Metro Bank expects a wave of coronavirus defaults to hit its loan book
Chairman Sir Michael Snyder warns of “significantly higher” bad loans at the bank.
As a result of coronavirus Metro Bank told investors at its AGM that it remains too early to predict the full impact of the virus on its business, but that lending would be particularly impacted.
“We are seeing short term economic disruption which will naturally result in significantly higher credit risk impairments than in recent years, with the actual quantum depending largely on the magnitude and length of the economic slowdown,” Snyder told investors.
In addition, the impact of lockdown and dwindling international travel will hit the bank’s revenues with “behavioural changes, such as a reduction in transaction volumes” expected to result in lower than expected fee income.
It wasn’t all doom and gloom however, with the chairman pointing out that Metro’s “relatively low exposure to unsecured lending and a conservative debt to value profile” put it in a strong position.
Snyder also reiterated Metro Bank’s intention to take part in the government’s Bounce Back Loan Scheme (BBLS) along with its continued support of the Coronavirus Business Interruption Loan Scheme (CBILS).
Metro Bank’s chief financial officer David Arden said the bank would consider asset sales to bolster its balance sheet if necessary, as what happened last year when Metro was forced into an emergency capital raise and asset disposals.
Earlier this year, before coronavirus, Metro Bank also handed back £50m of its £120m BCR grant to bolster business banking in the north of England—cash which will shortly be redeployed to rival business banks.