17
(30)
(13)
(12)
(1)
–
(13)
12
–
12
13
(1)
–
12
3
4
7
5
–
2
7
1
–
1
–
1
–
1
–
(26)
(26)
(23)
(3)
–
(26)
–
(6)
(6)
(7)
1
–
(6)
16
(28)
(12)
(12)
(2)
2
(12)
Offsetting of deferred tax assets and liabilities
We have presented all the deferred tax assets and liabilities above on a net basis within the balance sheet on page 168. This is on the basis that all our deferred tax assets and liabilities relate to
taxes levied by HMRC and we have a legally enforceable right to offset these. Further details on our offsetting of financial assets and liabilities can be found in note 33.
Unrecognised deferred tax assets
We have total unused tax losses of £912 million of which a deferred tax asset has not been recognised on £857 million. Accordingly, a deferred tax asset of £214 million has not been recognised on
unused tax losses. The impact of recognising the deferred tax asset in the future would be material.
Although there is an expectation for future profits in the near future, as we have a recent history of operating losses for tax purposes, we have taken the decision not to recognise a deferred tax
asset in respect of these losses at 31 December 2023. We will continue to reassess this decision as we move into 2024.
Due to unrealised investment property impairments of £11 million there is an unrecognised deferred tax asset of £2.7 million (2022: £2.6 million).
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
10. Financial instruments
Classification of financial instruments
Accounting policy
Repurchase agreements
Where we sell financial assets subject to sale and repurchase agreements, the financial
assets are retained in their respective balance sheet categories, however they become
encumbered and are not available for transfer or sale. The associated liabilities are included
in the repurchase agreements line. The difference between the sale and repurchase price
of repurchase agreements is treated as interest and accrued over the life of the agreements
using the effective interest method as set out in note 2.
Other financial instruments
Our accounting policies in respect of our other financial instruments can be found in their
respective notes, where applicable.
Our financial instruments primarily comprise customer deposits, loans and advances to
customers 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). Further details on these risks can be found within the
Risk report on pages 124 to 157.
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 and measurement 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 following tables.
Assets
Loans and advances to customers
Investment securities
Derivative financial assets
Liabilities
Deposits from customers
Deposits from central bank
Debt securities
Repurchase agreements
Assets
Loans and advances to customers
Investment securities
Financial assets held as fair value through profit and loss
Derivative financial assets
Liabilities
Deposits from customers
Deposits from central bank
Debt securities
Derivative financial liabilities
Repurchase agreements
180
31 December 2023
Fair value
through
profit and
loss
£’million
FVOCI
£’million
Amortised
cost
£’million
Total
£’million
–
–
36
–
12,297
12,297
476
4,403
4,879
–
–
36
–
–
–
–
–
–
–
–
15,623
15,623
3,050
3,050
694
1,191
694
1,191
31 December 2022
Fair value
through
profit
and loss
£’million
FVOCI
£’million
Amortised
cost
£’million
Total
£’million
–
–
1
23
–
–
–
26
–
–
13,102
571
5,343
13,102
5,914
–
–
–
–
–
–
–
–
–
1
23
16,014
3,800
16,014
3,800
571
–
238
571
26
238
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
181
10. Financial instruments Continued
11. Cash and balances with the Bank of England
Financial assets pledged as collateral
We have pledged £6,110 million (2022: £5,286 million) of the financial assets above as
encumbered collateral which can be called upon in the event of default. Of this, £1,311 million
(2022: £2,131 million) is made up of high-quality securities and £4,799 million (2022:
£3,141 million) is from our own loan portfolio.
This does not include cash balances pledged as collateral which are shown separately within
note 17.
LIBOR replacement
On 1 January 2022, SONIA (Sterling Overnight Index Average) replaced LIBOR (London
Inter-bank Offered Rate) as the industry standard sterling interest rate benchmark.
As at 31 December 2023 all of our market-facing derivative flows are executed against SONIA,
however we continue to hold £47 million (31 December 2022: £64 million) of mortgages that are
either exposed, or revert to synthetic LIBOR.
Accounting policy
Cash and balances with the Bank of England consists of both cash on hand and demand
deposits, both at other banks as well as the Bank of England. In addition, it includes highly
liquid investments that are readily convertible to known amounts of cash and which are
subject to insignificant risk of changes in value. Investment securities are only classified
as cash equivalents if they have a short maturity of three months or less from the date
of acquisition and are in substance cash equivalents, e.g. debt investments with fixed
redemption dates that are acquired within a short period of their maturity.
Where cash is pledged as collateral and as such is not available on demand this is included
within other assets within note 17.
Unrestricted balances with the Bank of England
Cash and unrestricted balances with other banks
Money market placements
Total cash and balances with the Bank of England
31 December
2023
£’million
31 December
2022
£’million
3,642
1,761
191
58
136
59
3,891
1,956
The expected credit loss held against cash and balances with the Bank of England is £0.1 million
(31 December 2022: less than £0.1 million).
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
182
12. Loans and advances to customers
An analysis of the gross loans and advances by product category is set out below:
Accounting policy
Loans and advances to customers are classified as held at amortised cost. Our business
model is that customer lending is held to collect cash flows, with no sales expected in
the normal course of business. We aim to offer products with simple terms to customers,
and as a result, all loans comprise solely payments of principal and interest. Loans are
initially recognised when cash is advanced to the borrower at fair value – which is the
cash consideration to originate the loan including any transaction costs – and measured
subsequently at amortised cost using the effective interest rate method, which is detailed
further in note 2. Interest on loans is included in the income statement and is reported as
‘Interest income’. Expected credit losses (ECL) are reported as a deduction from the carrying
value of the loan. Changes to the ECL during the year are recognised in the income statement
as ‘Expected credit loss expense’.
31 December 2023
31 December 2022
Gross
carrying
amount
£’million
1,297
7,817
3,382
ECL
allowance
£’million
(108)
(19)
(72)
Net
carrying
amount
£’million
1,189
7,798
3,310
Gross
carrying
amount
£’million
1,480
7,649
4,160
ECL
allowance
£’million
(75)
(20)
Net
carrying
amount
£’million
1,405
7,629
(92) 4,068
Consumer lending
Retail mortgages
Commercial lending
Total loans and advances
to customers
Overdrafts
Credit cards
Term loans
Consumer auto-finance
Total consumer lending
Residential owner occupied
Retail buy-to-let
Total retail mortgages
Total retail lending
Professional buy-to-let
Bounce back loans
Coronavirus business interruption loans
Recovery loan scheme1
Other term loans
Commercial term loans
Overdrafts and revolving credit facilities
Credit cards
12,496
(199)
12,297
13,289
(187)
13,102
Asset and invoice finance
Further information on the movements in gross carrying amounts and ECL can be found
in note 30.
Total commercial lending
Gross loans and advances to customers
Amounts include:
Repayable at short notice
31 December
2023
£’million
31 December
2022
£’million
40
28
60
19
1,219
1,401
10
1,297
5,851
1,966
7,817
9,114
465
524
86
328
1,341
2,744
172
4
462
–
1,480
5,507
2,142
7,649
9,129
731
801
127
385
1,578
3,622
122
4
412
3,382
4,160
12,496
13,289
244
156
1.
Recovery loan scheme includes £70 million acquired from third parties under forward flow arrangements
(31 December 2022: £97 million). The loans are held in a trust arrangement in which we hold 99% of the beneficial
interest, with the issuer retaining the remaining 1% (the trust retains the legal title loans).
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
183
13. Investment securities
Investment securities held at FVOCI
Accounting policy
Our investment securities may be categorised as amortised cost, FVOCI or fair value
through profit and loss. Currently all investment securities are non-complex, with cash flows
comprising solely payments of principal and interest. We hold some securities to collect
cash flows; other securities are held to collect cash flows, and to sell if the need arises (e.g. to
manage and meet day-to-day liquidity needs). Therefore, we have a mixed business model
and securities are classified as either amortised cost or FVOCI as appropriate. We do not
categorise any investment securities as fair value through profit and loss.
Settlement date accounting is used when recording financial asset transactions where a trade
is settled through the regular settlement cycle for that particular investment.
Investment securities held at amortised cost
Investment securities held at amortised cost consist entirely of debt instruments. They are
accounted for using the effective interest method, less any impairment losses.
Investment securities held at FVOCI
Investment securities held at FVOCI consist entirely of debt instruments. Investment
securities held at FVOCI are initially recognised at fair value, which is the cash consideration
including any transaction costs, and measured subsequently at fair value with gains and
losses being recognised in other comprehensive income, except for impairment losses and
foreign exchange gains and losses, until the investment security is derecognised. Interest is
calculated using the effective interest method.
Investment securities held at FVOCI
Investment securities held at amortised cost
Total investment securities
31 December
2023
£’million
31 December
2022
£’million
476
4,403
4,879
571
5,343
5,914
Sovereign bonds
Residential mortgage-backed securities
Covered bonds
Multi-lateral development bank bonds
Total investment securities held at FVOCI
Investment securities held at amortised cost
Sovereign bonds
Residential mortgage-backed securities
Covered bonds
Multi-lateral development bank bonds
Asset backed securities
Total investment securities held at amortised cost
31 December
2023
£’million
31 December
2022
£’million
220
–
112
144
476
215
38
152
166
571
31 December
2023
£’million
31 December
2022
£’million
938
954
594
1,729
188
1,717
1,095
542
1,821
168
4,403
5,343
Further information on the ECL recognised on investment securities can be found in note 30.
Metro Bank Holdings PLC Annual Report and Accounts 2023
184
Investment
property
£’million
Leasehold
improvements
£’million
2023
Freehold
land and
buildings
£’million
Fixtures,
fittings and
equipment
£’million
IT
hardware
£’million
Right-of-use
assets
£’million
Total
£’million
Cost
1 January 2023
Additions
Disposals
Transfers
31 December 2023
Accumulated depreciation
1 January 2023
Depreciation charge
Disposals
Transfers
31 December 2023
Net book value
12
–
–
–
12
8
–
–
–
8
4
261
372
22
–
–
(5)
9
–
5
1
–
–
8
2
–
–
283
958
–
(4)
–
12
(4)
–
256
386
23
10
279
966
34
20
69
13
–
(3)
79
5
–
3
42
177
344
1
–
–
21
2
2
2
–
–
4
6
77
13
(1)
–
89
190
210
34
(1)
–
243
723
Notes to the consolidated financial statements
Continued
14. Property, plant and equipment
Accounting policy
Property, plant and equipment
Our property, plant and equipment primarily consists of investments and improvements
in our store network and is stated at cost less accumulated depreciation and any
recognised impairment.
We depreciate property, plant and equipment on a straight-line basis to its residual value
using the following useful economic lives:
Leasehold improvements
Freehold land
Buildings
Fixtures, fittings and equipment
IT hardware
Lower of the remaining life of the lease or the
useful life of the asset
Not depreciated
Up to 50 years
5 years
3 to 5 years
We keep depreciation rates, methods and the residual values underlying the calculation of
depreciation of items of property, plant and equipment under review to take account of any
change in circumstances.
All items of property, plant and equipment are reviewed at the end of each reporting period
for indicators of impairment.
Right-of-use assets
All of our leases within the scope of IFRS 16 ‘Leases’ (other than those of low value) relate to
our stores and head office properties.
Upon the recognition of a lease liability (see note 22 for further details) a corresponding right-
of-use asset is recognised. This is adjusted for any initial direct costs incurred, lease incentives
paid or received and any restoration costs at the end of the lease (where applicable).
The right-of-use asset is depreciated on a straight-line basis over the life of the lease.
All right-of-use assets are reviewed at the end of each reporting period for indicators of
impairment.
Investment property
Investment property is also stated at cost less accumulated depreciation and any recognised
impairment. Depreciation is calculated on a consistent basis with that applied to land and
buildings as set out above.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
185
14. Property, plant and equipment Continued
Investment
property
£’million
Leasehold
improvements
£’million
2022
Freehold
land and
buildings
£’million
Fixtures,
fittings and
equipment
£’million
IT
hardware
£’million
Right-of-use
assets
£’million
Total
£’million
Cost
1 January 2022
Additions
Disposals
Write-offs
Moved to held for sale
Transfers
31 December 2022
Accumulated depreciation
1 January 2022
Depreciation charge
Impairments
Disposals
Write-offs
Moved to held for sale
Transfers
31 December 2022
Net book value
18
–
–
–
(6)
–
12
12
–
1
–
–
(5)
–
8
4
280
–
–
(10)
–
(9)
261
68
12
–
–
(10)
–
(1)
69
192
341
22
–
–
–
9
372
28
5
–
–
–
–
1
34
338
24
–
–
(2)
–
–
22
19
3
–
–
(2)
–
–
20
2
1
7
–
–
–
–
8
–
2
–
–
–
–
–
2
6
295
959
1
(13)
–
–
–
30
(13)
(12)
(6)
–
283
958
67
13
–
(3)
–
–
–
77
206
194
35
1
(3)
(12)
(5)
–
210
748
Fair value of investment property
Our investment property typically consists of shops and offices which are located within the
same buildings as some of our stores, where we have acquired the freehold interest. As at
31 December 2023 our investment property had a fair value of £4 million (31 December 2022:
£4 million). The fair value has been provided by a qualified independent valuer.
Impairments
During the year impairment indicators were identified in respect of other items of our property,
plant and equipment. The assets, which included our stores, were tested for impairment. We do
not consider individual stores to be cash generating units (CGU), on the basis that they do not
generate sufficiently independent cash flows. Instead all of our stores and associated assets are
deemed to belong to our retail bank CGU. Further details on the impairment testing of our CGUs
can be found in note 15.
The recoverable amount of the retail bank CGU was found to be in excess of its carrying amount
and as such no impairment was recognised.
Transfers
Transfers represent costs associated with the improvements made to the one (2022: two)
previously leased stores which have been purchased during the year.
Contractual commitment for the acquisition of property, plant and equipment
As at 31 December 2023 we had no contractual commitments relating to the acquisition of
property, plant and equipment that are not reflected in the tables (31 December 2022: £nil).
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
15. Intangible assets
Accounting policy
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the
consideration transferred over our interest in net fair value of the net identifiable assets,
liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling
interest in the acquiree.
For the purpose of impairment assessment, goodwill acquired in a business combination
is allocated to each of our CGUs, or groups of CGUs, that is expected to benefit from the
synergies of the combination. Each unit or group of units to which the goodwill is allocated
represents the lowest level within the entity at which the goodwill is monitored for internal
management purposes.
Goodwill is not amortised, however, it is tested for impairment at the end of each
reporting period.
The recoverable amount of a CGU is the higher of its fair value less cost to sell, and the
present value of its expected future cash flows.
If the recoverable amount is less than the carrying value, an impairment loss is charged to
the income statement. Goodwill is stated at cost less accumulated impairment losses. Any
impairment is recognised immediately as an expense and is not subsequently reversed.
Other intangible assets
Software includes both purchased items and internally developed systems, which
consist principally of identifiable and directly associated internal colleague, contractor
and other costs.
Purchased intangible assets and costs directly associated with the development of systems
are capitalised as intangible assets where there is an identifiable asset which we control and
which will generate future economic benefits in accordance with IAS 38 ‘Intangible Assets’.
Costs to establish feasibility or to maintain existing performance are recognised as an
expense. Intangible assets are amortised on a straight-line basis within the income statement
using the following useful economic lives:
Core banking software1
Other banking software
Software licences
Brands
up to 20 years
3 to 10 years
licence period
5 years
All intangible assets are reviewed at the end of each reporting period for indicators
of impairment.
1. Core banking software consists of our central banking transaction platform. The original platform was
assessed as having a 20-year life due to it being the central component of our digital infrastructure. It was
upgraded during 2019 with the upgrade assessed as having a 15-year life.
186
2023
Goodwill
£’million
Brands
£’million
Software
£’million
Total
£’million
10
–
–
10
–
–
–
–
10
338
350
26
(9)
26
(9)
355
367
134
43
(4)
173
182
134
44
(4)
174
193
2
–
–
2
–
1
–
1
1
2022
Goodwill
£’million
Brands
£’million
Software
£’million
Total
£’million
10
–
–
10
–
–
–
–
10
2
–
–
2
–
–
–
–
2
336
348
24
(22)
24
(22)
338
350
105
42
(13)
134
204
105
42
(13)
134
216
Cost
1 January 2023
Additions
Write-offs
31 December 2023
Accumulated amortisation
1 January 2023
Amortisation charge
Write-offs
31 December 2023
Net book value
Cost
1 January 2022
Additions
Write-offs
31 December 2022
Accumulated amortisation
1 January 2022
Amortisation charge
Write-offs
31 December 2022
Net book value
Software
Software consists of both internally generated and externally acquired assets. As at
31 December 2023 externally acquired licences had a net book value of £9 million (31 December
2022: £9 million). Out of our total intangible assets, £34 million of software assets were under
the course of construction at 31 December 2023 (31 December 2022: £39 million).
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
187
The profitability for each CGU per the Long Term Plan is adjusted for non-cash items (including
depreciation and amortisation), capital expenditure and long-term funding costs (which are
reflected in the discount rate) and certain cash flows which are not permitted to be included
under IAS 36, to establish the cash flows for the VIU. Cash flows beyond the five years have
been extrapolated using a decreasing growth rate for years six to ten at which point a terminal
growth rate of 2% (31 December 2022: 2%) is applied. The period of projection and growth rates
used reflects our anticipated growth profile after the five-year planning period, as well as the
nature and life of the assets within the CGUs. The terminal growth rate of 2% represents the
predicted long-term GDP growth rate of the UK economy (the only market both CGUs operate
in). The VIU cash flows are compared to the carrying value of the CGUs, which exclude long
term debt.
A pre-tax discount rate of 14.7% (31 December 2022: 15.3%) has been used for the VIU
calculation. The discount rate is based on our post-tax weighted average cost of capital of 12.7%
(which is grossed up to a pre-tax rate), based on the cost of equity and long term debt,
weighted by the market value of the equity and debt.
The VIU is most sensitive to changes in the projected profitability per the Long-Term Plan and
the discount rate applied (which are dependent on the assumptions regarding capital outlined
above). If adjusted independently of all other variables, reasonable changes to the assumption in
either of these factors over the next 12 months would not cause the recoverable amount of
either CGU to fall below its carrying amount.
15. Intangible assets Continued
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.
Contractual commitment for the acquisition of intangible assets
As at 31 December 2023 we had no contractual commitments relating to the acquisition of
intangible assets that are not reflected in the tables (31 December 2022: £nil).
Goodwill and impairment testing of cash generating units
An impairment test on the carrying value of the assets in our CGUs has been undertaken. As at
31 December 2023 we had two main CGUs being the retail bank and our asset and invoice
finance business and no changes have been made to our CGUs during the year. Both of our
CGUs contain goodwill and as such are tested annually for impairment. Additional impairment
indicators were identified in relation to the retail bank CGU in relation to both its intangible
assets as well as property, plant and equipment (see note 14).
Asset and invoice finance business
Retail bank
Total
31 December
2023
£’million
4
6
10
The recoverable amount for both CGUs was determined by a value in use (VIU) calculation in
accordance with IAS 36 impairment of assets. The application of the methodology, as described
below, is a critical accounting judgement. The VIU was higher than their carrying value and
therefore no impairment charge has been recognised for the current year (2022: £nil). The VIU
calculation is based on our Board-approved Long Term Plan which covers the five-year period
from 2024 to 2028 inclusive. Our Long-Term Plan is constructed using our best estimate of the
future performance of the business, adjusted for execution risk and encompasses commercially
sensitive estimates including lending and deposit yields and volumes, as well as costs forecasts
over the period. The Long Term Plan is built on the assumption that we remain appropriately
capitalised to fund our anticipated growth. We have determined that we will be able to meet the
appropriate regulatory requirements, which has been based on an analysis of both our existing
and planned capital structure. This is consistent with the assessment undertaken by the
Directors in respect of assessing viability, which can be found on pages 49 to 50.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
16. Prepayments and accrued income
18. Deposits from customers
Prepayments
Accrued income¹
VAT receivable
Total prepayments and accrued income
Current portion
Non-current portion
1. Includes accrued interest receivable.
17. Other assets
Cash pledged as collateral
Other1
Total other assets
Current portion
Non-current portion
31 December
2023
£’million
31 December
2022
£’million
42
75
1
118
118
–
32
52
1
85
85
–
31 December
2023
£’million
31 December
2022
£’million
50
58
108
55
53
39
34
73
45
28
Deposits from retail customers
Deposits from commercial customers
Total deposits from customers
Demand: current accounts
Demand: savings accounts
Fixed term: savings accounts
Total deposits from customers
19. Deposits from central banks
1. Other balance primarily comprises customer transactions in process or items in the course of collection
Deposits from central banks
over year end.
Amounts drawn down under TFSME
188
31 December
2023
£’million
31 December
2022
£’million
8,943
6.680
7,851
8,163
15,623
16,014
31 December
2023
£’million
31 December
2022
£’million
5,696
7,827
2,100
7,888
7,501
625
15,623
16,014
31 December
2023
£’million
31 December
2022
£’million
3,050
3,050
3,800
3,800
Deposits from central banks consist of amounts drawn down under the Bank of England’s Term
Funding Scheme with additional incentives for SMEs (TFSME).
TFSME was closed to further drawdowns in October 2021 and our drawdowns will mature in
2025 and 2027 in the amounts of £1,860 million and £1,390 million respectively.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
189
20. Debt securities
21. Derivatives
Accounting policy
Debt securities in issue are recognised initially at fair value, being proceeds less transaction
costs. Subsequently, debt securities are measured at amortised cost using the effective
interest method.
We assess the criteria for the modification and extinguishment of debt securities in
accordance with IFRS 9. A substantial modification of the terms of an existing financial
liability or a part of it is accounted for as an extinguishment of the original financial liability
and the recognition of a new financial liability. We determine a substantial modification by
performing a quantitative and qualitative prospective assessment.
Name
Issue date
Currency
Amount
issued
£’million
Coupon
rate
Call date
Maturity
date
Fixed rate reset callable
(MREL) notes
30/11/2023
GBP
525
12.00% 30/04/28 30/04/29
Fixed rate reset callable
subordinated (Tier 2) notes 30/11/2023
GBP
150
14.00% 30/04/29 30/04/34
1 January
Issuances
Redemption
Haircut
Costs associated with issuance
Movements in micro hedging
Unwind of issuance costs
31 December
2023
£’million
571
675
(500)
(100)
(5)
50
3
694
2022
£’million
588
–
–
–
–
(19)
2
571
In November 2023, we completed the raising of £175 million of new MREL notes, in addition to
the refinancing of our existing debt securities. The refinancing comprised:
• The exchange of our existing £350 million of bail-in MREL notes for £350 million of new bail-in
MREL instruments.
• The exchange of our existing £250 million bail-in Tier 2 notes for £150 million of new bail-in
Tier 2 instruments.
As part of the refinancing, we incurred fees that were recognised in general operating expenses
(note 6) and a £100m gain on the Tier 2 haircut agreed with creditors (note 5).
The £500m redemption reflects the extinguishment of the old MREL and Tier 2 as the criteria
for substantially modified terms were met.
In December 2022 the existing MREL and Tier 2 notes had a coupon rate of 9.50% and 5.50%
respectively, with the latter repricing to 9.14% in June 2023.
Hedge accounting is applied to our debt securities to manage interest rate risk.
Accounting policy
In accordance with our risk management strategy, to the extent not naturally hedged,
we use interest rate swaps to manage our exposure to interest rate risk. On adoption
of IFRS 9 we chose to continue applying the hedge accounting rules set out in IAS 39
‘Financial Instruments: Recognition and Measurement’ as we often chose to employ dynamic
portfolio hedge accounting of interest rate risk across fixed rate financial assets and fixed
rate financial liabilities.
Where we are using interest rate swaps to hedge the changes in fair value attributable to
the interest rate risk of a recognised asset or liability that could affect profit or loss, we apply
fair value hedge accounting. If there is an effective hedge relationship, the hedged item is
adjusted for fair value changes in respect of the hedged risk. These fair value changes are
recognised in the income statement together with the fair value movements on the hedging
instrument (the interest rate swaps).
Hedge accounting is discontinued when a hedge ceases to be highly effective, a derivative
expires or is sold, the underlying hedged item matures or is repaid, or periodically if a new
underlying hedged item or hedging instrument is added to the hedge relationship. Where
a fair value hedge is de-designated (either due to becoming ineffective or as part of our
dynamic approach to hedge accounting) any hedge adjustments accrued to that point are
amortised over the remaining life of the hedged item.
At the inception of every hedge, we produce hedge documentation which identifies
the hedged risk, hedged item and hedging instrument. This documentation sets out the
methodology used for testing hedge effectiveness.
Metro Bank Holdings PLC Annual Report and Accounts 2023
190
Notes to the consolidated financial statements
Continued
21. Derivatives Continued
We use derivatives as part of our approach to hedging interest rate and foreign exchange exposure. Our derivative financial instruments are analysed in the table below.
Interest rate swaps – Designated as hedging instruments
Interest rate swaps – Designated as held at fair value through profit and loss
Foreign currency swaps – Designated as held at fair value through profit and loss
Total
Derivative netting
Grand total
31 December 2023
31 December 2022
Notional
contract
amount
£’million
1,205
1,200
63
2,468
(1,200)
1,268
Carrying amount
Asset
£’million
Liability
£’million
Notional
contract
amount
£’million
Carrying amount
Asset
£’million
Liability
£’million
36
31
–
67
(31)
36
–
(31)
–
(31)
31
–
902
–
291
1,193
–
1,193
21
–
2
23
–
23
(26)
–
–
(26)
–
(26)
Hedge accounting
Our hedging strategy is divided into micro hedges, where the hedged item is an identifiable asset or liability, and portfolio hedges, where the hedged item is a portfolio of mortgage assets.
The designated risk components of hedged items are benchmark interest rate risk. Other risks such as credit risk and liquidity risk are managed separately and are not included in the hedge
accounting relationship.
The changes in the designated risk component usually account for the largest portion of the overall change in fair value of the hedged item.
Micro fair value hedges
We use this hedging strategy on fixed rate assets and liabilities held at fair value through other comprehensive income and amortised cost as well as on our fixed rate debt issuance.
Hedge ineffectiveness
Hedge ineffectiveness within fair value hedges can occur due to a number of potential sources, such as a non-zero derivative designated in a hedge relationship; mismatches between contractual
terms such as basis, timing, principal and notionals; or change in credit risk of interest rate swaps.
For the purposes of calculating ineffectiveness recognised in the profit or loss, the total movement in fair value due to the hedged risk on the hedged item and hedging instrument since
designation are considered. The total ineffectiveness on our fair value hedges is recognised in Other income within note 5.
Offsetting derivatives
The Tier 2 and MREL debt held until renegotiation in late 2023 were designated as hedged items in fair value hedge relationships to manage our exposure to interest rate risk. Following the renegotiation
of our debt in November 2023, these hedge relationships were de-designated. We entered into equal and opposite interest rate swaps with a notional of £600 million to fully offset the interest rate
swaps used to hedge the old MREL and Tier 2 debt securities. Cash flows are offset at a central clearing party and both sets of swaps will mature at the same time. Further details are included in note 33.
Debt issued through the capital package in late 2023 was designated within fair value hedge relationships, with new interest rate swaps designated as the hedging instruments.
Master netting arrangement and collateral
We either receive or provide collateral related to our hedging arrangements. As at 31 December 2023 we received collateral of £11.4 million.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
191
21. Derivatives Continued
Summary of hedging instruments in designated hedge relationships
The amounts relating to items designated as hedging instruments in fair value hedge relationships to manage our exposure to interest rates are:
Interest rate swaps
Total derivatives designated as fair value hedges
Summary of hedged items in designated hedge relationships
The items designated as hedged items in fair value hedge relationships to manage our exposure to interest rates are:
31 December 2023
31 December 2022
Notional
contract
amount
£’million
1,205
1,205
Carrying amount
Asset
£’million
Liability
£’million
36
36
–
–
Notional
contract
amount
£’million
902
902
Carrying amount
Asset
£’million
Liability
£’million
21
21
(26)
(26)
Fixed rate mortgages1
Fixed rate debt issuance2
Fixed rate investment securities at FVOCI3
Fixed rate investment securities at amortised cost4
Fixed rate loans1
Total derivatives designated as fair value hedges
31 December 2023
31 December 2022
Accumulated
amount of fair
value hedge
adjustments
included in the
carrying amount of
the hedged item
£’million
–
(24)
(7)
1
–
(30)
Carrying amount
Assets
£’million
–
–
238
271
3
512
Liabilities
£’million
–
(694)
–
–
–
(694)
Accumulated
amount of fair
value hedge
adjustments
included in the
carrying amount of
the hedged item
£’million
–
26
(20)
(1)
–
5
Carrying amount
Assets
£’million
129
–
236
59
5
429
Liabilities
£’million
–
(424)
–
–
–
(424)
1. Hedged item and the cumulative fair value changes are recorded in loans and advances to customers.
2. Hedged item and the cumulative fair value changes are recorded in debt securities in issue (see note 20).
3. Hedged item and the cumulative fair value changes are recorded in investment securities held at FVOCI.
4. Hedged item and the cumulative fair value changes are recorded in investment securities held at amortised cost.
Summary of ineffectiveness from designated hedge relationships
Total hedge ineffectiveness recognised in profit or loss for the designated fair value hedge relationships is a gain of £5.6 million (2022: £nil).
Metro Bank Holdings PLC Annual Report and Accounts 2023
192
Right-of-use assets
All of our disclosures relating to right-of-use assets, including our accounting policy, can be
found in note 14.
Disposals
The disposals during the year relate to one store (2022: two stores) where we purchased the
freehold during the year. Following the purchase both the lease liabilities and right-of-use assets
relating to the stores were derecognised.
Minimum lease payments
Future undiscounted minimum payments under lease liabilities, exclusive of VAT, as at
31 December are as follows:
Within one year
Due in one to five years
Due in more than five years
Total
31 December
2023
£’million
31 December
2022
£’million
22
83
145
250
24
88
172
284
Low value and short leases
During the year ended 31 December 2023 £0.3 million (2022: £0.2 million) was recognised in the
income statement with respect to assets of low value or a lease of less than 12 months.
Notes to the consolidated financial statements
Continued
22. Leases
Accounting policy
At the inception of a contract we assess whether the contract contains a lease.
At the commencement of a lease we recognise a lease liability and right-of-use asset (see
note 14 for further details). The lease liability is initially measured as the present value of the
future lease payments discounted at the rate implicit in the lease (where available) or our
incremental cost of borrowing. Generally we use our deemed incremental cost of borrowing
as the discount rate. Following initial recognition, the lease liability is measured using the
effective interest method.
Where we are reasonably certain to exercise a break in the lease, only the lease payments up
until the date of the break are included.
We subsequently remeasure the lease liability when there is a change to an index or rate used
or when there is a change in expectation that we will exercise a purchase option or break
clause or if we extend the lease. When such an adjustment is made to the lease liability a
corresponding adjustment is made to the right-of-use asset.
Irrecoverable VAT on lease payments is excluded from the lease liability and is taken to the
income statement over the period which it is due. This is included within note 6, General
operating expenses, under ‘occupancy expense’.
We have elected not to recognise a lease liability and right-of-use assets for any leases that
have a term of less than 12 months, or are for an asset which is deemed to be of low value
(item is worth less than £5,000). For these leases, the lease payments are recognised as an
expense in the income statement on a straight-line basis over the life of the lease.
All of our leases within the scope of IFRS 16 (other than those of low value) relate to our
stores and head office properties.
Lease liabilities
1 January
Additions and modifications
Disposals
Lease payments made
Interest on lease liabilities
31 December
Current
Non-current
2023
£’million
248
–
(4)
(23)
13
234
22
212
2022
£’million
269
1
(11)
(25)
14
248
23
225
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
193
22. Leases Continued
23. Deferred grants
Future income due under non-cancellable property leases
We lease out surplus space in some of our properties. The table below sets out the cash
payments expected over the remaining non-cancellable term of each lease, exclusive of VAT.
Receivable
Within one year
Due in one to five years
Due in more than five years
Total
31 December
2023
£’million
31 December
2022
£’million
1
3
3
7
1
3
4
8
Finance lease receivables
Through our asset finance business we lease a variety of assets to third parties, which typically
consist of plant, machinery and vehicles. These rentals typically cover the assets’ useful
economic life and as such any residual value is minimal. Amounts receivable are classified as
loans and advances to customers and are categorised within our asset and invoice finance
lending per the breakdown provided in note 12.
Within one year
Due in one to five years
Due in more than five years
Total
31 December 2023
31 December 2022
Total future
minimum
payments
£’million
Unearned
finance
income
£’million
Present
value
£’million
Total future
minimum
payments
£’million
Unearned
finance
income
£’million
Present
value
£’million
6
10
–
16
(1)
(1)
–
(2)
5
9
–
14
6
9
–
15
(1)
(1)
–
(2)
5
8
–
13
Accounting policy
Grants are recognised where there is reasonable assurance that we will both receive the
grant and will be able to comply with all the attached conditions. When the grant relates to
an expense item, it is recognised as income on a systematic basis over the periods that the
related costs, for which it is intended to compensate, are expensed. When the grant relates to
the purchase of an asset, it is recognised directly against the cost of the asset.
1 January
Released to the income statement
31 December
2023
£’million
2022
£’million
17
(1)
16
19
(2)
17
Our only deferred grant relates to amounts awarded in relation to the Capability and Innovation
Fund which formed part of the RBS alternative remedies programme. The programme was
aimed to increase competition in the UK business banking marketplace.
As part of the grant we are subject to delivering a number of public commitments. These
commitments can be found on BCR’s (the awarding body) website.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
24. Provisions
Accounting policy
We recognise provisions when it is probable that an outflow of economic benefits will be
required to settle a present legal or constructive obligation that has arisen as a result of past
events and for which a reliable estimate can be made. The provision is measured at its current
present value.
Provision
Description
Customer
remediation
We are committed to doing the right thing but occasionally we identify
issues that have caused detriment as a result of our actions.
Where we have to refund costs to customers we provide for this at the
point the obligation arises. The amounts recognised include any associated
interest due.
Dilapidations
Dilapidations provisions are recognised in regard to certain properties
we lease.
The majority of our stores and offices have an automatic right to renewal
at the end of the lease under the provisions of the Landlord and Tenant Act
1954. Where this is the case we do not provide for restorations on these
sites since we have no intention of vacating at the end of the lease term.
For sites that are outside the Landlord and Tenant Act 1954, or sites within
the Landlord and Tenant Act 1954 where we think there is a chance we will
vacate a site at the end of its lease, a provision is made for dilapidations.
The provision is made in line with the underlying obligations contained
within the lease.
Provisions are made relating to the outcome of legal cases and regulatory
investigations based on our best estimate of settlement following
consultation with our lawyers and advisors. The inclusion of a provision
does not constitute any admission of wrongdoing or legal liability. Details
of individual cases are provided where these are material to our financial
statements and disclosure would not be prejudicial to the outcome of
the case.
Onerous contract provisions are recognised when the unavoidable costs of
meeting the obligations under the contract exceed the economic benefits
we expect to be received under it. The provision is recognised as the net
cost of exiting from the contract, which is the lower of the cost of fulfilling it
and any compensation or penalties arising from failure to fulfil it.
Restructuring provisions are recognised at the point we have developed
a detailed formal paln and we have raised a valid expectation that it will
be implemented. This is typcially at the point the plan is announced to
affected colleagues.
Legal and
regulatory
Onerous
contracts
Restructuring
Other
provisions
Other provisions consist of other sundry amounts that are provided for in
the ordinary course of our business.
194
Customer
remediation
£’million
Dilapidations
£’million
Legal and
regulatory
£’million
1 January 2023
Additions
Released
Utilised
31 December 2023
1
2
–
–
3
1
–
–
–
1
–
–
–
–
–
Customer
remediation
£’million
Dilapidations
£’million
Legal and
regulatory
£’million
1 January 2022
Additions
Released
Utilised
31 December 2022
1
–
–
–
1
3
–
(2)
–
1
5
5
–
(10)
–
2023
Onerous
contracts
£’million
2
–
–
–
2
2022
Onerous
contracts
£’million
5
–
(1)
(2)
2
Restructuring
£’million
Other
provisions
£’million
Total
£’million
–
15
–
–
15
3
–
(1)
–
2
7
17
(1)
–
23
Restructuring
£’million
Other
provisions
£’million
Total
£’million
–
–
–
–
–
1
2
–
–
3
15
7
(3)
(12)
7
No provision has been recognised in relation to any of the legal and regulatory matters set out
in note 32.
All additions for both the current and prior year have been recognised in the income statement.
Restructing provision
The restructuring provision provided for during the year relates the decision taken during the
year to reduce the number of colleagues across the business by 1,000. Affected colleagues left
the business in early 2024, with the associated provision being utilised.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
195
25. Other liabilities
Trade creditors
Taxation and social security costs
Accruals1
Deferred income
Other liabilities
Total other liabilities
Current portion
Non-current portion
1. Includes accrued interest payable.
26. Called-up share capital
31 December
2023
£’million
31 December
2022
£’million
1
8
146
37
75
267
253
14
1
9
99
57
64
230
205
25
Accounting policy
On issue of new shares, incremental directly attributable costs are shown in equity
as a deduction from the proceeds.
As at 31 December 2023, we had 672.7 million ordinary shares of 0.0001p (31 December 2022:
172.5 million) authorised and in issue.
Called-up ordinary share capital, issued and fully paid
The called-up share capital reserve is used to record our nominal share capital. At 31 December
2023 our called-up share capital was £672.68 (31 December 2022: £172.54).
1 January
Cancellation of Metro Bank PLC share capital1
Issuance of Metro Bank Holdings PLC share capital1
Bonus issuance
Capital reduction
Share issuance2
31 December
2023
£’million
2022
£’million
–
–
–
965
(965)
–
–
–
–
–
–
–
–
–
1. The cancelled called-up share capital of Metro Bank PLC and new share capital of Metro Bank Holdings PLC
amount to £172 and as such have been rounded to £nil in the table above.
2. The called-up share capital of the equity issued during the year totalled £500 and as such has been rounded to
£nil in the table above.
Share premium
The share premium reserve is used to record the excess consideration of any shares we have
issued over the nominal share value.
1 January
Cancellation of Metro Bank PLC share premium
Share issuance
Cost of share issuance
31 December
2023
£’million
1,964
(1,964)
150
(6)
144
2022
£’million
1,964
–
–
–
1,964
Redeemable preference shares
In addition to the share capital set out above Metro Bank Holdings PLC has £50,000 of
redeemable preference shares which were issued to Robert Sharpe (Chair) and Daniel Frumkin
(Chief Executive Officer) upon the initial incorporation of the legal entity on 29 September 2022.
These shares are in the process of being redeemed.
New holding company
As set out in note 1, on 19 May 2023, Metro Bank Holdings PLC became the listed entity and
new holding company of Metro Bank PLC. As part of the insertion of Metro Bank Holdings PLC,
the existing listed share capital and share premium of Metro Bank PLC was cancelled and the
share capital and share premium amounts transferred to retained earnings. Metro Bank PLC
subsequently issued the same number of new unlisted 0.0001p ordinary shares to Metro Bank
Holdings PLC. Each existing holder of Metro Bank PLC shares was issued with an equivalent
number of new shares in Metro Bank Holdings PLC, with the nominal value of 0.0001p, as part
of a share for share exchange.
The difference between the new nominal share capital in Metro Bank Holdings PLC and the
net assets of Metro Bank PLC was recognised in a merger reserve. This merger reserve was
capitalised through the allotment of 964,505,616 million special shares of 0.0001p each,
which were then subsequently reduced to provide the Metro Bank Holdings PLC with
distributable reserves.
Equity raise
In November 2023, we issued 500 million ordinary shares for consideration of £150 million.
Associated costs of £6 million have been offset against the amount raised.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
196
27. Retained earnings
Retained earnings records our cumulative earnings since our formation, including the
accumulated earnings of our subsidiaries since they were acquired.
1 January
Profit/(loss) for the year
Cancellation of Metro Bank PLC share capital and share premium
Issuance of Metro Bank Holdings PLC share capital
Capital reduction of Metro Bank Holdings PLC share capital
31 December
No dividends were paid or declared during the year (2022: none).
As at 31 December 2023 all of our retained earnings are distributable.
2023
£’million
(1,015)
29
1,964
965
(965)
978
2022
£’million
(942)
(73)
–
–
–
(1,015)
Share option reserve
The share option reserve is used to record movements in relation to share options awarded
under our Deferred Variable Reward and LTIP.
1 January
Equity-settled share-based payment charges (note 7)
31 December
2023
£’million
2022
£’million
20
3
23
18
2
20
Fair value though other comprehensive income reserve
The FVOCI reserve is used to record changes in the fair value of investment securities
designated at FVOCI. When investment securities held at FVOCI are sold, any accumulated
gains or losses are transferred to the income statement.
1 January
Changes in fair value
Deferred tax movements
31 December
2023
£’million
2022
£’million
(13)
3
(1)
(11)
(5)
(10)
2
(13)
28. Other reserves
Merger reserve
1 January
Issuance of Metro Bank Holdings PLC share capital
Bonus issuance
31 December
2023
£’million
2022
£’million
–
965
(965)
–
–
–
–
–
Treasury shares
We have a small number of shares held in treasury relating to awards originally granted to
key members of management in 2016 in recognition of their significant contribution to the
successful listing on the London Stock Exchange. The final tranche of these awards vested in
April 2021 and the remaining balance represents awards that did not vest owing to the original
conditions of the grant not being fulfilled. These are held by an employee benefit trust, which is
consolidated within the Group accounts. The balance on the reserve is less than £1 million
(31 December 2022: less than £1 million) and therefore has not been separately disclosed as a
component of reserves due to its immaterial size.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
197
29. Share-based payments
Accounting policy
The grant date fair value of options awarded to colleagues is recognised as an expense
over the period in which colleagues become unconditionally entitled to the options. The
expense (representing the value of the services received by us) is measured by reference
to the fair value of the awards granted on the date of the grant. The cost of the colleague
services received in respect of the awards granted is recognised in the consolidated income
statement over the period that the services are received, which is the vesting period. Graded
vesting is applied where relevant.
Vesting conditions are limited to service and performance conditions. For performance-
based schemes, the relevant performance measures are projected to the end of the
performance period in order to determine the number of options expected to vest. This
estimate of the performance measures is used to determine the option fair value, discounted
to present value. The Group revises the number of options that are expected to vest,
including an estimate of lapses at each reporting date based on forecast performance
measures. The impact of the revision to original estimates, if any, is recognised in the income
statement, with a corresponding adjustment to equity.
The fair value of colleague awards plans is calculated at the grant date using Black-Scholes
and Monte Carlo models. The resulting cost is charged to the income statement over
the vesting period. The value of the charge is adjusted to reflect expected and actual levels
of vesting.
We provide share award schemes to colleagues as part of their remuneration packages, and
we operate a number of share-based compensation schemes, namely the DVRP and LTIP. The
granting of awards is designed to provide incentives to colleagues to deliver long-term returns.
No individual has a contractual right to participate in the plans or to receive any guaranteed
benefits and the granting of awards remains at the discretion of the People and Remuneration
Committee. Standard share options are granted for no consideration, are not pensionable and
carry no voting rights.
Long Term Incentive Plan
The LTIP is the primary long-term incentive scheme for the members of our ExCo. It was
approved by shareholders at the 2021 AGM. Under the plan, annual awards, based on a
percentage of salary, may be offered. The extent to which an award vests is measured over a
three-year period (four years for the initial awards granted in 2021) against financial targets,
which consist of return on tangible equity and relative total shareholder return, as well as
continued employment within the Group.
Deferred Variable Reward Plan
The DVRP was first introduced in 2010 and the latest plan was approved by shareholders at the
2021 AGM. Although originally designed for all colleagues, the plan is now operated for senior
managers, primarily consisting of members of the our ExCo and other Material Risk Takers.
Under the current rules participants are required to defer a proportion of any bonus paid into
nominal price awards, a proportion of which vest immediately and the remainder of which vest
over seven years. There are no further performance conditions on these shares, other than
continued employment. All awards under the DVRP are subject to a one-year holding period;
once exercised and all awards have a life of 10 years from the date of grant.
More information in relation to both the DVRP and LTIP is available within the Remuneration Report.
Awards outstanding
The table below summarises the movements in the number of options outstanding and their
weighted average exercise price:
Outstanding at 1 January
Granted
Exercised
Lapsed
Outstanding at 31 December
Exercisable at 31 December
2023
2022
Number
of options
‘000
13,326
3,429
(259)
(261)
16,235
Weighted
average
exercise
price
£
6.61
0.001
0.03
10.46
5.24
7,931
10.54
Number
of options
‘000
10,477
4,787
(222)
(1,716)
13,326
6,658
Weighted
average
exercise
price
£
8.72
0.001
0.001
1.96
6.61
12.35
1. Nominal price awards with exercise price of 0.0001p.
The average share price during 2023 was 94p (2022: 88p). For share options exercised during
the period, the weighted average share price at the date of exercise was 118p (2022: 93p).
All our options are equity settled and we have no legal or constructive obligation to repurchase
the shares or settle the options in cash. Exercises of awards granted are satisfied via the
issuance of new shares.
Total share-based compensation charges totalled £3.2 million in the year ended 2023 (2022:
£2.4 million).
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
29. Share-based payments Continued
Fair value of options granted
The number of options outstanding at year end was as follows:
Exercise price
£0.001
£0.93
£7.94
£12.00
£13.00
£13.50
£14.00
£16.00
£20.00
£32.73
£35.36
Total
1. Nominal price awards with exercise price of 0.0001p.
2023
2022
Weighted
average
remaining
contractual
life years
8.7
6.3
5.2
0.0
0.2
0.8
n/a
n/a
2.2
3.2
4.2
7.3
Number
of options
‘000
10,255
2,011
654
–
60
616
194
611
444
633
757
16,235
Weighted
average
remaining
contractual
life years
9.0
7.3
6.2
0.8
1.2
1.8
n/a
n/a
3.2
4.2
5.2
7.3
Number
of options
‘000
6,997
2,116
660
235
60
616
194
611
444
633
760
13,326
198
The total fair value of options granted in 2023 was £3.4 million (2022: £4.3 million), based on the
following assumptions:
Risk-free interest rate
Expected life
Volatility
Expected dividend yield
Share price at grant date
Exercise price
2023
awards
3.44% to 4.03%
1 to 7 years
166%
nil
£1.06
0.0001p
Volatility has been estimated by taking our share price volatility since we listed in 2016.
An assumption is also made in respect of how many shares will lapse due to the vesting criteria
not being met. For the awards granted post 2022, as these were only made to members of the
ExCo and other Material Risk Takers, the lapse assumption has been set at 0%. The fair value
charges recognised in the income statement for these scheme are adjusted annually to reflect
actual lapses. For all other schemes the lapse assumption is updated annually.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses
Strategic report
Governance
Risk report
Financial statements
Additional information
199
Accounting policy
We assess on a forward-looking basis the ECL associated with the assets carried at amortised cost and FVOCI and recognise a loss allowance for such losses at each reporting date.
Impairment provisions are driven by changes in the credit risk of loans and securities, with a provision for lifetime ECL recognised where the risk of default of an instrument has increased
significantly. Risk of default and ECL must incorporate forward-looking and macroeconomic information.
Loans and advances
Sophisticated impairment models have been developed for our retail and commercial loan portfolios, with three core models: revolving products; fixed term loans; and mortgages. Expected
credit losses are calculated for drawn loans, and for committed lending.
The same broad calculation approach is applied for each core model. ECL are calculated by multiplying three main components, being the PD, LGD and the EAD, discounted at the original
effective interest rate.
Key model inputs, judgements and estimates include:
• Consideration of when a SICR occurs.
• PD, LGD and EAD as well as their modelled impact.
• Macroeconomic scenarios and weightings applied.
Significant increase in credit risk
IFRS 9 requires a higher level of ECL to be recognised for underperforming loans. This is considered based on a staging approach:
Stage
Stage 1
Stage 2
Description
ECL recognised
Financial assets that have had no significant increase in credit risk since initial
recognition or that have low credit risk (high quality investment securities only) at
the reporting date.
Financial assets that have had a significant increase in credit risk since initial
recognition but that do not have objective evidence of impairment.
Stage 3
Financial assets that are credit impaired at the reporting date.
A financial asset is credit impaired when it has met the definition of default. We
define default to have occurred when a loan is greater than 90 days past due or
where the borrower is considered unlikely to pay.
POCI
Financial assets that have been purchased and had objective evidence of being
non-performing or credit impaired at the point of purchase.
12-month ECL
Total losses expected on defaults which may occur within the next 12 months.
Losses are adjusted for probability-weighted macroeconomic scenarios.
Lifetime ECL
Losses expected on defaults which may occur at any point in a loan’s lifetime.
Losses are adjusted for probability-weighted macroeconomic scenarios.
Lifetime ECL
Losses expected on defaults which may occur at any point in a loan’s lifetime.
Losses are adjusted for probability-weighted macroeconomic scenarios.
Interest income is calculated on the carrying amount of the loan net of credit
allowance.
Lifetime ECL
At initial recognition, POCI assets do not carry an impairment allowance. Lifetime
ECL are incorporated into the calculation of the asset’s effective interest rate.
Subsequent changes to the estimate of lifetime ECL are recognised as a loss
allowance.
Metro Bank Holdings PLC Annual Report and Accounts 2023
200
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
Accounting policy Continued
A SICR may be identified in a number of ways:
• Quantitative criteria — where the numerically calculated PD on a loan has increased significantly since initial recognition. This is assessed using detailed models which assess whether the
lifetime PD at observation is greater than the lifetime PD at origination by a portfolio specific threshold. Given the different nature of the products and the dissimilar level of lifetime PDs at
origination, we implement different thresholds by sub-products within each portfolio (term loans, revolving loan facilities and mortgages). The threshold is set at three times the median PD
of the portfolio at origination.
• Qualitative criteria — instruments that are 30 days past due or more are allocated to Stage 2, regardless of the results of the quantitative analysis. In addition, instruments classified on the
Early Warning List as higher risk are allocated to Stage 2, regardless of the results of the quantitative analysis.
A loan will be considered to be ‘non-performing’ or ‘credit impaired’ when it meets our definition of default — that is to say, the loan is 90 days past due, or the borrower is considered unlikely
to pay without realisation of collateral. Unlikeliness to pay is assessed through the presence of triggers including the loan being in repossession, the customer having been declared bankrupt, or
evidence of financial distress leading to forbearance.
A loan may also be considered to be non-performing when it is subject to forbearance measures, consisting of concessions in relation to either:
• A modification of the previous terms and conditions of the loan which the borrower is not considered able to comply with.
• A total or partial refinancing of a troubled debt contract that would not have been granted had the borrower not been in financial difficulties.
It may not be possible to identify a single discrete event which defines an asset as ‘non-performing’ or ‘credit impaired’. Instead, the combined effect of several events may cause financial assets
to become credit impaired.
A probation period is implemented before transferring a financial instrument to a lower stage (i.e. from Stage 3 to Stage 2, or from Stage 2 to Stage 1). Specifically, in order to move an account
from Stage 3 to Stage 2, we apply a backstop such that the instrument should meet the Stage 2 criteria for three consecutive months. The same logic is applied when transferring an account
from Stage 2 to Stage 1.
Probability of default
PD represents the likelihood of a borrower defaulting on its financial obligation either over the next 12 months (for Stage 1 accounts), or over the remaining lifetime of the loan (for Stage 2 and 3
accounts). A PD is calculated for all loans based on historical data and incorporates:
• Credit quality scores.
• Life cycle trends depending on a loan’s vintage.
• Factors indicating the quality of the vintage.
• Characteristics of the current and future economic environment.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
201
Accounting policy Continued
Loss given default
LGD represents our expectation of the extent of a loss on a defaulted exposure, and is expressed as a percentage considering expected recoveries on defaulted accounts. We apply two LGD
rates — one for unsecured lending and one for secured lending. LGD rates have been modelled considering a range of inputs, including:
• Value of collateral on secured portfolios — a key driver of the expected recovery in the event of default.
• Expected haircut applied to the collateral value to reflect a forced sale discount.
• Price index forecasts applied to project collateral values into the future.
• Stress factors based on macroeconomic scenarios.
Exposure at default
This is the amount that we expect to be owed at the point of default. This is subject to judgement since a balance will not necessarily remain static between the balance sheet date and the point
of expected default. For example:
• Interest should be accrued.
• Repayments may be received.
• For a revolving product, further drawings may be taken between the current point in time and the point of default.
• Estimations of these factors will be incorporated into our estimate of EAD.
PD, LGD and EAD are calculated and applied at an individual account level for secured lending. For unsecured lending, PD and EAD are calculated and applied at an individual account level, but
LGD is assessed at a portfolio level and applied to accounts on an individual basis.
Macroeconomic scenarios
The ECL recognised in the financial statements reflects the effect on ECL of a range of possible outcomes, calculated on a probability-weighted basis, based on a number of economic scenarios
and including management overlays where required. These scenarios are representative of our view of forecast economic conditions, sufficient to calculate unbiased ECL, and are designed to
capture material ‘non-linearities’ (i.e. where the increase in credit losses if conditions deteriorate exceeds the decrease in credit losses if conditions improve).
In the normal course of business, we use four scenarios. These represent a ‘most likely outcome’, (the ‘Baseline’ scenario) and three, less likely, ‘Outer’ scenarios, referred to as an ‘Upside’, a
‘Downside’ and a severe downside scenario respectively. The Baseline scenario captures the most likely economic future; the Downside and severe downside scenarios reflect adverse economic
conditions; and the Upside scenario presents more favourable economic conditions.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
202
Accounting policy Continued
Key scenario assumptions are set using data sourced from independent external economists. This helps ensure that the IFRS 9 scenarios are unbiased and maximise the use of independent
information.
The following assumptions, considered to be the key drivers of ECL, have been used for the scenarios applied as at 31 December 2023 and 31 December 2022:
• UK interest rates (five-year mortgage rate).
• UK unemployment rates.
• UK HPI changes, year on year.
• UK GDP changes, year on year.
• UK commercial real estate index, year on year.
Macroeconomic scenarios impact the ECL calculation through varying PDs and LGDs. We use UK HPI to index mortgage collateral which has a direct impact on LGDs. Other metrics are
considered to have a direct impact on PDs and were selected following a search and data calibration exercise of possible drivers. A list of around 15 potential drivers were initially considered,
representing drivers which capture trends in the economy at large, and may indicate economic trends which will impact UK borrowers. The list included variables which impact economic
output, interest rates, inflation, share prices, borrower income and the UK housing market. An algorithm was then used to choose the subset of drivers which had the greatest significance and
predictive fit to our data.
Each scenario was determined by flexing the Baseline scenario, taking into account a number of factors in the global and UK economy such as commodity prices, global interest rates, UK
investment spend and exchange rates, as well as the possible impact of recessionary conditions or financial shocks. A simulation process was designed to determine the weighting to apply
to each scenario based on its severity and the range of possible scenarios for which that scenario was representative. A summary of each scenario and weighting used at 31 December 2023
is as follows:
• Baseline scenario: Reflects the projection of the median, or ‘50%’ scenario, meaning that in the assessment there is an equal probability that the economy might perform better or worse than
the baseline forecast.
• Upside scenario: This above-baseline scenario is designed so there is a 10% probability the economy will perform better than in this scenario, broadly speaking, and a 90% probability it will
perform worse.
• Downside scenario: In this recession scenario, in which a deep downturn develops, there is a 90% probability the economy will perform better, broadly speaking, and a 10% probability it will
perform worse.
• Severe downside scenario: In this recession scenario, in which a deep downturn develops, there is a 96% probability the economy will perform better, broadly speaking, and a 4% probability it
will perform worse.
These assumptions are considered sufficient to capture any material non-linearities.
The weightings applied to each scenario at 31 December 2023 were Baseline – 50%, Upside – 20%, Downside – 25% and Severe downside scenario – 5% (31 December 2022: Baseline – 50%,
Upside – 20%, Downside – 25% and Severe downside scenario – 5%).
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
203
30. Expected credit losses Continued
Accounting policy Continued
Economic variable assumptions
The period-end assumptions used for the ECL estimate as at 31 December 2023 and 31 December 2022 are as follows:
Interest rates (%) –
five-year mortgage rate
UK unemployment (%)
UK HPI –
% change year-on-year
UK GDP –
% change year-on-year
UK commercial real estate index, year-on-year –
% change
Baseline
Upside
Downside
Severe downside
Baseline
Upside
Downside
Severe downside
Baseline
Upside
Downside
Severe downside
Baseline
Upside
Downside
Severe downside
Baseline
Upside
Downside
Severe downside
31 December 2023
31 December 2022
2024
5.1%
5.3%
3.7%
3.3%
4.6%
4.1%
6.5%
7.7%
(6.2%)
7.0%
2025
4.7%
4.7%
2.7%
2.2%
4.7%
3.8%
7.4%
8.5%
3.1%
6.3%
(16.5%)
(6.3%)
(22.2%)
(10.3%)
0.4%
3.9%
(5.6%)
(7.1%)
(4.2%)
10.1%
(18.7%)
(26.9%)
1.0%
1.2%
1.3%
(0.2%)
0.8%
3.3%
(5.3%)
(7.4%)
2026
4.3%
4.3%
2.6%
2.2%
4.7%
3.9%
7.4%
8.4%
4.7%
2.1%
4.0%
4.4%
1.3%
1.3%
2.6%
4.2%
1.7%
(1.3%)
3.0%
4.9%
2027
4.2%
4.2%
2.6%
2.2%
4.8%
4.2%
7.0%
8.1%
2.6%
(1.5%)
5.4%
4.1%
1.4%
1.4%
1.4%
2.4%
(0.4%)
(4.3%)
3.4%
2.6%
2023
5.5%
5.3%
5.5%
5.8%
4.3%
3.9%
6.2%
7.4%
(4.4%)
9.0%
2024
4.4%
4.3%
4.4%
4.0%
4.5%
3.6%
7.2%
8.3%
2.3%
5.4%
(14.9%)
(7.0%)
(20.7%)
(10.9%)
(0.8%)
1.9%
(6.9%)
(8.3%)
(8.2%)
3.2%
(23.2%)
(30.5%)
1.2%
1.2%
1.3%
(0.3%)
(6.0%)
(3.6%)
(11.9%)
(14.8%)
2025
4.0%
4.0%
3.6%
3.4%
4.5%
3.7%
7.2%
8.2%
4.8%
2.1%
4.0%
4.4%
1.4%
1.1%
2.5%
3.5%
2.0%
2026
4.0%
4.0%
3.1%
3.0%
4.6%
4.0%
6.8%
7.9%
2.9%
(1.2%)
5.7%
4.3%
1.2%
1.2%
1.2%
2.1%
1.4%
(0.3%)
(2.2%)
5.1%
6.9%
4.2%
3.5%
Following the initial four-year projection period, the Upside, Downside and Severe downside scenarios converge to the Baseline scenario. The rate of convergence varies based on the
macroeconomic factor, but at a minimum convergence takes place three years from the initial four-year projection period.
We recognise that applying the above scenarios will not always be sufficient to determine an appropriate ECL in all economic environments. The scenarios applied comprise our best estimate of
economic impacts on the ECL, and the actual outcome may be significantly different.
Investment securities and other financial assets
Impairment provisions have been calculated based on our best estimate of ECL on other assets classified and measured at amortised cost and fair value through other comprehensive income.
These include investment securities, cash held at banks and other financial assets. These impairment provisions are not material.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
204
Critical accounting judgement
Measurement of the expected credit loss allowance
The measurement of ECL is complex and involves the use of significant judgements. We consider that the following represent key judgements in respect of the measurement of the ECL.
Significant increase in credit risk
IFRS 9 requires a higher level of ECL to be recognised for under-performing loans as a lifetime ECL is recognised compared to a 12-month ECL for performing loans. This is considered based
on a staging approach. Financial assets that have had no SICR since initial recognition, or that have low credit risk at the reporting date, are considered to be performing loans and are classified
as ‘Stage 1’. Losses are calculated based on our expectation of defaults which may occur within the next 12 months. Assets which are considered to have experienced a SICR since initial
recognition, but that do not have objective evidence of impairment, are classified as ‘Stage 2’. Losses are calculated based on defaults which may occur at any point in the asset’s lifetime.
Judgement is required to determine when a SICR has occurred. An assessment of whether credit risk has increased significantly since initial recognition, resulting in transfer to Stage 2, is
performed at each reporting period by considering the change in the PD expected over the remaining life of the financial instrument. The assessment explicitly or implicitly compares the PD
occurring at the reporting date compared to that at initial recognition, taking into account reasonable and supportable information, including information about past events, current conditions
and future economic conditions.
Use of post model adjustments and overlays
We have applied expert judgement to the measurement of the ECL in the form of PMOs and PMAs.
Post model adjustments
PMAs refer to increases/decreases in ECL to address known model limitations, either in model methodology or model inputs. These rely on analysis of model inputs and parameters to
determine the change required to improve model accuracy. These may be applied at an aggregated level however, they will usually be applied at account level.
Post model overlays
PMOs reflect management judgement. These rely more heavily on expert judgement and will usually be applied at an aggregated level. For example, where recent changes in market and
economic conditions have not yet been captured in the macroeconomic factor inputs to models (e.g., industry – specific stress event).
The appropriateness of PMAs and PMOs is subject to rigorous review and challenge, including review by the Audit Committee (see page 70).
ECL assessment
We have applied Post Model Adjustments (PMAs) and Post Model Overlays (PMOs) in the assessment of ECL. PMAs supplement the models to account for where there are limitations in model
methodology or data inputs and PMOs accounts for downsides risks which are not fully captured through the economic scenarios. The appropriateness of PMAs and PMOs is subject to rigorous
review and challenge, including review by our Model Governance, Impairment Committee and Audit Committee.
The level of PMAs and PMOs has reduced in 2023 with the total percentage of ECL stock standing at 12% as at 31 December 2023 (31 December 2022: 16%).
No PMAs have been held as at 31 December 2023 as outstanding IFRS9 models have been implemented in production in 2023 resulting in previously held PMAs being removed:
• IFRS 9 retail mortgage secured LGD model (31 December 2023: £nil ; 31 December 2022: £0.1 million).
• IFRS 9 commercial business loans lifetime PD model scope extended to commercial Revolving facilities (31 December 2023: £nil ; 31 December 2022: £0.3 million).
PMOs have been reassessed during the period to ensure an appropriate level of ECL to account for the high level of macroeconomic uncertainty, following the cost of living pressures and stable
yet high interest rates, and anticipated property price falls.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
205
30. Expected credit losses Continued
Critical accounting judgement Continued
PMOs make up £23.4 million of the ECL stock as at 31 December 2023 (31 December 2022: £30.5 million) and comprise:
• High inflation environment and cost-of-living risks – Management overlays were introduced in 2022 to reflect high inflation and cost of living pressures, which are not fully captured through
the economic scenarios and IFRS9 models (31 December 2023: £16.0 million; 31 December 2022: £22.5 million). The reduction in 2023 is driven by underlying credit risk profile movements on
some individual cases resulting in previously held overlays now being released. This reflects the associated risks across the consumer and commercial portfolios. For commercial, the inflation
PMO has been assessed based on potential future individual customer migration of current Stage 1 lending migrating into Stage 2 and 3, based on an inflationary stress scenario. The overlay
assigned for the mortgage portfolio has been removed as it is now reflected in the new IFRS9 model as part of the model enhancement overlay mentioned below.
• Significant increase in credit risk (SICR) adjustment overlay – A negative overlay introduced in 2022 is still being held at December 2023. The SICR model for these portfolios is resulting in a
significant overstatement of stage 2 assets and the negative PMO is in place to account for this. These overlays will be removed once the IFRS9 PD Annual Model Reviews for both portfolios
are validated and implemented into production (scheduled in H1 2024) (31 December 2023: £7.4 million; 31 December 2022: £3.4 million).
• HPI and CRE adjustment – An overlay raised in 2022 is still being held at 31 December 2023 to reflect further downside risk in property price indices beyond the latest scenarios for the retail
mortgage and commercial property portfolios (31 December 2023: £3.4 million; 31 December 2022: £6.1 million). This overlay has been reduced in 2023 to offset the observed reduction in
HPI. However, management has continued to maintain an overlay to reflect the risk of further deterioration in property price falls (across HPI and CRE) as high base rates continue to be held
flat by the Bank of England.
• Climate change impact – An expert judgement overlay originally raised in 2021 has been revised for FY 2023 and reflects the impact of climate change on property values for the mortgage
and commercial portfolios (31 December 2023: £3.2 million; 31 December 2022: £3.5 million). The slight reduction in the overlay since December 2022 is due to the updated balance
movements for all portfolios across the period.
• Mortgage model enhancements – A PMO has been introduced in FY 2023 to reflect the new IFRS9 Mortgage PD and Staging models. This overlay will be removed once the IFRS9 PD and
Staging Annual Model Reviews are validated and implemented into production (scheduled in Q1 2024) (31 December 2023: £4.7 million; 31 December 2022: £nil).
• Commercial model enhancements – An overlay is held in anticipation of remaining model adjustments for the commercial portfolio (31 December 2023: £3.5 million; 31 December 2022:
£1.2 million). The increase in the overlay over the period is to reflect the impact from the anticipated new IFRS9 Commercial PD model and the Enhanced Business Overdrafts portfolio which
utilises the IFRS9 Commercial models as a proxy for ECL assessment.
We review our PMOs on an ongoing basis and reassess these based on the evolving economic outlook and observation of performance data.
All PMOs impact the ECL measurement, however not all adjust the staging.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
206
Critical accounting estimate
Measurement of the expected credit loss allowance
We consider that the key source of estimation uncertainty relates to the formulation and incorporation of multiple forward-looking economic scenarios into the ECL estimates to meet the
measurement objective of IFRS 9.
Multiple forward-looking economic scenarios
The ECL recognised in the financial statements reflects the effect on ECL of a range of possible outcomes, calculated on a probability-weighted basis, based on a number of economic scenarios,
including management overlays where required. These scenarios are representative of our view of forecast economic conditions, sufficient to calculate unbiased ECL.
The following assumptions, considered to be the key drivers of ECL, have been used for the scenarios applied:
• UK interest rates.
• UK unemployment rates.
• UK HPI changes, year on year.
• UK GDP changes, year on year.
• UK commercial real estate index, year on year.
The weightings applied to each scenario at 31 December 2023 and 31 December 2022 are:
Baseline
Upside
Downside
Severe downside
31 December
2023
31 December
2022
50%
20%
25%
5%
50%
20%
25%
5%
The weightings used are reviewed each reporting period to ensure these remain appropriate and as such are considered to represent significant accounting estimates. We have performed an
assessment of the impact on the ECL if each of the Baseline, Upside, Downside and Severe downside scenarios were applied to the ECL calculation using a 100% weighting (that is, ignoring all
other scenarios in each case):
Baseline
Upside
Downside
Severe downside
Weighted
Stage 1
£’million
Stage 2
£’million
Stage 3
£’million
Total
£’million
57
49
79
90
63
37
31
57
72
43
93
92
98
100
93
187
172
234
262
199
The sensitivities disclosed above represent example scenarios and may not represent actual scenarios which occur in the future. If one of these scenarios did arise then at that time the ECL
would not equal the amount disclosed above, as the amounts disclosed do not take account of the alternative possible scenarios which would be considered at that time.
PMOs and individually assessed provisions are reflected in the above sensitivities as are any resulting movements in staging allocation.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
Expected credit loss expense
Retail mortgages1
Consumer lending1
Commercial lending1
Investment securities
Write-offs and other movements
Total expected credit loss expense
Strategic report
Governance
Risk report
Financial statements
Additional information
207
2023
£’million
2022
£’million
(1)
33
(20)
1
20
33
1
33
(16)
1
21
40
1. Represents the movement in ECL allowance during the year and therefore excludes write-offs which are shown separately.
Investment securities
All investment securities held at FVOCI are deemed to be in Stage 1. Any credit loss allowance is, however, included as part of the revaluation amount in the FVOCI reserve. At 31 December 2023,
the loss allowance included within the FVOCI reserve is £0.1 million (31 December 2022: £0.1 million).
All investment securities held at amortised cost are deemed to be in Stage 1. The total ECL expense recognised for these assets at 31 December 2023 is £0.9 million (31 December 2022: £0.7 million).
Collateral
Collateral is usually held in the form of real estate, guarantees, debentures and other liens that we can call upon in the event of the borrower defaulting. At 31 December 2023, 80% (31 December
2022: 79%) of our loans consisted of retail mortgages and commercial term loans secured on collateral, with average DTV of 58% (31 December 2022: 56%) and 55% (31 December 2022: 55%)
respectively. A further 4% (31 December 2022: 6%) of our lending portfolio consists of BBLS, which although they do not have any collateral are 100% guaranteed by the Government. Further
details on the collateral of our loans can be found in the Risk report.
Write-off policy
We write off financial assets (either partially or fully) when there is no realistic expectation of receiving further payment from the customer. Indicators that there is no reasonable expectation of
recovery include debt sale to a third party and ceasing enforcement activity. We may write off financial assets that are still subject to enforcement activity.
Modification of financial assets
We sometimes renegotiate the terms of loans provided to customers with a view to maximising recovery. The modifications have not led to any material modification gains or losses being recognised.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
208
30. Expected credit losses Continued
The following tables explain the changes in both the gross carrying amount and loss allowances of our loans and advances during the year.
£’million
1 January 2023
Transfers to/(from) Stage 11
Transfers to/(from) Stage 2
Transfers to/(from) Stage 3
Net remeasurement due to transfers2
New lending3
Repayments, additional drawdowns and
interest accrued
Derecognitions4
Changes to model assumptions5
31 December 2023
Off-balance sheet items
Commitments and guarantees6
£’million
1 January 2022
Transfers to/(from) Stage 11
Transfers to/(from) Stage 2
Transfers to/(from) Stage 3
Net remeasurement due to transfers2
New lending3
Repayments, additional drawdowns and
interest accrued
Derecognitions4
Changes to model assumptions5
31 December 2022
Off-balance sheet items
Commitments and guarantees6
Gross carrying amount
Loss allowance
Net carrying amount
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
10,849
2,088
352
872
(581)
(170)
–
(857)
589
(71)
–
2,060
239
(15)
(8)
241
–
16
(685)
(172)
(1,749)
(305)
–
–
(40)
(157)
–
10,596
1,511
389
–
–
–
–
–
–
–
–
–
–
13,289
–
–
–
–
(66)
(15)
4
3
12
2,315
(18)
(897)
(2,211)
–
–
13
4
(51)
(70)
15
(6)
4
(13)
(6)
–
10
4
–
2
(7)
(38)
(6)
–
26
–
12,496
(63)
(43)
(93)
–
–
–
–
–
–
–
–
–
–
(187)
10,783
2,037
282
–
–
–
(39)
(30)
–
49
8
857
(842)
(577)
(167)
12
2,042
583
(67)
(13)
233
(685)
(172)
(1,736)
(295)
4
4
(15)
(6)
234
(38)
10
(40)
(131)
–
(199)
10,533
1,468
296
718
–
–
–
–
–
–
–
–
–
–
–
13,102
–
–
–
(39)
2,285
(897)
(2,162)
8
12,297
718
Gross carrying amount
Loss allowance
Net carrying amount
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
10,071
1,925
462
517
(504)
(451)
(124)
–
458
(73)
–
3,157
742
(13)
(7)
197
–
31
1
–
–
–
–
–
12,459
–
–
–
–
3,930
(604)
(107)
(26)
(1)
(738)
(1,717)
(353)
(292)
–
–
–
10,849
2,088
352
–
–
–
(2,362)
–
13,289
(66)
(47)
(13)
2
1
10
(30)
–
7
4
(49)
(73)
13
(2)
7
(10)
(15)
–
10
(5)
(51)
–
–
(8)
(15)
(11)
–
34
3
(70)
–
–
–
–
–
–
–
–
–
–
–
–
–
(15)
(56)
–
51
2
(169)
10,024
1,876
389
504
(449)
(123)
10
3,127
(491)
456
(66)
(10)
727
(13)
(7)
189
(15)
20
(604)
(107)
(26)
(1)
(738)
(1,710)
(343)
(258)
4
(5)
3
(187)
10,783
2,037
282
1
–
–
–
–
–
12,290
–
–
–
(15)
3,874
–
–
–
(2,311)
2
13,102
1,120
1,120
–
1. Represents stage transfers prior to any ECL remeasurements.
2. Represents the remeasurement between the 12-month and lifetime ECL due to stage transfer. In addition it includes any ECL change resulting from model assumptions and forward-looking information on these loans.
3. Represents the increase in balances resulting from loans and advances that have been newly originated, purchased or renewed as well as any ECL that has been recognised in relation to these loans during the year.
4. Represents the decrease in balances resulting from loans and advances that have been fully repaid, sold or written off.
5. Represents the change in ECL to those loans that remain within the same stage through the year.
6. Represents undrawn lending facilities. Further details can be found in note 31.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
209
Retail mortgages
£’million
1 January 2023
Transfers to/(from) Stage 1
Transfers to/(from) Stage 2
Transfers to/(from) Stage 3
Net remeasurement due to transfers
New lending
Repayments, additional drawdowns and
interest accrued
Derecognitions
Changes to model assumptions
31 December 2023
£’million
1 January 2022
Transfers to/(from) Stage 1
Transfers to/(from) Stage 2
Transfers to/(from) Stage 3
Net remeasurement due to transfers
New lending
Repayments, additional drawdowns and
interest accrued
Derecognitions
Changes to model assumptions
31 December 2022
Stage 1
Stage 2
Stage 3
POCI
Total
6,189
1,332
108
Gross carrying amount
Loss allowance
Net carrying amount
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
6,195
1,343
745
(193)
(38)
–
(737)
199
(29)
–
1,195
147
(177)
(840)
–
(18)
(121)
–
111
(8)
(6)
67
–
1
–
(19)
–
6,887
784
146
–
–
–
–
–
–
–
–
–
–
7,649
–
–
–
–
1,343
(195)
(980)
–
7,817
(6)
(6)
–
–
5
(1)
–
1
–
(11)
6
–
–
(2)
(1)
–
1
1
(7)
(6)
(3)
–
–
–
(2)
–
–
–
(1)
(6)
–
–
–
–
–
–
–
–
–
–
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
5,546
1,063
293
(199)
(16)
–
(281)
205
(22)
–
1,666
549
(130)
(965)
–
(22)
(149)
–
6,195
1,343
114
(12)
(6)
38
–
1
(5)
(19)
–
111
–
–
–
–
–
–
–
–
–
–
6,723
–
–
–
–
2,216
(157)
(1,133)
–
7,649
(2)
(4)
–
–
4
(3)
–
(1)
–
(6)
(12)
4
–
1
(1)
(7)
–
2
2
(5)
–
–
(1)
–
–
–
3
–
(11)
(3)
–
–
–
–
–
–
–
–
–
–
Total
(20)
–
–
–
1
(2)
–
2
–
Total
(19)
–
–
–
3
739
(193)
(38)
5
1,194
(177)
(839)
–
(731)
199
(29)
(2)
146
(18)
(120)
1
(19)
6,880
778
289
(199)
(16)
4
(277)
205
(21)
(1)
(10)
1,663
542
–
4
2
(130)
(966)
–
(22)
(147)
2
(8)
(6)
67
(2)
1
–
(19)
(1)
140
(12)
(6)
37
–
1
(5)
(16)
–
(20)
6,189
1,332
108
Gross carrying amount
Loss allowance
Net carrying amount
–
–
–
–
–
–
–
–
–
–
7,629
–
–
–
1
1,341
(195)
(978)
–
7,798
–
–
–
–
–
–
–
–
–
–
6,704
–
–
–
3
2,206
(157)
(1,129)
2
7,629
Stage 1
Stage 2
Stage 3
POCI
Total
5,544
1,051
109
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
210
Consumer lending
£’million
1 January 2023
Transfers to/(from) Stage 1
Transfers to/(from) Stage 2
Transfers to/(from) Stage 3
Net remeasurement due to transfers
New lending
Repayments, additional drawdowns and
interest accrued
Derecognitions
Changes to model assumptions
31 December 2023
£’million
1 January 2022
Transfers to/(from) Stage 1
Transfers to/(from) Stage 2
Transfers to/(from) Stage 3
Net remeasurement due to transfers
New lending
Repayments, additional drawdowns and
interest accrued
Derecognitions
Changes to model assumptions
31 December 2022
Gross carrying amount
Loss allowance
Net carrying amount
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Stage 1
Stage 2
Stage 3
POCI
Total
1,480
–
–
–
–
396
(338)
(241)
–
1,297
Total
890
–
–
–
–
1,180
34
(182)
(35)
–
311
(217)
(185)
–
906
250
(34)
182
(9)
–
78
(111)
(42)
–
314
50
–
–
44
–
7
(10)
(14)
–
77
–
–
–
–
–
–
–
–
–
–
Gross carrying amount
Stage 1
Stage 2
Stage 3
POCI
786
19
(96)
(21)
–
82
(19)
96
(6)
–
806
156
(144)
(170)
–
(41)
(18)
–
1,180
250
21
–
–
27
–
12
(6)
(4)
–
50
1
–
–
–
–
–
(1)
–
–
–
(21)
(2)
2
1
2
(9)
–
3
(2)
(26)
(12)
(42)
2
(2)
2
(6)
(4)
–
2
2
–
–
(3)
(28)
(6)
–
12
1
(16)
(66)
–
–
–
–
–
–
–
–
–
–
(18)
(2)
1
1
2
974
(15)
(192)
(192)
–
–
5
5
(8)
2
(1)
2
(3)
(7)
–
1
2
(16)
–
–
(3)
(15)
(9)
–
1
–
–
–
–
–
–
–
–
–
–
–
Total
(75)
–
–
–
(32)
(19)
–
17
1
(108)
Total
(42)
–
–
–
(16)
(31)
–
7
7
1,159
32
(180)
(34)
2
302
(217)
(182)
(2)
880
238
(32)
180
(7)
(6)
74
(111)
(40)
2
298
8
–
–
41
(28)
1
(10)
(2)
1
11
–
–
–
–
–
–
–
–
–
–
768
17
(95)
(20)
2
791
(144)
(165)
5
74
(17)
95
(4)
(3)
149
(41)
(17)
2
5
–
–
24
(15)
3
(6)
(3)
–
8
1
–
–
–
–
–
(1)
–
–
–
1,405
–
–
–
(32)
377
(338)
(224)
1
1,189
Total
848
–
–
–
(16)
943
(192)
(185)
7
1,405
Loss allowance
Net carrying amount
Stage 1
Stage 2
Stage 3
POCI
Stage 1
Stage 2
Stage 3
POCI
1,480
(21)
(12)
(42)
(75)
1,159
238
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
211
Commercial lending
£’million
1 January 2023
Transfers to/(from) Stage 1
Transfers to/(from) Stage 2
Transfers to/(from) Stage 3
Net remeasurement due to transfers
New lending
Repayments, additional drawdowns and
interest accrued
Derecognitions
Changes to model assumptions
31 December 2023
£’million
1 January 2022
Transfers to/(from) Stage 1
Transfers to/(from) Stage 2
Transfers to/(from) Stage 3
Net remeasurement due to transfers
New lending
Repayments, additional drawdowns and
interest accrued
Derecognitions
Changes to model assumptions
31 December 2022
Gross carrying amount
Loss allowance
Net carrying amount
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
3,474
93
(206)
(97)
–
554
(291)
(724)
–
495
(86)
208
(33)
–
14
(43)
(142)
–
191
(7)
(2)
130
–
8
(30)
(124)
–
2,803
413
166
–
–
–
–
–
–
–
–
–
–
4,160
–
–
–
–
576
(364)
(990)
–
(39)
(7)
2
2
5
(8)
–
9
6
(28)
(25)
7
(4)
2
(5)
(1)
–
7
1
–
2
(4)
(8)
–
–
14
–
3,382
(30)
(21)
(21)
–
–
–
–
–
–
–
–
–
–
3,739
205
(156)
(87)
–
685
(330)
(582)
–
780
(204)
157
(45)
–
37
327
(1)
(1)
132
–
18
(44)
(15)
(186)
(269)
–
–
191
3,474
495
–
–
–
–
–
–
–
–
–
–
4,846
–
–
–
–
(27)
(7)
1
–
4
740
(12)
(389)
(1,037)
–
–
3
(1)
4,160
(39)
(29)
(52)
7
(1)
4
(6)
(1)
–
7
(9)
(28)
–
–
(4)
–
(2)
–
30
3
(25)
–
–
–
–
–
–
–
–
–
–
Total
(92)
–
–
–
(8)
(9)
–
30
7
–
–
–
(2)
(15)
–
40
(7)
(92)
Stage 1
Stage 2
Stage 3
POCI
Total
3,435
86
(204)
(95)
5
546
(291)
(715)
6
467
(79)
204
(31)
(5)
13
(43)
(135)
1
392
166
(7)
–
126
(8)
8
(30)
(110)
–
145
–
–
–
–
–
–
–
–
–
–
4,068
–
–
–
(8)
567
(364)
(960)
7
3,310
198
(155)
(87)
4
673
751
(197)
156
(41)
(6)
36
275
(1)
(1)
128
–
16
(330)
(579)
(44)
(15)
(179)
(239)
(1)
(9)
3,435
467
3
166
–
–
–
–
–
–
–
–
–
–
4,738
–
–
–
(2)
725
(389)
(997)
(7)
4,068
(72)
2,773
(108)
3,712
Gross carrying amount
Loss allowance
Net carrying amount
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
Credit risk exposures
Total lending
£’million
Up to date
1 to 29 days past due
30 to 89 days past due
90+ days past due
Gross carrying amount
Retail mortgages
£’million
Up to date
1 to 29 days past due
30 to 89 days past due
90+ days past due
Gross carrying amount
Consumer lending
£’million
Up to date
1 to 29 days past due
30 to 89 days past due
90+ days past due
Gross carrying amount
Commercial lending
£’million
Up to date
1 to 29 days past due
30 to 89 days past due
90+ days past due
Gross carrying amount
212
31 December 2023
31 December 2022
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
10,553
1,342
123
12,018
10,819
1,943
43
–
–
54
115
–
15
43
112
158
208
208
30
–
–
59
86
–
103
12
40
197
12,865
101
126
197
10,596
1,511
389
12,496
10,849
2,088
352
13,289
31 December 2023
31 December 2022
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
6,885
695
2
–
–
28
61
–
37
10
16
83
7,617
6,194
1,289
40
77
83
1
–
–
21
33
–
6,887
784
146
7,817
6,195
1,343
33
7
15
56
111
7,516
29
48
56
7,649
31 December 2023
31 December 2022
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
900
297
6
–
–
2
15
–
906
314
3
–
7
67
77
1,200
1,172
235
8
22
67
8
–
–
2
13
–
1,297
1,180
250
3
–
5
42
50
1,410
10
18
42
1,480
31 December 2023
31 December 2022
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
2,768
350
83
3,201
3,453
35
–
–
24
39
–
5
20
58
64
59
58
21
–
–
419
36
40
–
2,803
413
166
3,382
3,474
495
67
5
20
99
191
3,939
62
60
99
4,160
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
213
31. Financial commitments
32. Legal and regulatory matters
Accounting policy
To meet the financial needs of our customers, we enter into various irrevocable
commitments. These generally consist of financial guarantees, letters of credit and other
undrawn commitments to lend.
Even though these obligations are not recognised on the balance sheet, they do contain
credit risk and an ECL is calculated and recognised for them (see note 30).
When these commitments are drawn down or called upon, and meet the recognition criteria
as detailed in note 12, these are recognised within our loans and advances to customers.
At 31 December 2023, we had undrawn facilities granted to retail and commercial customers of
£718 million (31 December 2022: £1,120 million).
As part of our retail and commercial operations, this includes commitments of £327 million
(31 December 2022: £250 million) for credit card and overdraft facilities. These commitments
represent agreements to lend in the future, subject to certain conditions. Such commitments are
cancellable, subject to notice requirements, and given their nature are not expected to be drawn
down to the full level of exposure.
As part of the normal course of business we are subject to legal and regulatory matters.
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. This is because,
based on the facts currently known, it is not practicable to predict the outcome, if any, of these
matters or reliably estimate any financial impact. Their inclusion does not constitute any
admission of wrongdoing or legal liability.
Financial crime
The FCA is currently undertaking enquiries regarding our financial crime systems and controls.
We continue to engage and co-operate fully with the FCA in relation to these matters, and the
FCA’s enquiries remain ongoing.
Magic Money Machine litigation
In 2022 Arkeyo LLC, a software company based in the United States, filed a civil suit with a
stated value of over £24 million against us in the English High Court alleging, among other
matters, that we infringed their copyright and misappropriated their trade secrets relating to
money counting machines (i.e. our Magic Money Machines).
We believe Arkeyo LLC’s claims are without merit and are vigorously defending the claim.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
33. Offsetting of financial assets and liabilities
214
Accounting policy
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to
settle on a net basis or realise the asset and settle the liability simultaneously.
Assets
Loans and advances to customers1
Investment securities1
Derivative financial assets
Deferred tax assets
Other assets2
Liabilities
Derivative financial liabilities
Repurchase agreements1
Deposits from central banks1
Deferred tax liabilities
31 December 2023
Effects of offsetting
on the balance sheet
Gross amounts
offset in the
balance sheet
£’million
–
–
(31)
(17)
–
(31)
–
–
(17)
Gross
amount
£’million
12,297
4,879
67
17
108
31
1,191
3,050
30
Net amounts
presented
in the balance
sheet
£’million
12,297
4,879
36
–
108
–
1,191
3,050
13
31 December 2022
Effects of offsetting
on the balance sheet
Gross amounts
offset in the
balance sheet
£’million
–
–
–
(16)
–
–
–
–
(16)
Gross
amount
£’million
13,102
5,914
–
16
73
26
238
3,800
28
Net amounts
presented
in the balance
sheet
£’million
13,102
5,914
–
–
73
26
238
3,800
12
1. We have pledged £6,110 million (2022: £5,286 million) against repos, deposits from central banks and other assets as encumbered collateral which can be called upon in the event of default.
2. Includes £50 million (2022: £39 million) pledged as cash collateral. None of the cash collateral has been offset in the Balance Sheet.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
34. Fair value of financial instruments
Strategic report
Governance
Risk report
Financial statements
Additional information
215
Accounting policy
Determination of fair value
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its
absence, the most advantageous market to which we have access at that date. The fair value of a liability reflects its non-performance risk.
In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as summarised below:
• Level 1 financial instruments – Those where the inputs used in the valuation are unadjusted quoted prices from active markets for identical assets or liabilities that we have access to at the
measurement date. We consider markets as active only if there are sufficient trading activities with regards to the volume and liquidity of the identical assets or liabilities and when there are
binding and exercisable price quotes available on the balance sheet date.
• Level 2 financial instruments – Those where the inputs that are used for valuation are significant, and are derived from directly or indirectly observable market data available over the entire
period of the instrument’s life. Such inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical instruments in inactive markets and observable
inputs other than quoted prices, such as interest rates and yield curves, implied volatilities, and credit spreads. In addition, adjustments may be required for the condition or location of the
asset or the extent to which it relates to items that are comparable to the valued instrument. However, if such adjustments are based on unobservable inputs which are significant to the entire
measurement, we will classify the instruments as Level 3.
• Level 3 financial instruments – Those that include one or more unobservable inputs that are significant to the measurement as whole.
Assets
Loans and advances to customers
Investment securities held at fair value through other comprehensive income
Investment securities held at amortised cost
Financial assets held at fair value through profit and loss
Derivative financial assets
Liabilities
Deposits from customers
Deposits from central bank
Debt securities
Derivative financial liabilities
Repurchase agreements
31 December 2023
Quoted
market
price
Level 1
£’million
Using
observable
inputs
Level 2
£’million
With
significant
unobservable
inputs
Level 3
£’million
Total fair
value
£’million
Carrying
value
£’million
31 December 2022
Quoted
market
price
Level 1
£’million
Using
observable
inputs
Level 2
£’million
With
significant
unobservable
inputs
Level 3
£’million
Total fair
value
£’million
–
476
3,143
–
–
–
–
–
–
–
–
–
1,072
–
36
–
–
585
–
–
12,156
–
–
–
–
12,156
476
4,215
–
36
15,622
3,050
15,622
3,050
–
–
1,191
585
–
1,191
13,102
–
571
533
–
38
12,321
12,321
–
571
5,343
3,834
1,135
40
5,009
1
23
16,014
3,800
571
26
238
–
–
–
–
423
–
–
–
23
–
–
–
26
–
1
–
1
23
16,004
16,004
3,800
3,800
–
–
238
423
26
238
Carrying
value
£’million
12,297
476
4,403
–
36
15,623
3,050
694
–
1,191
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
216
34. Fair value of financial instruments Continued
35. Related parties
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 tables. Their carrying amount is a reasonable approximation of fair value.
Information on how fair values are calculated 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).
Financial assets held at fair value through profit and loss
The financial assets at fair value through profit and loss relate to the loans and advances
previously assumed by the RateSetter provision fund. They are measured at the fair value of the
amounts that we expect to recover on these loans.
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 either short-dated or are on a variable rate
which aligns to the current market rate.
Derivative financial assets and liabilities
The fair values of derivatives are obtained from discounted cash flow models as appropriate.
Related persons
Key management personnel
Our key management personnel, and persons connected with them, are considered to be
related parties. 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 ExCo are considered to be the key management personnel for
disclosure purposes.
Controlling shareholder
Following the completion of our capital raise in November 2023, Jaime Gilinski Bacal, via Spaldy
Investments Limited, a company of which he is the sole director and shareholder, became the
controlling shareholder of Metro Bank Holdings PLC (see note 7 to the Company financial
statements for further details). Given his control over the Group, Jaime Gilinski Bacal, Spaldy
Investments Limited and persons connected to them are also considered to be related parties
as at 31 December 2023.We have a relationship agreeement with our controlling shareholder
which be viewed on our website. More information on the independence of our controlling
shareholder can be found on page 122.
Key management compensation
Total compensation cost for key management personnel for the year by category of benefit was
as follows:
Short-term benefits
Post-employment benefits
Share-based payment costs
Termination benefits
Total compensation for key management personnel
2023
£’million
2022
£’million
5.4
0.1
0.9
0.9
7.3
6.2
0.1
1.8
0.3
8.4
Short-term employee benefits include salary, medical insurance, bonuses and cash allowances
paid to key management personnel.
The share-based payment cost represents the IFRS 2 ‘Share-based Payment’ charge for the
year which includes awards granted in prior years that have not yet vested.
Termination benefits includes the costs assocaited with the exit of key management personnel
agreed and fully provided for as at the year-end, even where this was paid after the balance
sheet date.
Banking transactions with key management personnel
We provide banking services to Directors and other key management personnel and persons
connected to them.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
217
35. Related parties Continued
36. Earnings per share
Deposit transactions during the year and the balances outstanding as at 31 December 2023 and
31 December 2022 were as follows:
Basic earnings per share is calculated by dividing the profit/(loss) attributable to our ordinary
equity holders by the weighted average number of ordinary shares in issue during the year.
Deposits held at 1 January
Deposits relating to persons and companies newly considered
related parties
Deposits relating to persons and companies no longer considered
related parties
Net amounts deposited/(withdrawn)
Deposits held as at 31 December
2023
£’million
1.5
2022
£’million
1.5
–
0.2
(0.5)
(0.3)
–
1.0
0.1
1.5
Diluted earnings per share has been calculated by dividing the profit/(loss) attributable to our
ordinary equity holders 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 we were loss making during the year
ended 31 December 2022 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 for 2022.
In the year ended 31 December 2023, 6.5 million share options were excluded from the weighted
average number of shares due to these being antidilutative.
Loan transactions during the year and the balances outstanding as at 31 December 2023 and
31 December 2022 were as follows:
Profit/(loss) attributable to ordinary equity holders (£’million)
2023
£’million
2022
£’million
Weighted average number of ordinary shares in issue (thousands)
Basic
Loans outstanding at 1 January
Loans issued during the year
Net repayments during the year
Loans outstanding as at 31 December
Interest received on loans (£’000)
2.1
–
–
2.1
35
3.2
0.2
(1.3)
2.1
60
Adjustment for share awards
Diluted
Earnings per share (pence)
Basic
Diluted
2023
29.5
–
2022
(72.7)
214,297
172,464
6,459
–
220,756
172,464
13.8
13.4
(42.2)
(42.2)
There were two (31 December 2022: two) loans outstanding at 31 December 2023 totalling
£2.1 million (31 December 2022: £2.1 million). Both are residential mortgages secured on
property; all loans were provided on our standard commercial terms.
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 loss per share.
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 as at 31 December 2023 and 31 December 2022 were
as follows:
Credit cards outstanding as at 31 December
2023
£’000
3
2022
£’000
7
As with all of our lending we recognise an ECL on loans and credit card balances outstanding
with key management personnel. As at 31 December 2023 the only ECL recognised on the
balances above was our standard modelled ECL with no individual impairments recognised
(31 December 2022: £nil). We have not written off any balances to key management personnel
in either 2022 or 2023.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
218
37. Non-cash items
The table below sets out the non-cash items included in profit/(loss) before tax. These have
been adjusted for in the cash flow statements on page 170.
Interest receivable
Interest paid
Depreciation and amortisation
Impairment and write-offs of property, plant, equipment
and intangible assets
Expected credit loss expense
Share option charge
Grant income recognised in the income statement
Amounts provided for (net of amounts released)
Haircut on Tier 2 debt
Gain on sale of assets
2023
£’million
(856)
444
78
5
33
3
(2)
16
(100)
3
2022
£’million
(564)
160
77
10
40
2
(2)
4
–
–
Total adjustments for non-cash items
(376)
(273)
38. Post balance sheet events
There have been no material post balance sheet events.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Company balance sheet
As at 31 December 2023
Cash and balances with the Bank of England
Financial assets held at fair value through profit and loss
Investment in subsidiaries
Prepayments and accrued income
Total assets
Debt securities
Other liabilities
Total liabilities
Called-up share capital
Share premium
Retained earnings
Share option reserve
Total equity
Total equity and liabilities
Strategic report
Governance
Risk report
Financial statements
Additional information
219
Years ended 31 December
Notes
2023
£’million
2022
£’million
2
3
4
5
5
2
585
682
7
1,276
670
33
703
–
144
406
23
573
1,276
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1. The Company loss for the year was £536.5 million (2022: £nil).
The accompanying notes form an integral part of these financial statements. They were approved by the Board of Directors on 16 April 2024 and signed on its behalf by:
Robert Sharpe
Chair
Daniel Frumkin
Chief Executive Officer
Metro Bank Holdings PLC Annual Report and Accounts 2023
Company statement of changes in equity
For the year ended 31 December 2023
Balance as at 1 January 2023
Loss and total comprehensive loss for the year
Net share option movements
Cancellation of Metro Bank PLC share capital and share premium
Issuance of Metro Bank Holdings PLC share capital
Bonus issuance
Capital reduction of Metro Bank Holdings PLC share capital
Transfer of share option reserve
Shares issued
Cost of shares issued
Balance as at 31 December 2023
Company incorporated on 29 September 2022
Issuance of shares
Balance as at 31 December 2022
Notes
The accompanying notes form an integral part of these financial statements.
220
Total
equity
£’million
–
(537)
1
–
965
–
–
–
150
(6)
573
–
–
–
Called-up
share
capital
£’million
–
–
–
–
–
965
(965)
–
–
–
–
–
–
–
5
Share
premium
£’million
Merger
Reserve
£’million
Retained
earnings
£’million
Share
option
reserve
£’million
–
–
–
–
–
–
–
–
150
(6)
144
–
–
–
5
–
–
–
–
965
(965)
–
–
–
–
–
–
(537)
–
–
–
–
965
(22)
–
–
–
–
1
–
–
–
–
22
–
–
406
23
–
–
–
–
–
–
Metro Bank Holdings PLC Annual Report and Accounts 2023
Company cash flow statement
For the year ended 31 December 2023
Strategic report
Governance
Risk report
Financial statements
Additional information
221
Reconciliation of loss before tax to net cash flows from operating activities:
Loss before tax
Adjustments for non-cash items
Interest receivable
Interest paid
Fair value movements
Impairment loss on investment in subsidiary
Interest received
Interest paid
Changes in other operating assets
Changes in other operating liabilities
Net cash inflows from operating activities
Cash flows from investing activities
Issuance of equity to subsidiary
Issuance of debt to subsidiaries
Net cash outflows from investing activities
Cash flows from financing activities
Share issuance
Cost of share issuance
Debt issuance
Cost of debt issuance
Net cash inflows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
The accompanying notes form an integral part of these financial statements.
Years ended 31 December
2023
£’million
2022
£’million
(537)
(24)
25
88
428
17
(16)
(7)
33
7
(144)
(175)
(319)
150
(6)
175
(5)
314
2
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the company
financial statements
222
1. Basis of preparation and significant accounting policies
2. Financial assets held at fair value through profit and loss
The financial assets held at fair value through profit and loss consist solely of intercompany
loans used for downstreaming regulatory debt issued by the Company to Metro Bank PLC.
In line with resolution requirements these internal agreements incorporate the Bank of England’s
Statement of Policy giving the Bank of England power to write down the par value of the loans
or convert the loans into equity. As such the intercompany loans fail the ‘solely payments of
principal and interest’ test under IFRS 9 and have a mandatory classification of fair value
through profit and loss.
The measurement of these assets is consistent with the measurement approach used to
determine the fair value of the debt securities as set out in note 34 to the Group’s consolidated
financial statements.
1.1 General information
The separate financial statements of the Company are presented as required by the Companies
Act 2006. The basis of preparation and principal accounting policies adopted are the same as
those set out in within the Group’s consolidated financial statements, aside from the accounting
policy in relation to share-based payments. For the Company, the cost of the awards are
recognised on a straight-line basis to investment in subsidiaries (with a corresponding increase
in the share-based payment reserve within equity) over the vesting period in which the
employees become unconditionally entitled to the awards.
Incorporation of Metro Bank Holdings PLC
The Company was incorporated on 29 September 2022 as MB Group TopCo PLC with £50,000
of redeemable preference shares and £2 of ordinary shares, which were issued to Robert Sharpe
(Chair) and Daniel Frumkin (Chief Executive Officer). On 12 December 2022, the Company
changed its name to Metro Bank Holdings PLC. The Company remained a dormant company
with no trading activities until the 19 May 2023, when it was inserted as the new ultimate holding
company and listed entity of the Group.
The Company’s main activity consists of holding the Group’s external regulatory debt and share
capital which is then downstreamed to Metro Bank PLC to meet the Bank of England’s resolution
requirements.
The Company adopted the predecessor value method with an investment in subsidiary of
Metro Bank PLC being the book value of the balance sheet in Metro Bank PLC at the date of
insertion. As part of this the share option reserve was transferred from Metro Bank PLC to the
Company at its carrying amount on the same day.
1.2 Critical accounting estimates
The preparation of financial statements in conformity with IFRS requires us to make both
material judgements as well as estimates which, although based on our best assessment, by
definition will seldom equal the actual results. Management believes that the underlying
assumptions applied at 31 December 2023 are appropriate and that these financial statements
therefore present our financial position and results fairly. The areas involving a higher degree of
complexity, judgement or where estimates have a significant risk of resulting in a material
adjustment to the carrying amounts within the next financial year are:
Area
Estimates
Judgements
Impairment of
investments in
subsidiaries
Key assumptions used
for VIU calculations
n/a
Further details
Note 3
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the company
financial statements
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
223
3. Investment in subsidiaries
The Company had the following subsidiaries at 31 December 2023:
Name
Metro Bank PLC
SME Invoice Finance Limited
SME Asset Finance Limited
RDM Factors Limited
Country of
incorporation
and place of
business
UK
UK
UK
UK
Nature of business
Retail banking
Invoice financing
Asset financing
Dormant
Proportion
of ordinary
shares
directly
held by the
Parent (%)
100%
–
–
–
Proportion
of ordinary
shares
directly
held by the
Group (%)
–
100%
100%
100%
All of the Company’s subsidiaries have their registered address at One Southampton Row, London, WC1B 5HA.
The proportion of the voting rights in the subsidiary undertakings held directly by the Company
do not differ from the proportion of ordinary shares held.
On implementation of the Holding company, the group adopted predecessor accounting as
explained on page 222. The investment in Metro Bank PLC was recorded at the carrying value
of the net assets of the bank on acquisition which was £965 million. In November 2023, the
Company issued 500.0 million ordinary shares for consideration of £150 million, with associated
costs of £6 million having been offset against the amount raised (see note 26 to the Group’s
financial statements for further details). In line with the resolution requirements, Metro Bank PLC
issued 500.0 million new shares for consideration of £144 million to the Company to allow the
proceeds of the capital raised to be downstreamed. An impairment of £428 million was
recognised at year end.
Accounting policy
The Company’s only directly held subsidiary is that of Metro Bank PLC, which was recognised
on 19 May 2023. The value of the subsidiary was recognised using the predecessor value
method as set out in note 1.
At the end of each reporting period, the investment in the subsidiary is tested for impairment
when there is an indication that the investment may be impaired. An impairment is
recognised when the carrying amount exceeds the recoverable amount for that investment.
The recoverable amount is the higher of the investment’s fair value less costs of disposal and
its VIU, in accordance with the requirements of IAS 36. The VIU is calculated by discounting
management’s cash flow projections for the investment. The cash flows represent the free
cash flows based on the subsidiary’s binding capital requirements.
Critical accounting estimate
Impairment of investment in subsidiary
The review identified that the carrying amount exceeded the VIU and that an impairment
in the investment in Metro Bank PLC, the Company’s only directly held subsidiary, of
£428 million was required, which reduced the carrying amount to £682 million.
Key assumptions used for VIU calculations
The rate used to discount the cash flows is based on the cost of capital related to the
investment, which is derived using a capital asset pricing model and market implied cost of
equity. A discount rate of 17.50% (31 December 2022: n/a) has been used in the VIU. In
determining the discount rate, management has used judgement and applied the Group’s
cost of equity, as this represents a proxy for the subsidiary’s cost of equity given it represents
substantially all of the Group.
The impairment assessment is most sensitive to the discount rate. A 2% increase or decrease in
the discount rate would increase and decrease the impairment amount by £119 million and
£160 million respectively. Reducing the discount rate to 13.2% eliminates the impairment entirely.
The profitability and growth rates applied are consistent with those used in the Group’s
impairment assessment as set out in note 15 to the Group’s consolidated financial statements.
Increasing the free cash flows used in the VIU calculation by 10% would reduce the
impairment by £68 million and decreasing the free cash flows used in the VIU calculation by
10% would increase the impairment by £68 million.
As the investment is eliminated upon consolidation within the Group’s financial statements, it
has no impact on the Group’s capital position or regulatory ratios.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the company
financial statements
Continued
224
3. Investment in subsidiaries Continued
6. Directors and employees
Transactions between the Company and Group subsidiaries
In addition to the intercompany loans used for downstreaming regulatory debt set out in note 2,
Metro Bank PLC provides the Company with a small amount of operational funding. The
amounts outstanding as at 31 December 2023, primarily relate to the costs of the capital raise
in November 2023 which were paid by Metro Bank PLC on the Company’s behalf.
As at 31 December 2023 Metro Bank PLC had £7 million of accrued interest payable to the
Company on the internal debt instruments used for downstreaming the regulatory debt. The
timing of interest payments on these internal instruments is aligned to the interest payment
dates on the external debt securities (see note 4).
Amounts owed by Metro Bank PLC
Amounts owed to Metro Bank PLC
2023
£’million
2022
£’million
7
24
–
–
The Company has no employees. Metro Bank PLC provides the Company with employee
services and bears the costs, associated with the Directors of the Company. These costs are not
recharged to the Company.
7. Controlling party
As at 31 December 2023 the controlling party of Metro Bank Holdings PLC was Jaime Gilinski
Bacal, through Spaldy Investments Limited a company registered in the British Virgin Islands
and of which he is the sole director and shareholder.
The registered office of Spaldy Investments Limited is at the offices of Aleman, Cordero,
Galindo & Lee Trust (BVI) Limited, 3rd Floor, Yamraj Building, Market Square, P.O. Box 3175,
Road Town, Tortola, British Virgin Islands.
The transactions above are eliminated upon consolidation within the Group’s financial statements.
4. Debt securities
Details of the Company’s debt securities in issue can be found in note 20 to the Group’s
consolidated financial statements.
Hedge accounting is not applicable to the debt securities in issue at the Company level.
5. Called-up share capital
As set out in note 1 the Company was incorporated on 29 September 2022 with £50,000 of
redeemable preference shares and £2 of ordinary shares. The £2 of ordinary shares have since
been redeemed with the £50,000 of preference shares in the process of being redeemed.
As at 31 December 2023 the Company had 672.7 million ordinary shares of 0.0001p authorised
and in issue. Further details on the Company’s called-up share capital can be found in note 26 to
the Group’s consolidated financial statements.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Strategic report
Governance
Risk report
Financial statements
Additional information
225
Additional information
In this section
226 Country-by-country report
227 Independent auditors’ report to the Directors of
Metro Bank Holdings PLC (on country-by-country
information)
229 Other disclosures
230 Alternative performance measures
235 Abbreviations
236 Shareholder information
Metro Bank Holdings PLC Annual Report and Accounts 2023
Country-by-country report
226
The reporting obligations set out in the Capital Requirements Directive IV (CRD IV) have
been implemented in the UK by the Capital Requirements (Country-by-Country Reporting)
Regulations. The purpose of the regulations is to provide clarity on the source of the Group’s
income and the locations of its operations.
Basis of preparation
Country
Metro Bank Holdings PLC and its subsidiaries only operate within the UK and are all UK
registered entities.
The Group is a credit institution for the purposes of CRD IV and is therefore within the
scope of Country-by-Country Reporting. Our activities are disclosed within note 1 to the
financial statements.
For the purposes of Country-by-Country Reporting, the appropriate disclosures required are
summarised below:
Number of employees (average full-time equivalent)
Turnover (£’million)
Profit before tax (£’million)
Tax expense (£’million)
Corporation tax paid (£’million)
No public subsidies were received during the year.
UK
4,286
648.9
30.5
(1.0)
0.8
Full-time equivalent employees
FTE employees are allocated to the country in which they are primarily based for the
performance of their employment duties. The figures disclosed represent the average number
of FTE employee, all of which were employed in the UK.
Turnover and profit before tax
Turnover and loss before tax are compiled from the Metro Bank Holdings PLC consolidated
financial statements for the year ended 31 December 2023, which are prepared in accordance
with IFRS. Turnover represents the sum of the Group’s net interest income, net fee and
commission income, net gains on sale of assets and other income.
Tax credit and corporation tax paid
Corporation tax paid represents the net cash taxes paid to the tax authority, HMRC, during
2023. Corporation tax paid is reported on a cash basis and will normally differ from the tax
expense recorded for accounting purposes due to:
• Timing differences in the accrual of the tax charge.
• Brought forward losses from previous years that were used to extinguish a portion
of its taxable profits.
• Other differences between when income and expenses are accounted for under IFRS and
when they become taxable.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Strategic report
Governance
Risk report
Financial statements
Additional information
227
Independent auditors’ report to the
directors of Metro Bank Holdings PLC
Report on the audit of the country-by-country information
Opinion
In our opinion, Metro Bank Holdings plc’s (the “Group”) country-by-country information for
the year ended 31 December 2023 has been properly prepared, in all material respects, in
accordance with the requirements of the Capital Requirements (Country-by-Country Reporting)
Regulations 2013.
We have audited the country-by-country information for the year ended 31 December 2023 in
the Country-by-Country Report.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs
(UK)”), including ISA (UK) 800 and ISA (UK) 805, and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the country-by-
country information section of our report. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are
relevant to our audit of the country-by-country information in the UK, which includes the FRC’s
Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
Emphasis of matter – Basis of preparation
In forming our opinion on the country-by-country information, which is not modified, we
draw attention to note 1 of the country-by-country information which describes the basis of
preparation. The country-by-country information is prepared for the directors for the purpose
of complying with the requirements of the Capital Requirements (Country-by-Country
Reporting) Regulations 2013. The country-by-country information has therefore been prepared
in accordance with a special purpose framework and, as a result, the country-by-country
information may not be suitable for another purpose.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s ability to continue to adopt the going
concern basis of accounting included:
• Understanding the Directors’ going concern assessment process, including the preparation
and approval of the budget. We obtained management’s Board approved forecast covering
the period of the going concern assessment to 30 June 2025. We evaluated the forecasting
method adopted by the Directors in assessing going concern;
• Evaluation of management’s financial and regulatory capital forecasts. We checked the
mathematical accuracy of the model and evaluated the key assumptions using our
understanding of the Group and external evidence where appropriate. We used our Prudential
Regulatory experts to review the Bank’s risk weighted assets and forecast capital requirement
assumptions. We also performed a comparison of the 2023 budget and the actual results to
assess the accuracy of the budgeting process;
• Evaluation of the appropriateness of management’s severe but plausible scenario using our
firm’s economics experts and our understanding of the Bank and the external environment.
We evaluated management’s assumptions by performing an independent stress test to
determine whether a reasonable alternative stressed scenario would result in a breach of
minimum regulatory requirements;
• Considering the mitigating actions that management identified, including the reduction of
costs and slowing down the origination of new loans and advances, and assessing whether
these were in the control of management and possible in the going concern period of
assessment;
• Reviewing management’s stress testing of liquidity and evaluation of the impact on liquidity of
past stress events. We substantiated the liquid resources held, and liquidity facilities available
to the group, for example, with the Bank of England. We also reconciled Metro Bank Holdings
PLC’s liquidity position to its regulatory liquidity reporting returns;
• Reviewing correspondence between the Bank and its regulators and we met with the PRA
during the audit and understood the PRA’s perspectives on the Bank’s risks and its capital and
liquidity position; and
• Assessing the adequacy of disclosures in the Going Concern statement in note 1 of the
Consolidated and Company Financial Statements and within the Assessment of going
concern section of the Viability statement on page 50 and found these appropriately reflect
the key areas of uncertainty identified.
Based on the work we have performed, we have not identified any material uncertainties relating
to events or conditions that, individually or collectively, may cast significant doubt on the
Group’s ability to continue as a going concern for a period of at least twelve months from the
date on which the country-by-country information is authorised for issue.
In auditing the country-by-country information, we have concluded that the directors’ use of
the going concern basis of accounting in the preparation of the country-by-country information
is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a
guarantee as to the Group’s ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Independent auditors’ report to the directors
of Metro Bank Holdings PLC
Continued
228
Responsibilities for the country-by-country information and the audit
Responsibilities of the directors for the country-by-country information
The directors are responsible for the preparation of the country-by-country information in
accordance with the requirements of the Capital Requirements (Country-by-Country Reporting)
Regulations 2013 as explained in the basis of preparation in note 1 of the Country-by-Country
Report and the accounting policies in the Consolidated and Company financial statements,
and for determining that the basis of preparation and accounting policies are acceptable in the
circumstances. The directors are also responsible for such internal control as they determine is
necessary to enable the preparation of country-by-country information that is free from material
misstatement, whether due to fraud or error.
In preparing the country-by-country information, the directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative but to do so.
• Enquiries of the Audit Committee, management, internal audit and the group’s legal counsel,
including consideration of known or suspected instances of non-compliance with laws and
regulation and fraud;
• Evaluation of the design and implementation of controls designed to prevent and detect
irregularities relevant to financial reporting;
• Reviewing key correspondence and holding discussions with regulators, such as the FCA and
the PRA, in relation to the group’s compliance with banking regulations;
• Incorporating unpredictability into the nature, timing and/or extent of our testing;
• Challenging assumptions and judgements made by management in respect of the
determination of allowance for expected credit losses on loans and advances to customers,
the carrying value of non-financial assets and the carrying value of the investment in
subsidiary; and
• Identifying and testing journal entries including those posted by infrequent or unexpected
users, related to significant one off or unusual transactions, as well as year-end provisions or
write downs and those posted late in the financial reporting process.
Auditors’ responsibilities for the audit of the country-by-country information
It is our responsibility to report on whether the country-by-country information has been
properly prepared in accordance with the relevant requirements of the Capital Requirements
(Country-by-Country Reporting) Regulations 2013.
Our objectives are to obtain reasonable assurance about whether the country-by-country
information as a whole is free from material misstatement, whether due to fraud or error, and
to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this country-by-
country information.
Irregularities, including fraud, are instances of non-compliance with laws and regulations.
We design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks
of non-compliance with laws and regulations related to breaches of the rules of the Financial
Conduct Authority (FCA) and Prudential Regulatory Authority (PRA) and we considered the
extent to which non-compliance might have a material effect on the country-by-country
information. We also considered those laws and regulations that have a direct impact on the
country-by-country information such as UK tax legislation and the Capital Requirements
(Country-by-Country Reporting) Regulations 2013. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the country-by-country information (including the
risk of override of controls), and determined that the principal risks were related to posting
manual journal entries to manipulate financial performance and management bias in accounting
estimates. Audit procedures performed included:
There are inherent limitations in the audit procedures described above. We are less likely to
become aware of instances of non-compliance with laws and regulations that are not closely
related to events and transactions reflected in the country-by-country information. Also, the risk
of not detecting a material misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate concealment by, for example, forgery
or intentional misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the country-by-country information
is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditors’ report.
Use of this report
This report, including the opinion, has been prepared for and only for the Group’s directors in
accordance with the Capital Requirements (Country-by-Country Reporting) Regulations 2013
and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it
may come, save where expressly agreed by our prior consent in writing.
The engagement partner responsible for this audit is Jonathan Holloway.
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
16 April 2024
Metro Bank Holdings PLC Annual Report and Accounts 2023
Other disclosures (unaudited)
Strategic report
Governance
Risk report
Financial statements
Additional information
229
Reconciliation of statutory balance sheet to risk-weighted asset
31 December 2023
31 December 2022
Cash and balances with the Bank of England
Loans and advances to customers
Investment securities held at FVOCI
Investment securities held at amortised cost
Financial assets held at fair value through profit and loss
Derivative financial assets
Property, plant and equipment
Intangible assets
Prepayments and accrued income
Deferred tax assets¹
Other assets
Total assets
Off-balance sheet assets
Credit risk (excluding counterparty credit risk)
Counterparty credit risk
Market risk
Operational risk
Total risk-weighted assets
Financial
statements
£’million
Average risk
density
%
3,891
12,297
476
4,403
–
36
723
193
118
3
108
22,248
1%
46%
2%
4%
–
–
100%
–
43%
267%
96%
30%
Risk-
weighted
assets
£’million
44
5,597
11
187
–
–
723
–
51
8
104
6,725
79
6,804
26
–
703
7,533
Financial
statements
£’million
Average risk
density
%
1,956
13,102
571
5,343
1
23
748
216
85
1
73
22,119
Risk-
weighted
assets
£’million
30
5,949
20
215
–
–
2%
45%
4%
4%
–
–
100%
748
–
47%
100%
89%
32%
–
40
1
65
7,073
169
7,242
9
–
739
7,990
1. In the consolidated balance sheet per the financial statements, deferred tax is shown as a net figure with the deferred tax liability, however, from a regulatory perspective the deferred tax asset and liability are treated separately.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Alternative performance
measures (unaudited)
230
In the reporting of financial information, we use certain measures that are not required under IFRS, the Generally Accepted Accounting Principles under which we report. These measures are
consistent with those used by management to assess underlying performance.
These alternative performance measures have been defined below:
Metric
Cost of deposits
KPI
Yes
Scorecard
measure
No
LTIP
No
Cost of risk
Yes
Yes
No
Coverage ratio
No
No
No
Definition
Interest expense on customer deposits divided by the average deposits
from customers for the year.
Interest on customer deposits (note 2)
Average deposits from customer
Cost of deposits
Expected credit loss expense divided by average gross loans.
Expected credit loss expense (note 30)
Average gross lending
Cost of risk
Expected credit losses as a percentage of gross loans.
Expected credit losses (note 12)
Gross loans and advances to customers (note 12)
Coverage ratio
Retail mortgages
Expected credit losses – retail mortgages (note 12)
Gross retail mortgage lending (note 12)
Coverage ratio
Consumer
Expected credit losses – consumer (note 12)
Gross consumer lending (note 12)
Coverage ratio
Commercial
Expected credit losses – commercial (note 12)
Gross commercial lending (note 12)
Coverage ratio
2023
£’million
147.8
15,237
0.97%
2023
£’million
33.2
12,778
0.26%
2023
£’million
199
12,496
1.59%
2023
£’million
19
7,817
0.24%
2023
£’million
108
1,297
8.33%
2023
£’million
72
3,382
2.13%
2022
£’million
32.9
16,351
0.20%
2022
£’million
39.9
12,611
0.32%
2022
£’million
187
13,289
1.41%
2022
£’million
20
7,649
0.26%
2022
£’million
75
1,480
5.07%
2022
£’million
92
4,160
2.21%
Metro Bank Holdings PLC Annual Report and Accounts 2023
Alternative performance measures (unaudited)
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
231
Metric
Loan-to-deposit ratio
KPI
Yes
Scorecard
measure
No
LTIP
No
Definition
Net loans and advances to customers expressed as a percentage of total deposits as at the year end.
It is a commonly used ratio within the banking industry to assess liquidity.
Net interest margin
No
No
No
Non-performing loan ratio
No
No
No
Net loans and advances to customers (note 12)
Deposits from customer (note 18)
Loan-to-deposit ratio
Net interest income as a percentage of average interest-earning assets.
Net interest income (note 2)
Average interest-earning assets
2023
£’million
12,297
15,623
79%
2023
£’million
411.9
20,786
2022
£’million
13,102
16,014
82%
2022
£’million
404.1
21,029
Net interest margin
Gross balance of loans in stage 3 (non-performing loans) as a percentage of gross loans as at year end.
1.98%
1.92%
Total book
Stage 3 loans (note 30)
Loans and advances to customers (note 12)
Non-performing loan ratio
Retail mortgages
Stage 3 loans – retail mortgages (note 30)
Gross retail mortgage lending (note 12)
Non-performing loan ratio – retail mortgages
Consumer
Stage 3 loans – consumer (note 30)
Gross consumer lending (note 12)
Non-performing loan ratio – consumer
Commercial
Stage 3 loans – commercial (note 30)
Gross commercial lending (note 12)
Non–performing loan ratio - commercial
2023
£’million
389
12,496
3.11%
2023
£’million
146
7,817
1.87%
2023
£’million
77
1,297
5.94%
2023
£’million
166
3,382
4.91%
2022
£’million
352
13,289
2.65%
2022
£’million
111
7,649
1.45%
2022
£’million
50
1,480
3.38%
2022
£’million
191
4,160
4.59%
Metro Bank Holdings PLC Annual Report and Accounts 2023
Alternative performance measures (unaudited)
Continued
Metric
Return on tangible equity
KPI
Yes
Scorecard
measure
No
LTIP
Yes
Statutory cost:income ratio
Yes
Yes
No
Total shareholder return
Yes
No
Yes
Definition
Statutory profit after tax as a percentage of average tangible equity
(average total equity less intangible assets).
Statutory profit after tax (Consolidated statement of comprehensive income)
Average tangible equity
Return on tangible equity
Statutory total operating expenses as a percentage of statutory total income.
Total operating expenses (Consolidated statement of comprehensive income)
Total income (Consolidated statement of comprehensive income)
Statutory cost:income ratio
Total capital gains and dividends returned to investors over a three-year rolling period.
Share price at the start of the three-year period
Share price at the end of the three-year period
Total shareholder return¹
1. No dividends were paid in either period
Underlying cost:income ratio
No
No
No
Underlying total operating expenses as a percentage of underlying total income.
Total underlying operating expenses (page 234)
Total underlying income (page 234)
232
2023
£’million
2022
£’million
29.5
795
4%
2023
£’million
585.2
648.9
90%
2023
126p
37p
(71%)
(72.7)
749
(10%)
2022
£’million
554.3
523.5
106%
2022
205p
121p
(41%)
2023
£’million
530.2
546.5
2022
£’million
532.8
522.1
Underlying loss
Yes
Yes
No
Underlying cost:income ratio
Underlying loss represents an adjusted measure, excluding the effect of certain items that are considered to
distort year-on-year comparisons, in order to provide readers with a better and more relevant understanding
of the underlying trends in the business.
102%
97%
We also disclose a number of capital and liquidity metrics which are required by the PRA and FCA. The basis of calculation of those metrics is defined within the relevant legislation.
Details of the calculation of underlying loss can be found on pages 233 to 234.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Alternative performance measures (unaudited)
Continued
Strategic report
Governance
Risk report
Financial statements
Additional information
233
Non-underlying item
Description
Reason for exclusion
Impairment and
write-offs of property,
plant, equipment
and intangible assets
Net C&I costs
Remediation costs
Transformation costs
Holding company
insertion costs
Capital raise and
refinancing
(2023 only)
The costs associated with non-current assets that are either no longer
being used by or are no longer generating future economic benefit for the
business.
The impairments and write-offs relating to property, plant, equipment and
intangible assets are removed as they distort comparison between years.
This is on the basis that the write-offs and impairments relate to specific
events and triggers which are not consistent between years.
These costs and income relate to the delivering the commitments
associated with the Capability and Innovation Fund (awarded by BCR).
Further details on this grant can be found in note 23.
The commitments under the Capability and Innovation Fund continue through
to 2025. The costs associated with fulfilling the commitments and associated
income are felt to distort year-on-year comparison. Given the offsetting nature
of the income and expenditure, there is no net impact on our profitability from
this adjustment.
Remediation costs consists of money spent in relation to the RWA
adjustment including the associated investigations by the PRA and FCA
(2022 only) as well as work undertaken in relation to financial crime.
The remediation costs are felt to be time limited and will disappear once the
investigations have concluded, as such these are removed to allow greater
comparability between periods.
Transformation costs primarily consist of the costs associated with
redundancy programmes during the year as part of our approach to right-
sizing teams as well as the costs of work undertaken to establish our cost
reduction programme.
The transformation costs are seen as a nonrecurring cost stream aimed at
addressing the challenges the business faces. These are therefore removed in
order to prevent year-on-year distortion.
Costs associated with the establishment and insertion of a
holding company (Metro Bank Holdings PLC) above the operating
company (Metro Bank PLC) to meet regulatory requirements.
During 2022 we started work on implementing our new holding company,
which we sucessfully completed in May 2023. As such no further associated
costs will be recognised in 2024.
In November 2023 shareholders approved a £925 million capital package
which consisted of £150 million of new equity, £175 million of new MREL-
eligible debt and £600 million of debt refinancing. Costs associated
with the refinancing were expensed to the income statement, including
the impact of discontinuing the previous hedge relationships. Alongside
this a £100 million gain was recognised on the haircut agreed by Tier 2
bondholders.
The nature of the capital package meant it was both significant and one-off and
as such will not see any additional costs recur in relation to this.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Alternative performance measures (unaudited)
Continued
234
A reconciliation from statutory profit/(loss) before tax to underlying loss before tax is set out below.
Year ended 31 December 2023
Net interest income
Net fee and commission income
Net gains on sale of assets
Other income
Total income
General operating expenses
Depreciation and amortisation
Impairment and write-offs of property, plant, equipment and intangible assets
Total operating expenses
Expected credit loss expense
Profit/(loss) before tax
Year ended 31 December 2022
Net interest income
Net fee and commission income
Net gains on sale of assets
Other income
Total income
General operating expenses
Depreciation and amortisation
Impairment and write-offs of property, plant, equipment and intangible assets
Total operating expenses
Expected credit loss expense
Loss before tax
Impairment
and write-off of
property, plant,
equipment
and intangible
assets
£’million
Net C&I
costs
£’million
Transformation
costs
£’million
Remediation
costs
£’million
Holding
company
insertion costs
£’million
Capital
raise and
refinancing
£’million
Underlying
basis
£’million
–
–
–
–
–
–
–
4.6
4.6
–
4.6
–
–
–
(2.4)
(2.4)
2.4
–
–
2.4
–
–
–
–
–
–
–
20.2
–
20.2
–
20.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.8
–
–
1.8
–
1.8
–
–
–
(100.0)
(100.0)
26.0
–
–
411.9
90.4
2.7
41.5
546.5
(452.5)
(77.7)
–
26.0
(530.2)
–
(74.0)
(33.2)
(16.9)
Impairment
and write-off of
property, plant,
equipment
and intangible
assets
£’million
–
–
–
–
–
–
–
9.7
9.7
–
9.7
Net C&I
costs
£’million
Transformation
costs
£’million
Remediation
costs
£’million
Holding
company
insertion costs
£’million
Capital
raise and
refinancing
£’million
0.1
–
–
(1.5)
(1.4)
1.4
–
–
1.4
–
–
–
–
–
–
–
3.3
–
3.3
–
3.3
–
–
–
–
–
5.3
–
–
5.3
–
5.3
–
–
–
–
–
1.8
–
–
1.8
–
1.8
–
–
–
–
–
–
–
–
–
–
–
Underlying
basis
£’million
404.2
81.8
–
36.1
522.1
(455.8)
(77.0)
–
(532.8)
(39.9)
(50.6)
Statutory
basis
£’million
411.9
90.4
2.7
143.9
648.9
(502.9)
(77.7)
(4.6)
(585.2)
(33.2)
30.5
Statutory
basis
£’million
404.1
81.8
–
37.6
523.5
(467.6)
(77.0)
(9.7)
(554.3)
(39.9)
(70.7)
Metro Bank Holdings PLC Annual Report and Accounts 2023
Abbreviations
Strategic report
Governance
Risk report
Financial statements
Additional information
235
AGM
Annual General Meeting
ALCO Asset and Liability Committee
ATM
Automated teller machine
BAME
Black, Asian and Minority Ethnic
BBLS
Bounce Back Loan Scheme
BCR
BEIS
bps
C&I
CEO
CET1
CFO
CMA
CRD
CRO
D&I
Banking Competition Remedies
Department of Business, Energy and Industrial Strategy
Basis points
Capability and Innovation Fund
Chief Executive Officer
Common Equity Tier 1 Capital
Chief Financial Officer
Competition and Markets Authority
Capital Requirements Directive
Chief Risk Officer
Diversity and inclusion
DNED
Designated Non-Executive Director for Colleague Engagement
DTR
DTV
Disclosure Guidance and Transparency Rules
Debt-to-value
DVRP
Deferred Variable Reward Plan
EAD
ECL
EPC
ERC
ESG
Exposure at default
Expected credit losses
Energy Performance Certificate
Executive Risk Committee
Environmental, social, and governance
ExCo
Executive Committee
FCA
FRC
Financial Conduct Authority
Financial Reporting Council
FSQS
Financial Services Qualification System
FTE
Full time equivalent
FVOCI
Fair value through other comprehensive income
GDP
GHG
Gross domestic product
Greenhouse gases
HMRC His Majesty’s Revenue and Customs
HPI
IAS
House price index
International Accounting Standards Board
ICAAP Internal Capital Adequacy Assessment Process
IFRS
International Financial Reporting Standards
ILAAP
Internal Liquidity Adequacy Assessment Process
IRB
KPI
Internal ratings-based
Key performance indicator
LGBTQ+ Lesbian, gay, bisexual, transgender, queer plus
LGD
Loss given default
LIBOR London Inter-Bank Offered Rate
LTI
LTIP
LTV
MPs
Loan-to-income
Long Term Incentive Plan
Loan-to-value
Members of Parliament
MREL Minimum requirement for own funds and eligible liabilities
MSc
NED
NICs
NPL
Master of Science
Non-Executive Director
National insurance contributions
Non-performing loan
OFAC Office of Foreign Assets Control
PAYE
PCAF
PD
PMA
PMO
POCI
PRA
PwC
Pay as you earn
Partnership for Carbon Accounting Financials
Probability of default
Post model adjustments
Post model overlays
Purchased or originated credit impaired
Prudential Regulation Authority
PricewaterhouseCoopers LLP
REGO Renewable Energy Guarantee of Origin
RLS
ROC
Recovery Loan Scheme
Risk Oversight Committee
RWAs
Risk-weighted assets
SBTi
SICR
SME
Science-Based Targets Initiative
Significant increase in credit risk
Small or medium-sized enterprise
SONIA Sterling Overnight Index Average
TCFD
Task Force on Climate-related Financial Disclosures
TFSME Term Funding Scheme with additional incentives for SMEs
UK
VAT
VIU
United Kingdom
Value added tax
Value in use
Metro Bank Holdings PLC Annual Report and Accounts 2023
Shareholder information
236
Registrars
We have appointed Equiniti Limited to maintain our register of members. Shareholders should
contact Equiniti using the details below in relation to all general enquiries concerning their
shareholding:
Annual General Meeting
Our 2024 AGM will be held on 21 May 2024. Full details for the arrangements for the AGM and
details of the resolutions to be proposed, together with explanatory notes, will be set out in the
Notice of AGM to be published on our website.
Equiniti Limited1,2
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone: 0371 384 2311
International callers: +44 121 415 7095
Shareholder profile
Shareholder profile by size of holding as at 31 December 2023
Range
0-100
101-500
501-5,000
Total
number of
holdings
203
122
196
153
56
59
789
Percentage
of holders
25.73%
15.46%
24.84%
19.39%
Total number
of shares held
at 31 December
2023
8,067
32,525
344,346
4,331,319
7.10%
12,820,897
7.48% 655,139,393
Percentage
of total
0.00%
0.01%
0.05%
0.64%
1.91%
97.39%
100.00% 672,676,547
100.00%
1. Equiniti Limited and Equiniti Financial Services Limited are part of the Equiniti group of companies. Company
share registration, employee scheme and pension administration services are provided through Equiniti Limited,
which is registered in England and Wales with No. 6226088. Investment and general insurance services are
provided through Equiniti Financial Services Limited, which is registered in England and Wales with No. 6208699
and is authorised and regulated by the UK Financial Conduct Authority.
2. Lines are open from 8.30 to 5.30pm (UK time) Monday to Friday, excluding public holidays in England and Wales.
5,001-100,000
100,001-500,000
500,000+
Total
Registered and other offices
Our registered office and head office is:
One Southampton Row
London
WC1B 5HA
Telephone: 0345 08 08 500/0345 08 08 508
Website: metrobankonline.co.uk
Unsolicited mail
We are required by law to make our share register available on request to unconnected
organisations. As a consequence, shareholders may receive unsolicited mail, including mail
from unauthorised investment firms. If you wish to limit the amount of unsolicited mail received,
please contact the Mailing Preference Service, an independent organisation whose services are
free for consumers.
Further details can be obtained from:
Mailing Preference Service
MPS Freepost LON 20771
London
W1E 0ZT
Website: mpsonline.org.uk
Shareholder profile by category as at 31 December 2023
Category
Number of
holders
Percentage
of holders
within type
Shares held at
31 December
2023
Private shareholders
501
63.50%
1,083,970.00
Banks
Nominees and other
institutional investors
Total
2
0.25%
66,183
286
789
36.25%
100%
671,526,394
672,676,547
Percentage
of issued
share capital
0.16%
0.01%
99.83%
100%
Forward-looking statements
This Annual Report and Accounts contains statements that are, or may be deemed to be,
forward-looking statements. Forward-looking statements typically use terms such as ‘believes’,
‘projects’, ‘anticipates’, ‘expects’, ‘intends’, ‘plans’, ‘may’, ‘will’, ‘would’, ‘could’ or ‘should’ or similar
terminology. Any forward-looking statements in this Annual Report and Accounts are based
on our current expectations and, by their nature, forward-looking statements are subject to
a number of risks and uncertainties, many of which are beyond our control, that could cause
our actual results and performance to differ materially from any expected future results or
performance expressed or implied by any forward-looking statements. As a result, you are
cautioned not to place undue reliance on such forward-looking statements. Past performance
should not be taken as an indication or guarantee of future results, and no representation
or warranty, expressed or implied, is made regarding future performance. No assurances
can be given that the forward-looking statements in this Annual Report and Accounts will
be realised. We undertake no obligation to release the results of any revisions to any forward-
looking statements in this Annual Report and Accounts that may occur due to any change
in its expectations or to reflect events or circumstances after the date of this announcement
and we disclaim any such obligation.
Metro Bank Holdings PLC Annual Report and Accounts 2023
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Metro Bank Holdings PLC Annual Report and Accounts 2023
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