Metro Bank (LON:MTRO) reported a record underlying profit of £61 million for the first half of 2026, a 34% increase from a year earlier, as higher-margin lending, treasury asset repricing and cost discipline supported earnings growth.
The bank said its return on average equity rose 270 basis points year over year to 7.5%, while its exit net interest margin (NIM) increased 30 basis points to 325 basis points, the highest level in its history. Its cost-to-income ratio declined to 77% from 82% a year earlier.
Commercial lending pipeline expands
Metro Bank said it originated £1 billion of commercial and corporate lending during the first half and had a credit-approved pipeline of £1 billion at the period end, its largest on record. Management expects to complete roughly £1.2 billion to £1.3 billion of new commercial and corporate lending in the second half.
The bank said it received £6 billion of deal flow during the first half, with 95% of corporate deal flow arriving directly rather than through brokers. It also said 15% of U.K. SME deal flow came to the bank over the past year.
Commercial lending accounted for 44% of the total loan book, up from 35% a year earlier. The total loan book increased 4% to £9.2 billion, while core business lines expanded 43%, or £1.9 billion, as run-off portfolios declined 34%.
Chief Financial Officer Marc Page said the shift in the loan portfolio is intended to increase risk-adjusted returns. Commercial lending generates margins of 330 to 350 basis points over base rate, while specialist mortgages yield more than 200 basis points relative to swaps, compared with 40 to 70 basis points for prime mortgages, he said.
Metro Bank said its cost of risk stood at 22 basis points, below its through-the-cycle guidance range of 40 to 60 basis points. Management added that 82% of lending originated outside Greater London, supported by its regional hub strategy.
Treasury repricing and funding mix support margins
Page said £833 million of treasury assets are scheduled to mature in the second half of 2026. Those assets currently carry an 85-basis-point pay rate and are now expected to roll onto a rate closer to 3.75%, rather than the 3.25% rate anticipated at the end of 2025.
The maturities are expected to provide a £24 million revenue uplift, equivalent to 15 basis points of NIM or 2.7 percentage points of return on tangible equity, according to the bank.
Metro Bank also highlighted its deposit base as a funding advantage. Current accounts represented 43% of balances, compared with 18% among market peers, while its deposit cost was 98 basis points, which the bank described as the lowest on the High Street. High-yielding deposits represented less than 5% of its deposit mix, compared with 34% for the market.
Commercial and SME customers accounted for 53% of deposits, up from 48% a year earlier. The bank reported a liquidity coverage ratio of 270% and a loan-to-deposit ratio of 69%.
In response to analyst questions about lower deposits, management said declines included some fixed-term and relationship-priced deposits that were relatively expensive. The bank expects liquidity released from its run-off residential mortgage book to fund commercial and corporate lending growth for roughly the next 18 months, with the loan-to-deposit ratio not expected to rise materially above current levels.
Revenue growth outpaces costs
Underlying revenue increased 5% to £301 million, driven by an 8% increase in net interest income. Fee income declined during the half, although Page said fees are expected to be broadly consistent in the second half with the first-half level.
Page attributed pressure on fees to competition in foreign exchange and interchange, while pointing to demand for in-house services such as safety deposit boxes. He said net interest income, supported by lending growth and asset rotation, remains the primary engine of earnings growth.
Costs fell 2% year over year to £231 million. Metro Bank maintained its guidance for full-year 2026 costs to be broadly flat compared with 2025.
Management said lending completed in May and June was particularly strong, meaning much of the income contribution from first-half originations should be reflected later in the year. Page also said a higher base-rate environment than previously expected should support second-half momentum.
Focus remains on organic growth
Asked about potential acquisitions, management said Metro Bank is currently focused on organic opportunities in commercial, corporate and specialist mortgage markets. The bank said it has the management capability to execute an inorganic transaction if it chose to do so, but does not need one to pursue its current return targets.
The company said it is expanding its physical footprint after signing leases in Leeds, Newcastle and Nottingham. It is also using artificial intelligence tools for lender prospecting, customer account opening and reviews of customers with balances above £1 million.
Management said its partnership with Ask Silver has helped customers avoid more than £3 million of fraud. The bank plans to discuss its capital-return policy when it reports full-year 2026 results.
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.
