Metro Bank focuses business lending on SMEs

Metro Bank’s strategy of targeting SMEs is paying dividends with an increase in business lending.

Metro Bank has been at the forefront of the challenger bank charge in recent years. As the first full-service bank to launch in a century when it took off four years ago, it has blazed a trail that is now being followed by the likes of Aldermore, and even TSB as it moves further away from Lloyds’ control.

In a difficult financial climate, challenger banks have largely gone from strength to strength and it’s no coincidence that Metro Bank have heavily targeted small businesses with their products and services.

As the companies that have found it harder to borrow from traditional banks, small and medium-sized enterprises (SMEs) have found more sympathetic sources of finance in these small lenders. In turn, that has improved the outlook for the banks as well as small firms, as Metro Bank’s latest set of results has demonstrated.

Deposits at Metro Bank increased to £2.34 billion in the third quarter of this year. That’s a dramatic rise from last year, representing growth of 118 per cent. At the same time, that capital is being used to produce some very healthy lending figures – total loans rocketed by 146 per cent to a total of £1.39 billion.

“The British people need a bank that puts their needs first and offers the best in service and convenience; they need choice on the high street, and we are here to provide that choice,” said Metro Bank chief executive Craig Donaldson.

Crucially, the figures show that Metro Bank’s tactic of focusing on business customers is bearing fruit – loans to this category constituted nearly half of total lending.

Given that 60 per cent of total deposits at the end of Q3 were also from businesses, and it’s clear that companies are seeking out the banks that offer them the best opportunities.

Metro Bank has particularly focused its marketing strategies on SMEs, and they seem to be reciprocating that interest. That doesn’t mean the bank is making a profit yet – post-tax losses stood at £9.4 million in Q3, although they are generally on the decline. But either way, SMEs seem to be making the most of the opportunities that challenger banks can offer them.