Metro Bank (LON:MTRO) reported what management described as its “strongest performance” to date in fiscal year 2025, highlighting record profitability, revenue, net interest income and net interest margin, alongside cost reductions and strengthening capital ratios.
Record underlying profit and revenue, with NIM expansion despite rate cuts
Chief executive Daniel Frumkin said the bank generated £98 million of underlying profit in 2025, calling it the highest in Metro Bank’s history. He also pointed to record revenue, net interest income (NII), and net interest margin (NIM).
Management attributed the performance primarily to:
- 22% growth in NII driven by lower deposit costs and higher lending yields
- 16% revenue growth, which Frumkin said was the highest among U.K. banks that have reported so far
- 7% cost reduction, ahead of the bank’s guidance
Frumkin said the bank’s return on tangible equity (RoTE) was 6.4% for 2025, in line with guidance, and that widening “jaws” from rising revenue and lower costs helped reduce the cost-income ratio.
Deposit costs and current account growth framed as a funding advantage
A key theme of the call was Metro Bank’s funding position. Frumkin said the bank had the “lowest funding costs of any high street bank,” with an exit cost of deposits of 94 basis points. Page said deposit costs have fallen by more than 100 basis points over the past two years, driven by a mix shift away from expensive fixed-term deposits and growth in current accounts.
Page said Metro reduced the share of expensive fixed-term deposits from 15% to 7% of the deposit mix as excess liquidity ran off. He also said the bank opened more than 100,000 new current accounts in 2025 (Frumkin later cited 110,000), and that current account non-interest-bearing balances now account for 44% of total deposits, which he said is more than twice the average of market peers.
Asked about deposit pricing and the ability to sustain low deposit costs if deposit growth accelerates, Frumkin argued Metro’s advantage comes from “transactional banking” and service—particularly in current accounts. He said current accounts grew 3% in the second half of 2025 and that management is “pretty confident” in the bank’s ability to keep growing its current account franchise while continuing to invest in digital offerings where the bank is “a bit behind the competitors.”
Loan growth, asset rotation, and credit discipline
Management emphasized momentum in corporate and commercial lending. Frumkin said Metro completed £2 billion of new commercial and corporate loans in 2025—“almost triple” the level of two years ago—and entered 2026 with an £800 million pipeline. Page said commercial and SME origination capability has “more than trebled” over the last two years, and he described the lending as “high margin,” at over 350 basis points above base rate.
Page said the balance sheet size was broadly stable year-on-year (about £9.0 billion versus £9.2 billion), but Metro has shifted its composition. He said the bank has run off nearly £2.1 billion of non-core segments and recycled that into commercial/SME lending and specialist mortgages. According to Page, core business lines were up 56% year-over-year.
On asset quality, Page said non-performing ratios were low for both retail mortgages and commercial lending and presented collateral metrics he described as prudent. He said over 87% of loans are collateral-backed by property or government guarantees, and for the property-backed portion (which he said is 83% of loans), the average loan-to-value is 62%.
Frumkin provided additional detail on commercial lending sourcing and selectivity:
- 88% of corporate lending was originated directly via relationship managers (not broker-led)
- Two-thirds of lending occurs outside Greater London
- 69% of new commercial lending went to customers the bank has known for more than five years
- Of £4.5 billion of corporate credit opportunities reviewed, Metro completed £1 billion and “turned down £3.5 for every £1” completed
Frumkin said the bank is “very good” in certain sectors including hotels, care homes, and medical practices (including dental and physician groups), while noting it does not currently do much manufacturing or transportation-related lending.
Capital, liquidity, and a path to higher RoTE through 2028
Metro highlighted significant liquidity and capital headroom. Frumkin said the loan-to-deposit ratio is 66% and the liquidity coverage ratio is over 300%, which he said means the bank does not need to issue new MREL and has “optionality” around existing MREL with a call date in April 2028. Page said the bank’s total capital ratio is 18.4%.
Frumkin and Page both emphasized what they described as “mechanical” tailwinds to returns from treasury portfolio roll-off and MREL dynamics. Frumkin said treasury portfolio roll-off creates a 3% RoTE uplift in 2026 and a further 1.4% in 2027, while calling MREL in April 2028 creates a 4% uplift in RoTE “in and of itself.”
Based on those factors and the existing strategy, Frumkin said Metro expects to more than double RoTE within the next seven months, guiding to 13% RoTE by Q4 2026, rising to 15% in 2027 and greater than 18% in 2028.
On CET1 assumptions behind the longer-term RoTE guidance, Frumkin said the bank is not yet providing guidance that far out because it “starts to get into a capital return story.” He said the bank expects to discuss a capital return strategy “at the end of this year,” which would then influence where CET1 settles.
Updated guidance and interest-rate sensitivity
Management said it widened NIM guidance but reduced the lower end of the range by roughly 20–25 basis points due to interest-rate uncertainty. Frumkin said that if revenue is pressured by lower margins, the bank intends to use cost actions to hold the cost-income ratio in line with prior guidance. Page said Metro is now guiding for 2026 costs to be broadly flat versus 2025, citing discipline across people, non-people and “other” costs, including depreciation, amortization, and fraud.
Metro also provided interest-rate sensitivity disclosure. Page said the bank’s planning assumption is a further 50 basis point reduction in base rate to 3.25% by summer 2026. The sensitivity example included a 50 basis point parallel shock that would imply a £23 million impact (and £41 million annualized for 2027), noting the illustration did not include management actions and assumed the shock applies to future lending and maturities as well.
In response to analyst questions on structural hedging, Page said Metro has “up to £2 billion of hedges in place,” adding that as the bank pivots further toward floating-rate corporate and commercial assets, it expects to add hedging positions relative to its growing current account base.
On the possibility of buying back MREL debt ahead of the 2028 call date, Frumkin said the bank would do so “tomorrow” if the economics made sense, but current trading levels are at a premium that prevents the bank from making the math work. For now, he said planning assumes the bank will call the instrument in April 2028.
About Metro Bank (LON:MTRO)
Metro Bank Holdings PLC operates as the bank holding company for Metro Bank PLC that provides various banking products and services in the United Kingdom. It offers personal banking products and services, including current, cash, and foreign currency accounts; savings; residential and buy-to-let mortgages; overdrafts; credit cards; pet insurance; and safe deposit box services. The company also provides business banking products and services comprising business bank, commercial and community current, foreign currency, and insolvency practitioner accounts; deposit accounts, such as business and community instant access deposit, business notice, client premium and flexible client term deposit, and business and community fixed term deposit accounts; insurance products; and business and commercial loans and overdrafts, asset and invoice financing, bounce back loans, business credit cards, and recovery loan schemes services.
