Metro Bank Share Price Forecast December 2021 – Time to Buy MTRO?

Shares of United Kingdom-based retail and commercial bank Metro Bank (LSE: MTRO) are in the green today, currently trading around the 101p mark at the time of writing. In recent years, Metro Bank has struggled to earn a profit and has appeared quite risky for investors. It has also faced trouble from regulators for failing to account for risk on its balance sheet correctly. While all of these have negatively affected its reputation among investors, Metro Bank’s branch network and focus on customers over profit is something exceptional.

Metro Bank – Technical Analysis

Metro Bank’s financial statement indicates a market cap of £17.639 billion with total assets worth £2.301 trillion. Revenue for 2020 was at £58.65 billion with a profit margin of -51.44% compared to £59.39 billion.

Oscillators for Metro Bank such as Relative Strength Index (14)(42.4),  Stochastic %K (14, 3, 3)(18.4), Commodity Channel Index (20)(−49.4),  Average Directional Index (14)(19.9) and Awesome Oscillator(−10.7) are neutral. Moving averages such as Exponential Moving Average (20)(107.1),  Simple Moving Average (20)(112.5),  Exponential Moving Average (30)(108.7), Simple Moving Average (30)(111.6) and Exponential Moving Average (50)(109.2) are indicating a sell action.

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Recent Developments

Metro Bank offers retail, business, commercial, and private banking via a network of 77 locations throughout the UK. With 2.2 million customers Metro Bank has won multiple awards for doing so, including Bank of the Year at the 2020 MoneyAge Awards and Banking Brand of The Year at the 2021 Moneynet Personal Finance Awards.

Metro Bank has been going through problems since before the Coronavirus pandemic hit the world. It experienced an accounting issue regarding different types of loans in early 2019.  It wrongly classified millions of pounds worth of loans as less risky than they really were. Metro Bank Investors thus thought that new funds are necessary to give more of a capital buffer due to tight regulations. When this news was made public, Metro Bank shares fell by 39% in a day and has been in a downtrend since.

Metro Bank’s overall results were poor although it recorded 11% growth in deposits last year. The bank expected to make a loss of £124 million, with around £100 million of this being expected credit losses due to the pandemic. However, it recorded a loss of £271.8 million which indicated that it would have been loss-making even without the pandemic. At one point in October, shares reached a low of 58p. The share price reached another low when private equity firm Carlyle walked away from takeover talks. Management has forecast losses before interest and tax of more than £300 million in the next two years.

Should You Buy MTRO Shares?

It now seems impossible that Metro Bank shares could climb back to the 2019 figures as the tide is finally turning. As per their H1 2021 results, the company’s adjusted underlying revenue was up 14% versus the previous half-year and up 47% year-on-year. The shares have the characteristics of a value trap. Metro Banking which operates in corporate and retail banking sectors have high competition. New competitors such as Starling Bank and Wise make the situation worse for Metro Bank.

The timing for the announcement from Carlyle has seemed to catch the market off-guard. Carlyle was interested in Metro Bank because the Bank of England might raise interest rates soon. However, with inflation over 4% which is more than the Bank of England’s target, many believe that the interest rate hike is just around the corner. Considering this, one can easily invest in Metro Bank shares for the long term.

 

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