Metro Bank has recorded a four per cent drop in lending in the first quarter of the year as the bank refocuses on higher yield opportunities and commercial loans.

On Tuesday the UK bank revealed that lending had declined from £12.2 billion at the end of December 2023 to £11.8 billion in March.

The move reflects Metro's strategy to reposition its balance sheet towards higher yield specialist mortgages, SMEs, and commercial lending.

Deposits however saw growth of four per cent, from £15.6 billion at the end of 2023 to £16.2 billion last month.

The bank went on to say that its focus remains on optimising risk-adjusted returns on regulatory capital to "improve margins and profitability".

In October 2023 Metro secured a rescue deal with investors following a volatile week of trading for the UK challenger bank.

The package included a £325 million capital raise, made up of £150 million of fresh equity from Metro's largest shareholders and £175 million of new debt from bondholders.

The announcement included £600 million of debt refinancing, which the bank said would enhance its balance sheet strength and accelerate earnings potential.

In March, Metro committed to a further £30 million in cost savings by the end of 2024 after announcing it had returned to profitability for the first time since 2018.

The pledge follows previously announced annualised cost savings of £50 million which will see 1,000 employees – representing 22 per cent of the bank's headcount – leaving before mid-April.

Commenting on the bank's latest lending figures, Metro Bank chief executive Daniel Frumkin said: "Lending activity levels are in line with expectations and the pivot to higher margin commercial and residential lending progresses, with lending balances reflecting the time lag between committing facilities and subsequent draw down."

The chief exec added that the bank has maintained its focus on "people-people banking and relationship-based services", with further growth across personal and business current accounts.

"Based on performance in the first quarter we remain confident that financial results will continue to improve throughout 2024 as we optimise funding, deliver on cost savings, continue our asset rotation and benefit from lower yielding fixed rate treasury and mortgage maturities," he continued.

---