Challenger bank Metro Bank (MTRO) has delivered double-digit growth in deposits and exceeded £1bn in net lending for the fourth consecutive quarter - so why are the shares down 7.8% at £23.74 on the news?
Investors are spooked by a continuing slide in the net interest margin, which measures the difference between how much interest banks earn from lending and how much they pay out.
Approximately 102,000 new customers joined the bank over the last quarter, helping Metro surpass an impressive 1.5m accounts overall.
Yet in the quarter to 30 September, its net interest margin has fallen from 1.85% to 1.77%.
Metro Bank has warned of fierce competition in the mortgage industry, particularly for residential mortgages, which is weighing on margin growth.
‘Metro Bank’s margins are being squeezed as it fights for business,’ comments AJ Bell investment director Russ Mould.
He argues mortgage rates should be rising with the hiked UK interest rate, but there is evidence across the industry of two-year fixed mortgage rates falling in value.
Metro Bank’s deposits rose 8% quarter-on-quarter from £13.7bn to £14.8bn, which Jefferies analyst Joseph Dickerson believes offers some defence from pressure on net interest margins.
