Unfortunately Metro’s half-year results were a blizzard of bad news, with seemingly all of the numbers going in the wrong direction. There was the £112m provision for bad loans, pushing it to what one analyst called an “eye-watering” £241m pre-tax loss. Its net interest margin, a key measure of profitability, sank to 1.15pc, and its capital buffer ratio shrank too. Customer deposits have risen by 8pc since December, but that is happening across the board, with people choosing to stash money away rather than spend.
Metro isn’t giving any guidance about when it will make a profit. Analysts at Goodbody note the bank is “particularly susceptible to the performance of the UK economy”; it’s not a great time to be hitching your cart to that horse. Despite the rising risk of customers defaulting, Frumkin is bullish on the move into unsecured lending, insisting the bank will know how to spot the good prospects from the bad.
Although he is slowing the pace of branch openings, now the bank has hit 77, Frumkin sees them as a key strength. Metro’s branches are spacious, making it slightly easier to manage social distancing; from these, it can sell more products to its “fans”, with Frumkin hinting at partnerships to allow a move into insurance and credit cards. But this all depends on footfall holding up – currently Metro puts it at around 70pc to 80pc of pre-Covid levels. It also relies on the UK economy not getting any worse.
Otherwise Frumkin’s plan to chase organic growth may founder, and he will need bolder ideas to achieve the scale that Metro needs. The bank may have to become a buyer again, or get itself match fit as a takeover target – Colombian billionaire Jaime Gilinski Bacal, its largest shareholder, has been tipped as one interested party. Then perhaps it can truly move on up.
William Hill bets on a shift to online
The sweeping closure of retail outlets at the start of lockdown was a boon to online operators, so the logic goes. Bookies should be partly insulated by their huge online arms – except, with sporting events cancelled, there were no bets to place unless you fancied a flutter on Belarussian soccer.
Thus William Hill reported an 8pc decline in online revenue in the UK in the first half. Coupled with the 13-week closure of shops, this lopped nearly one third off its turnover. The return of horse racing and football could not come quickly enough. Now boss Ulrik Bengtsson has “pruned” a further 119 shops, not so long after Hill closed down 700. He says the 1,414 sites it has left will be future-proofed against footfall that will struggle to return to pre-Covid levels.