Its gross lending figure was flat on the same period a year ago.
Metro Bank said house price falls over the first six months of the year caused the average debt to value of its mortgage portfolio to rise from 58% in December to 61% by June.
Metro Bank said the £2.5bn sale of its mortgage portfolio to NatWest would give it additional lending capacity and allow it to shift to higher yielding commercial, corporate, SME and specialist mortgage lending.
The lender has previously expressed its intention to move further into the specialist mortgage market and in its interim results, said its operating model was more tailored to complex underwriting.
It said this would allow the bank to “meet the needs of more customers and scale underserved markets whilst offering improved risk-adjusted returns”.
Excluding support initiatives such as the Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS), its commercial loan lending totalled £2.43bn, down from £2.44bn in December. It said this reflected its continued focus on commercial customers while shrinking its commercial real estate from £509m to £440m and portfolio buy-to-let from £465m to £365m.
Metro Bank said it would also use the proceeds of the portfolio sale to repay its Term Funding Scheme (TFSME) loan, “eliminating any industry-wide deposit funding headwinds going forward”.
For the first half of the year, the bank posted a statutory loss before tax of £34m, down from a profit of £15m in H1 2023.
It posted an underlying loss before tax of £26.8m, an improvement on the £33m loss it reported at the end of last year. Metro Bank said this was driven by a lower net interest margin of 1.64%, compared to 1.85% as of December.
However, the bank said it expected to return to profitability by the final quarter of this year through cost discipline, asset rotation and the mortgage portfolio sale.
Metro Bank aims for smaller mortgage portfolio
Going forward, Metro Bank expects its total lending to grow by between 8% and 11%.
By 2029, the bank said mortgages would reduce to just 30% of its total lending balances while commercial lending would increase to account for 70%.
The lender said it had a “solid credit approved” commercial pipeline in H1, which was equivalent to 116% of its total new lending in 2023.
It would also run off around £5bn of back book mortgages.
Daniel Frumkin, chief executive at Metro Bank, said: “Metro Bank has made significant underlying progress during the first half of 2024. We have built real momentum in credit approved pipelines across commercial, corporate and SME lending, whilst expanding spreads in retail mortgages and repricing deposits. At the same time, our continued cost discipline is creating a simpler, more agile bank that is fit for the future.”
“Our upgraded guidance today reflects progress against our strategy, including the recent residential mortgage portfolio sale. We expect these actions to positively impact on our balance sheet in the fourth quarter of the current financial year, delivering a return to profitability.”
He added: “We look to the future with renewed confidence, as we continue to strengthen and deepen our people-people banking and relationship-led services in areas our customers value the most.”
