Britain's Metro Bank (MTRO.L) expects defaults to rise during 2021 in line with its provisions as government support offering during the COVID-19 crisis are wound down, it said after posting a deeper annual loss.
Shares tumbled 7% to 139 pence by 0946 GMT on Wednesday.
"The pandemic has clearly impacted performance, leading to significant expected credit losses, but our transformation strategy is firmly on track and we have accelerated initiatives to shift our asset mix," Chief Executive Daniel Frumkin said.
Metro, one of the several so-called challenger banks set up to take on bigger established lenders in Britain, estimated the pandemic would cost the bank 124 million pounds in credit loss expenses and lower transaction fee income.
Its provisions for loan losses rose to 126.7 million pounds at the end of 2020 from 11.7 million pounds a year earlier, driving up its underlying pretax loss to 271.8 million pounds ($385.6 million) from 11.7 million pounds.
Metro said the rise in expected credit losses was driven by the deteriorating economic picture, with cost of risk climbing to 0.86% from 0.08%, which measures of the cost of lending due to defaults.
Frumklin told a media call Metro's office square footage would be 30%-40% lower in central London as employees prefered a 'hybrid' model involving splitting work days between the home and office.
Metro, which had to scale back its growth plans last year after a major accounting scandal forced out its top bosses, said future expansion was subject to review with no new branches planned in the next two years.
It relieved some pressure on its capital levels in December when it agreed to sell its portfolio of owner-occupied residential mortgages to NatWest (NWG.L) for up to 3.13 billion pounds.
Total net loans tumbled 18% to 12.09 billion pounds after the portfolio sale, while net interest margin fell to 1.22% from 1.51% in a low interest rate environment.
($1 = 0.7049 pounds)
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