Metro is accelerating its move into the specialist mortgage lending market as a result of the squeeze on its income and falling rate margins due to cuts in the Bank of England Base Rate.
The lender completed £264m in new lending in the six months from January to June, but noted that its retail mortgage book shrank by £240m to £10.2bn compared to the end of 2019.
Metro said this reflected customer attrition and lower activity in the market, but added that applications began recovering in June and this had continued into July.
However, the lender has predicted a £29m loss on its retail mortgage book as a result of the coronavirus, this is in addition to its underlying £3m expected loss.
Overall, it is expecting the Covid-19 pandemic to cost it £97m – with £61m of this through its commercial lending book.
In publishing its first half results, Metro also noted that remediation following the failure to correctly assess its mortgage book and subsequent regulatory action was costing it £17.8m.
Metro issued more than 9,000 mortgage payment deferrals during the lockdown period.
At 30 June it had 6,419 retail mortgage payment deferrals active, totalling £1.8bn in loans which represented 16 per cent of the portfolio, but added that active deferrals have since reduced by around 45 per cent.
Accelerating move to higher yields
Chief executive officer Daniel Frumkin highlighted that the first half of 2020 had been an incredibly tough six months within a difficult operating environment.
“I am therefore pleased with how resilient the bank has been, particularly in supporting our customers and communities,” he said.
“We continue to work on delivering our turnaround strategy and addressing the legacies of the past.
“It is now more important than ever that we ensure the success of our transformation, as we reshape the bank to be more efficient and adaptable in order to face the future.”
Frumkin noted that Covid-19 remained an unprecedented challenge and the pace of recovery in expected credit losses would largely be driven by the wider macroeconomic recovery.
“An even lower interest rate environment has emboldened our focus on reducing our cost of deposits through a continued focus on customer service,” he continued.
“Additionally, we are accelerating our move to higher yielding assets, through our acquisition of the RateSetter platform and expansion into specialist mortgages.”