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Metro Bank PLC
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Ladies and gentlemen, welcome to the Metro Bank Q1 Results Call. [Operator Instructions] Just to remind you, this session is being recorded. Today, I'm pleased to present the Chairman, Vernon Hill; the CEO, Craig Donaldson; and David Arden is the CFO. I'll now hand you over to Vernon Hill.
Good afternoon to everyone and thank you for joining the call in the afternoon on both sides of the Atlantic. Craig and David Arden, the CFO, will go through the details, but I'd like to start the call with a few comments and a few thoughts. Metro Bank performance was resilient during the first quarter, which we had some tough events to deal with. But it's important to note that we did not lose sight about what our basic business model is and what we have achieved so far. We built the first new High Street bank in 100-plus years. And in the first quarter, we continued to see growth in customer accounts and most of our deposit types. Lending also grew to a record number in the first quarter. We want to remind everybody that the Metro Bank model is about building fans. It's about service. It's convenience, it's about the experience whether it's in-store or online or mobile. And we're pleased to receive the CMA survey for #1 in customer satisfaction for consumer accounts in Britain.We're entering -- we're about to enter into our ninth year. I want to make it clear to everyone on the call, I have complete faith in the Metro Bank model. And of course, we have to adapt and adjust the model as things change. But our basic core model of building fans remains very strong. And I have tremendous faith in the years ahead. With that, I'll now turn it over to Craig.
Thank you, Vernon. Hello everyone, and welcome to the call. Thank you for joining us. I do appreciate it.As we discussed at the full year results in February, 2019 is a year of transition for Metro Bank, and our Q1 results demonstrate the continued momentum of the franchise and the progress in implementing our evolving strategy. And Q1 also reflects the challenges from the broader operating environment as well as some adverse sentiment we've seen following our trading update from January.To go into the specifics, whilst we can report the 19% year-on-year increase in deposits, we have to raise that Q1 saw a 3.6% reduction on our deposits, result of a small number of commercial and partnership customers reducing deposit balances with us. However, momentum in the core retail franchise and SME customer base has continued with retail deposits actually up GBP 118 million in the quarter. Although we saw some outflows, total deposits actually stabilized in March and we continued to see net growth into April. And whilst we remain committed to our medium-term guidance for 20% growth per annum, given the challenge in the first quarter, we expect a more modest rate of deposit growth in 2019 as we capture what has happened to date.As Vernon said, and just to reiterate what Vernon said, we remain absolutely committed to customer service and we're genuinely very proud of Metro Bank with the survey results which show them getting it right. Also if you look at the core franchise, the core group of people who joined us and help us build the organization, our customer accounts grew by 97,000 in the quarter. And we now have over 1.7 million customer accounts. Year-on-year, personal current accounts grew 24% and business current accounts were up 23%. And we continue to win business switches. We actually attracted 15% of all business current account switches in London and the Southeast in the first quarter, another exceptionally strong number when we deal with our business community.On the 26th of February, we actually announced our evolving strategy and we have made progress on this. Fee income, as commented on by certain people, is up meaningfully. And this is being driven by the development of new services, the optimization of fee structures and a deepening of our relationships with our existing and our new customers. We've also made progress on our cost efficiency program during the quarter. We have a clear plan of what we need to achieve over the next 36 months and we have a dedicated team driving the cost efficiencies forward. And we'll talk more about what we've done when we're next together.We've also started to deliver on our capital efficiency focus as we slowed our growth in high-risk density commercial real estate lending and as we focused more on driving into being more cost -- capital-efficient mortgage businesses. So we're focused on delivering what we said we would do. We're very focused on driving our cost efficiency and that will come through as we go through this year. We're very focused on driving our service offerings and driving our fee income. And when we were discussing that in Q3 and Q4 last year, that has come through in Q1. When we focus on it, we do it. And we are driving our capital efficiency. As we go through this year into next year, you will continue to see that capital efficiency and the right yield play through.We're also extremely pleased to be awarded the GBP 120 million in February from the Capability & Innovation Fund, the highest award. We came first. And we aim to use this money to boost SME competition. We received the cash in full during April so the money is all in the bank now. And we signed leases for new stores in Manchester and Liverpool, a strong first step in delivering our commitment to bringing further competition in the North of England. We're also on track to deliver our Artificial intelligence-led business insights into our mobile app, building on our success for businesses that we have for personal customers. We're also well-onward developing our new cash pick up and drop off service. And I will compare that to an almost delivery-type service through the mobile app. And also joining direct debits origination direct to ourselves. That's just some of the things that we'll be developing and launching during this year and into next year.Our equity raising plans are unchanged and we remain on track to raise the GBP 350 million of equity capital during Q2 as we stated previously. As this is a fully documented deal, it takes longer to prepare, but we will be concluding it in half 1 as we stated the last time we spoke.At the time of our full year results, I explained that following the RWA adjustment, we will be making some significant changes to our internal processes and procedures. I am pleased to say that we are making progress in this area and we are implementing a remediation of our internal systems, processes and controls as well as recruiting additional expertise to fill out the 2. David, I'll now hand over to you. Thank you.
Thank you, Craig. Hello, everybody. I'll add some color to key metrics. Headline NIM reduced to 1.64% during the quarter, largely due to the impact of incurring interest expense on lease liabilities following the adoption of our IFRS 16 as well as ongoing competition in residential mortgage lending. We have though seen mortgage yields stabilize during in Q1. Underlying PBT in the quarter was GBP 6.9 million compared with GBP 10 million in the prior year, reflecting a net GBP 2 million impact from IFRS 16 and the GBP 3.5 million quarterly interest expense on the Tier 2 debt we issued in June '18. We expect IFRS 16 to have around a net GBP 13 million negative impact on the underlying PBT of the business in 2019. In line with expectations, cost of deposits during the quarter was 70 basis points. The increase of 3 basis points in the quarter and 9 bps since Q3 remains materially lower than the 25 basis points increase in bank base rate in August. We expect our cost of deposits to remain below the Bank of England base rate of 75 bps during Q2, demonstrating the ongoing benefits we receive from our low-cost deposit model and supported by the high proportion of current accounts.Fulfillment of our Q4 lending pipeline resulted in a 7% loan growth during the quarter which led to an increase in the loans-to-deposit ratio to 100% in Q1. Over time, we will manage our loan-to-deposit ratio in a controlled way back to within our guidance of 85% to 90%. While growing our lending in the quarter, we have maintained our prudent low-risk approach which is evidenced by our cost of risk at 6 basis points, a 3 basis point improvement year-on-year. We continue to see no signs of credit stress in the loan portfolio. The strong growth in our fee income is reflected in 13 bps improvement in customer NIM plus fees to 2.8% during the quarter. We previously spoken of optimizing fee structures, developing these services and deepening customer relationships, and the meaningful increase in fee income demonstrates good progress in this key initiative.The cost to income ratio increased to 92% in Q1, reflecting the income challenges I've outlined as well as the ongoing investment in technology, stores and colleagues and continuing to keep pace with the regulatory change. As Craig said, we've commenced our cost efficiency program and have a portfolio of actionable initiatives to reduce our cost growth run rate. These initiatives include reducing costs serving stores, process automation in the back office and cost optimization to reflect the lending mix shift. In line with our year-end guidance, we continue to guide through a cost to income ratio between 85% to 90%, though we do expect to be at the upper end of that range this year. We continue to a target ratio of 55% to 60% by 2023. You'll have noticed that costs relating to the RBS alternative remedies package and transformation and remediation costs are reflected below the line and we expect this to be the case throughout 2019. Finally, our CET1 ratio is 12.1% with RWAs as at 31 March increasing to GBP 9.6 billion. The increase principally reflects the adoption of IFRS 16, the annual updates for operational risk RWAs as well as lending growth. The planned equity raise in Q2 will support our growth plans and strengthen our capital position, providing material headroom above our capital targets.Craig?
Thank you, David. So looking back at...
Craig, can you hear me?
Yes, sir.
Craig. Would you just repeat again the increase in fees year-over-year and quarter-to-quarter so we all have the right number?
So we saw a circa 50% increase year-on-year, circa 20% increase Q4 to Q1.
Thank you.
So thank you, David, and thank you, Vernon. So looking back at the quarter, we have had to manage both external as well as internal challenges. But the underlying resilience of the bank is evidenced in our customer satisfaction, in our continued growth in customer accounts, in the actual return to growth in deposits that was seen in April and our service offerings that are being so readily taken up by our customers, which has led to our fee income growth.So 2019 is a year of transition where we are making headway across our strategic initiatives and we are absolutely focused on the cost efficiency we must drive, on the lending efficiencies that we must drive and on the fee service offerings that we must drive. And they have our full attention. And we are very good at delivering in the areas where we focus. We will talk more about the capital raise as we go through the rest of this half year as well. So now we'll -- myself and David and Vernon will be happy to take any questions. So operator, over to you.
[Operator Instructions] And our first question comes from the line of Robert Sage of Macquarie.
I was wondering if I could ask a question about loan growth in the short term because your loan to deposit ratio has obviously going up to 100% and your CET1 ratio seems to be very close to its minimum level of 12%. And I would imagine it might have eroded further since the end of March if the asset growth is continued. So it looks as if you've got very limited capability to be growing loans in the very short term, at least pre the equity raise. So I was wondering whether you could give a little bit of guidance in terms of what we should expect in terms of shorter-term lending expansion?
Hi, Robert. David here. Thanks for question. As I articulated, we would expect over the medium term to bring our loans-to-deposit ratio back to within our stated guidance range of 85% to 90% in a controlled way. We're not going to take any knee-jerk reaction but we have increased front book pricing and adjusted some of our underwriting which has had the impact of reducing our pipeline. And you will see that loan-to-deposit ratio come back to within guidance in a controlled way over the medium term.
So do you think there will be [ deposit ] growth in the second quarter, for example?
Absolutely. Right, David?
Yes.
So David, this is Vernon answering. Craig will give the real numbers. But you're going to have funding from growth in deposits, you're going to have loans being repaid in the normal course of business. And we expect to see continued loan growth.
Absolutely. Across '19, Robert, given the Q1 trading, you shouldn't expect a 20% increase in balance sheet this year. That will be materially lower. And -- but we do anticipate in the medium term going back to 20% per annum growth thereafter.
Our next question comes from the line of Aman Rakkar of Barclays.
Just wanted to ask regarding the IFRS 16 impact. Could you just confirm how much exactly the 12 basis points step down Q-on-Q was driven by the impacts of IFRS 16, and how much was driven by what you're calling out as pressure on asset yields? I mean, I had a second part, so that's still one question. The second was regarding the outlook for deposit costs. So I note that you say you expect deposit cost to remain under Bank of England base rate. And I was just interested, I've noticed recently you've launched a 1-year fixed term deposit rate at about 2%. So amongst mainstream [ products ], that's probably top of the market. And that to me suggests there perhaps could a bit of upward pressure on deposit costs. So I mean, are you able to write any bit more [ perhaps ] beyond Q2 on your expectations for deposit costs from here?
Thank you. The IFRS 16 question is really good. If you just step back and articulate how we're expecting that IFRS 16 to impact the P&L in '19. So the way to think about is clearly, we've got the discount unwind on the lease liability and we would expect that to have an GBP 18 million drag across interest expense across '19. And the way IFRS 16 works, under IAS 7, the rental cost were straight line; IFRS 16, it's not a straight line. It hits a young leasehold base like ours in a higher way in the first half of the lease. So an GBP 18 million increase in interest expense and a GBP 5 million reduction in operating expense as the depreciation and asset comes through. And that's where you get the GBP 13 million impact across the '19 UPBT. Craig, do you want to talk on the...
Yes, on the deposits. Thank you for that, Aman. So look, we constantly review our products, and periodically, we move up and down the tables. We made a decision to move up the table slightly: One, to prove we can bring the deposits in; two, to ensure that we put the brands on the mind. Obviously, with the sentiment that was out there, we were driving and continuing to drive to ensure that our brand is positioned properly and positively into the minds of our customer sets. And also as we enter new markets, just to create a halo with the discussion. So it was part of business as usual, part of driving some positive sentiment. And I would expect us to do that from time to time as part of business as usual. The cost of deposits, well, we continue to win strongly on our [ NVCAs ]. We've seen 24% growth in our personal current accounts year-on-year but we've also seen 23% growth on our business current accounts. So as I've said, we won 15% of the switches in London and the Southeast in quarter 1. That drives in current accounts, that's rising, therefore, nibbles the 0% current accounts. And therefore, that balances the cost of deposits. So I stand by what David said around our cost deposits being at base or below, and we'd expect to drive forward in that basis really as we go forward and have our positive growth in deposits as we move forward.
Craig, would you give a brief description, for those that don't follow us, what IFSR 16 (sic) [ IFRS 16 ] is in the layman's description?
Yes. it's a new accounting standard that brings assets and liabilities onto the balance sheet for our leasehold property base. And as I explained, Vernon, it impacts our interest expense and our depreciation going forward. And we would expect a GBP 13 million negative impact in the P&L this year. As we -- as the leases mature over time, that impact will reduce. Given our young estate, it's a drag in the early years.
Reversing to positive as we move through the medium-term plans in different ways.
It's a long-term timing difference which impacts [ the way that it does ].
Our next question comes from the line of Michael Perito of KBW.
I wanted to ask on the fee side. You guys had spoken about some new products and services that you were rolling out over the last, call it, 6 months or so. And I guess what I'm trying to get a better sense of is the fee growth sequentially, how much of that was driven by kind of the introduction of new products or services that might have bolstered that growth rate? And how much -- how should we be thinking about what kind of is a sustainable growth rate for the fee income going forward with kind of the -- some of the new platform enhancements you've made?
Thanks for that, Mike. So Mike, when we were talking in Q3 and Q4, we talked about some of the services that we'd be launching at the end of November and beginning of December. And those services were launched and some of the benefits were seen slightly in quarter 4, but the vast majority of those benefits have been seen in quarter 1. So that has driven some of that and we will continue to see the benefits of those new services come through throughout this year. Also at the end of Q3 and the beginning of Q4, we did optimize some of our pricing around the safe deposit box pricing and around card payments internationally. And that came in, really for the majority of it, in the middle of Q4. So what you've had is you've had a number of the things that we said we'd be delivering have been delivered. They were delivered in the middle or late in Q4. And therefore, we have seen the benefits come wholly through the whole quarter in Q1. So will you see continued benefits from those changes? Yes. Will they be as large as you've just seen in Q4 to Q1 and quarter 1 -- in quarter 1? Well, in truth, no, because obviously they've been launched and we've seen the benefits of those new services and those price increases come through now. But you'll see continued growth in the fee line. What we also have though that will continue to drive that fee line is one, we spoke before about how strong the franchise is performing. And the fact that we have 97,000 customer accounts -- growth in customer accounts in Q1, the large number of those being business current accounts, will drive that fee income further. And that will continue as we go through Q2, Q3, Q4. And the other thing is during this year, we'll also be launching some new services using, I mentioned earlier, the artificial intelligence in the business insights -- on business insights, our new cash offering for delivery. These new services will continue to broaden out the fee income line and we'll continue to drive it forward. So you will see growth. Will it be as spectacular as you saw Q4 to Q1? I can't promise that every quarter, but it will be strong.
Our next question comes from line of Joseph Dickerson of Jefferies.
So my question is on the trajectory of costs over the remainder of the year because it's kind of hard to parse out what's incremental investment around investment in controls after the January RWA events. What's related to capability and innovation and what's kind of underlying business expense growth? So what's the right way -- from my vantage point, your cost/income ratio is an output, not an input. So when I look at it, I look at the cost growth. So the cost grew 2.5% quarter-on-quarter, 24% year-on-year. Is that kind of 24% year-over-year growth rate in Q1 something -- how should I think about this? Is that the growth rate in costs we should expect for the full year? Will it moderate? What's the right way to think about modeling the cost outcome this year? Is the short way of asking the question.
Joe, it's David here. Clearly as we're growing business, you will expect our costs to continue to grow over time as we increase the scale in terms of stores and customers. However, our efficiency program is focused on containing our cost growth by being more efficient, and that's something that we are extremely focused on. And therefore, I will expect these things take time to feed through. But as we go through the year, I would expect the absolute level of cost growth to moderate somewhat. And as I've articulated, the cost/income ratio guidance we've given out, would expect us to be at the upper end of the range. Well, there is a cost and an income there, but we are very, very focused as a management team on reducing the absolute level of cost's growth over time.
If I may, Joe, so I think this is an area of absolute focus and clarity for the organization to drive this cost efficiency, which is why we have a very clear plan that we're working to. And absolute dedicated, reporting directly to myself a team, with a transformation -- a Chief Transformation Officer reporting to me focused on delivering the capital efficiency in the right way. So my view is that the 24% should moderate definitely. I'm not sure we'll be delivering 2.5% a quarter that we've done Q4 to Q1, but I think that was a good start. And we have a number of things that are in train today that we will be able to talk more about in the half year results. We just need to let them play through, and then once we've concluded them, we'll talk more on the half year, which will deliver real tangible cost efficiency during this year.
Can I just ask a follow-up on that, which is, obviously, your model is a -- to generate the lower-cost deposits is a slightly structurally higher cost model than some of your peers. So I guess, to what impact -- how do you manage and how do you think about balancing the need for cost efficiency versus the delivery of your model to the customer?
Joe, it's Craig here. I think that they are actually one and the same and when we get it right. Pin drop is the example I use where we have introduced, at the end of last year, a new front end to our telephony around security and how we assess the security that's needed before we'll answer the questions of the customer. By reducing that, we have reduced the average handling time significantly, meaning that actually we can recruit a lot less people to feed the growth. Because the average handling time, it's come down between 10% and 15%, meaning that we can soak off 10% to 15% growth without needing to recruit anybody, driving real therefore cost efficiency with our growth. However, we've actually seen Net Promoter Score go up by delivering that. And what we need to do is continue to invest in understanding what our customers want and how we can leverage that to deliver better service. Another one, I once talked to a customer who actually wants us to have the machines in the store to be able to -- they look over the counter if they want certain things done, but they don't want to go to the counter and talk to somebody to get other things done. And they want us to implement technology in a way that they can self-serve when they come into store. Now when we implement that, that will drive some cost efficiencies. But actually, what it will also drive is an increase in Net Promoter Score by giving choice to our customer so they can choose the channel by which they want to engage with us. So we're very focused on the costs where we can actually improve our Net Promoter Scores as well. And you'll see a lot of work around straight-through processing, around engaging customers and giving them more choice so they can choose how they interact with us across a number of different channels. So you will see more of that. I think it can be done, we are doing it and we'll continue to do it as we go forward by making what I consider to be the smart choices or the sensible ones for our customers and for our shareholders.
Our next question comes from line of Martin Leitgeb, Goldman Sachs.
I was just wondering if you could give us a steer on how we should think of the evolution of customer net interest margin throughout this year. And at least from the perspective, what we can follow from your release, there seem to be 2 main shifts happening there. On one hand, the moderation of growth and the increase in some of the front book pricing, so -- which should be a benefit to margins going forward. And on the other hand, the mix shift towards more mortgages and also are the repricing of some of the older mortgages, which should be a bit of downward pressure on the margins. So is the base case outlook, in case of this kind of customer net interest margin, to be broadly flattish throughout this year? Or do you have any more color you could give us?
Martin, it's Craig here. Thanks for the question, good sir. So I would expect that, as that I said, what we're focusing on is our capital efficiency and also our cost efficiency and how we bring those 2 things together whilst managing also with the one thing we never let go of, the cost of risk. So you will see, as we started in quarter 1, that change in our capital-efficient mix to drive the ROE and that will continue. And that will drive the yield actually slightly up over time, but there will be -- it will be pretty static in the shorter term. So you will see a pretty static customer NIM in the short term. But over time, as we drive the mix and drive that ROE more, the yield will go up, but as a consequence of mix, not what any of the assets themselves going up in yield. Fees. We talk about customer NIM plus fees. Fees is where we then expect to see the deposit of -- increase continue to come through. We've seen a very positive start as we've said in Q1. We do anticipate across the year that fees will continue to play a very, very strong part in that customer NIM plus fees play. So static customer NIM and fees doing what we expected them to do.
Yes, I would agree with that. I think mortgage yields appear to have stabilized. We have been taking action on the front book pricing which could and should play through. Deposit cost should broadly be flat. So as I look at it broadly plays a draw and I would expect consistent customer NIM from here.
With that fees playing well.
Exactly.
Our next question comes from line of Jordan Hymowitz of Philadelphia Financial Management.
Most of my questions have been answered. Just one quick is, the government gave you the GBP 120 billion (sic) [ GBP 120 million ] of deposits. They're actively seeking for more challenger bank customers. Why wouldn't they do anything possible to accelerate as much as possible, play their capital standards once you raise the money? Doesn't it go against their best interest by slowing down your growth?
So Thank you for that, Jordan. It's Craig here. My view on this one is simple, that -- I -- we are very focused on optimizing the growth with our capital efficiency and our profitability. And the plans we've put together achieve that over the medium term after numerous scenarios and -- that we've been working through with Dave and his team, Dave MacLean below him. And what we've come up with, we believe, is the right optimization across those 3 areas. There's no doubt that the BC -- the Williams & Glyn money that's been given out is about driving more competition. And we were very, very proud to win that because it obviously was recognized that we are in a absolute and great position to continue to drive competition into the SME market. And the GBP 120 million that's in the bank, every single penny of that will be used to drive more competition into the SME market. With regard to capital and what can be done, obviously that's a totally different area. And the regulators have their job to do. We work with them closely. And I do think the regulator is very supportive at the moment. We'll continue to work with them. And time will tell how things like AIRB progress. But we don't expect to get AIRB pre-2021, and I do think the regulator wants to support us, I do think they support us. We have very good interactions with them. But I don't think that will change with -- around AIRB in any of other thing than the time frame we've already set out.
And one other quick question, if you don't mind is, has the stability a little bit in the U.K. market with a little more clarity in Brexit made a little more easier to sell some of the buy-or-let mortgages that are impacting the capital standards so much? Is there more stability in that market, should you decided to sell?
To be honest, we discussed that we have options around what we do with the different books that we have. But at the moment, we are -- it's an interesting market. I think it was RBS that said, they've seen some behavior in the large corporates. We're seeing the market at the moment actually feels pretty stable and there is definitely uncertainty around things like the Brexit debate. But for our customers and for the people we're interacting with, it does feel as though people are getting on with their day-to-day business and that it's a stable environment we are trading in.
Our next question comes from the line of John Cronin of Goodbody Stockbrokers.
Just to look, a point of clarification really. You've mentioned total deposits stabilized in March and returned to net growth in April. Just wondering if that's also the case for the commercial deposits?And if I may add a follow-up, there is the RWA uplift on the buy-to-let assets reported back in January. Has there been any progress? You did mention mentioned previously that there could be some scope for subsequent reduction, though you didn't -- you were obviously very careful to message that, that was a tentative comment. But is -- any progress or work going on to try and get some of those risk weights back down? That would be all.
So the deposit growth we saw, John, in April was broad-based across the franchise, including commercial deposits. And as Craig said, we've seen a 24% increase in PCAs, a 23% increase in BCAs. So we are seeing the franchise underlying continue to progress well. On the RWAs, we continue to go through a program of remediation which is looking at our end-to-end processes, tightening up our internal controls and bolstering capacity, capability across certain functions in finance and risk. And that's what we continue to do. And until we've completed that work then, there will be no further progression there. We just want to make sure we get things right.
Can I just clarify. So on your first answer. So commercial deposit book grew in April and stabilized in March. Is that correct?
We saw a net stabilization in March. And the -- we've seen a return to net growth in April. And as I say, the growth was broad-based across the franchise.
Absolutely. It was a very positive move forward across the organization, John.
Our next question comes from line of Raul Sinha of JPMorgan.
Question on -- sorry, can you hear me?
Yes. We're listening to you, good, sir.
Okay. Great. So my question is about the point, I think Vernon said at the start, you don't need to change the model. I guess one of the things that stands out when I look at your model relative to the other U.K. banks is you have a relatively high reliance on corporate deposits in the mix. 52% of your deposit base is corporate. And if you look at the outflows you have experienced in Q1, actually the core retail deposit base held up pretty well. It came -- the outflows were retail partnerships and corporate customers. So the question really is, shouldn't you be pivoting away a little bit from the reliance on corporates, especially? And if you do that, how quickly can you get back to this 90% or below loans-to-deposit ratio?
So we're both saying who should answer it, forgive us Raul. Raul. So for me, it's very simple. Our commercial and corporate deposits are made up of a number of different segments within that. And our business SMEs and a large part of our commercial segments have been very, very stable and have grown. Now we're sitting today with our Regional Director for Central London, Kevin Barrett, who was telling me what a great April he'd had across his business in commercial customers with the growth they'd had. So for me, we are seeing continued stability in a large number for our segments. However, there are -- there will be 1 or 2 areas where we will move back from over time as we drive less for certain types and more for where we get the transacting banking with the fee income and service fees. So very much with the evolving strategy that we announced on the 26th of February, we are focusing on winning transacting businesses who want to have their transacting banking with us so that we can offer them the great service that we offer to all of our customers. But from then, we can win the service opportunities that are very, very fee-accretive and capital-efficient. And that's where we're focusing our investment. That's where we're focusing our colleagues, on winning those type of customers with those type of deposits. And that's what we'll continue to do. With regard to when the loan-to-deposit ratio will come back down. As David said, we will bring it back it down in a very controlled way. It'll be a sensible way. No knee jerking. We are a highly liquid bank, we have high liquidity in the organization, and therefore, I want to manage the customer, lending and the long-term service that we offer whilst bringing down the loan-to-deposit ratio in a sensible way over the short to medium term.
Craig, isn't it true that even at this level, our loan-to-deposit ratio is lower than the average of the U.K. banks?
It's fair to say we're definitely even at 100%, we're at the lower end on the loan-to-deposit ratio of banks in the U.K.
Our last question comes from the line of [ Richard Harris ].
As some of you may know, I've been a fan of Metro since the IPO and I've been to every Annual General Meeting but I can't come this year, hence my interest today. I was finding it quite interesting that all the questions have come from professional institutions asking about financial and growth matters. And yet nobody's mentioned the share price with regards to Investor Relations. My comment, if you like, is that the bank, I think from where I am, and I'm just an individual shareholder through a nominee company in my pension, that needs to limit its reputational damage. Now clearly, it has that reputational damage because the share price, as we all know, has come down from GBP 40 to just under GBP 8 in 15 months. And so I think some things need to be done. I should say first of all that I think that the 3 people on this call, the CEO is probably one of the best in the country. I mean, he does a great job for the bank and a great talent. I know David's had a baptism of fire in the last year. And I'm a big fan of Vernon's and I hope that he gets a lot of support at the AGM. But I do think that there needs to be a reassessment of the Board members. And also with respect, Vernon, I think the remuneration committee should look again at Mrs. Hill's company's payments. Up to now, it's been I think justified in some way because it's been very obvious and spectacular. But it's a question of reputation. And I think the reputation of the bank, we need to clarify and clear up anything that looks as though it's holding the bank back in any way. That's my thoughts.
Thank you, Richard. We hear your thoughts and we are working on those issues. Reputation is very important.
Richard, I'd just reiterate what Vernon said. Really, thank you for your feedback. You know we take feedback from your good self and from all of our shareholders, it's very important to us. And as Vernon said, we are looking at how we take action forward in the areas you've raised. What I would say is though, it's a shame you're not going to be in the AGM, good sir, we shall miss you. Thank you very, very much.
Keep up the good work, gentleman.
Thank you.
Thank you.
Thank you.
And there are no more questions on the line, so I'll hand back to our speakers for closing comments.
Why don't I go first, Craig? And then you and Dave can close. Thank you all for being on the call. The Metro Bank model is still unbelievably strong. We have tremendous confidence in the years ahead. We appreciate your support. Bumps in the road do happen. We have to learn from them and make our company better. Craig?
Thank you, Vernon. Thank you to everybody who's joined us on the call today. I look forward to updating you on progress as we go forward. We announced our evolving strategy, like we said, on the 26th of February, and we are well on with the work across the 3 areas of cost efficiency, capital efficiency and the lending mix. And you will see that, as we go forward in the solid fee income as we go forward. Q1 has been a challenge for the organization, some internal, some external, but I'm very proud of how my colleagues have responded. I'm very, very proud of how our customers have supported us as well. I think it shows great resilience in the organization. And it's that resilience that we'll continue to take forward. So thank you very much. David, I don't know if you have anything to add?
The only thing I would add is just to reassure everybody in the call that management are 100% focused on the revised strategy that Craig laid out at the end of February around optimizing capital efficiency growth and having a really strong focus on profitability. And that's what we'll continue to do every day, every week, this -- from now on.
Whilst creating funds always.
Whilst creating funds.
Thank you very much, everybody. Thank you. Bye-bye.
Thank you, all.
This now concludes our call. Thank you all for attending. Participants, you may now disconnect your lines.