Banking institution Metro Bank transitions to a profitable state, marked by a strategic shift in corporate lending.
Metro Bank Enjoys Record SME Lending Growth and Profit Improvement
Metro Bank, the UK high street lender, has reported a significant turnaround in its performance, with a pre-tax profit of £43 million in the first half of 2025, a marked improvement from a £33.5 million loss in the same period last year [1]. This positive momentum is largely attributed to Metro Bank's focus on supporting small and medium-sized businesses (SMEs) through a relationship-led model and specialist lending expertise [2].
In the first half of 2025, Metro Bank originated a record £1 billion in new corporate, commercial, and SME lending, more than doubling the amount from the same period in 2024 [3][5]. This growth is underpinned by the bank's commitment to maintaining low operating costs and optimising funding costs, resulting in the lowest cost of deposits among UK high street banks [1][3].
The bank's loan book declined by 24 percent, but the focus on SME lending has yielded positive results [3]. Metro Bank expects future benefits from recent changes in the regulatory environment, particularly the easing of MREL (Minimum Requirement for Own Funds and Eligible Liabilities) regulations, which will likely improve the bank’s capital and funding flexibility, supporting its growth strategy [1].
Metro Bank's CEO, Daniel Frumkin, expressed confidence in continuing this growth trajectory, aiming for a mid-to-upper teens return on tangible equity (RoTE) by 2027, driven by the bank’s cost efficiencies, lending growth in SME and commercial segments, and its expanding store network [1][3][5].
The bank's revenue increased by 22 percent in the first half, and it has pivoted away from retail customers to focus on lending to SMEs [2]. However, overall deposits at Metro Bank fell 15 percent year on year [1]. The bank has scaled back opening times and closed stores as part of its cost-cutting programme [6].
Recent reports suggest that investment firm Pollen Street Capital has approached Metro Bank about a potential takeover [4][7]. This follows the status of Metro Bank as vulnerable to a takeover after a difficult period on the public markets [8]. If successful, this takeover could provide Metro Bank with the capital it needs to help small businesses grow, as the bank plans to use the money "freed up from MREL" for this purpose [9].
Shares of Metro Bank were down 5 percent in morning trading on Wednesday [10]. Despite these setbacks, the bank remains committed to its strategy of supporting SMEs and delivering sustainable growth.
References:
- Metro Bank Interim Results 2025
- Metro Bank shifts focus to SMEs
- Metro Bank doubles SME lending in first half of 2025
- Pollen Street Capital in talks to buy Metro Bank
- Metro Bank posts £43m profit as SME lending surges
- Metro Bank closes more branches as it cuts costs
- Sky News: Pollen Street Capital in talks to buy Metro Bank
- Metro Bank: Is it vulnerable to a takeover?
- Metro Bank to use MREL windfall to help small businesses grow
- Metro Bank shares fall as it reports first-half profit
- The growth in Metro Bank's SME lending is a result of its focus on supporting small and medium-sized businesses, which has led to record investments in the first half of 2025.
- The bank's commitment to maintaining low operating costs and optimising funding costs has contributed to the lowest cost of deposits among UK high street banks, supporting its lending growth.
- The easing of MREL regulations is expected to improve Metro Bank’s capital and funding flexibility, providing opportunities for further investment in the industry and contributing to its growth strategy.
