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Metro Bank has revealed a 17% slump in lending over the first quarter, but said it was starting to see a recovery as lockdown restrictions ease.
The high street lender said total net loans dropped to £12 billion in the three months to the end of March from £14.5 billion a year ago.
It saw customer deposits lift 13% to £16.4 billion as locked-down Britons piled their cash into savings.
Metro Bank sold its residential mortgage book to NatWest for £3 billion in February, as it looks to focus on specialist mortgages and unsecured lending.
But the shift means it missed out on the mortgage boost enjoyed by rivals such as Lloyds Banking Group and Santander – which also reported figures on Wednesday – thanks to the housing market bubble spurred on by tax breaks and changing needs in the pandemic.
Metro Bank said: “Customer activity dipped in January following the introduction of the third national lockdown in late December, recovering as the quarter progressed and helped by the gradual easing of restrictions in April.”
Chief executive Daniel Frumkin added: “We are also beginning to see progress across our loan book, with strong growth in consumer lending and specialist mortgages as we focus on assets delivering higher risk-adjusted returns.”
The bank was at the start of a four-year turnaround plan when coronavirus struck, after a major accounting error at the start of 2019 cost the company its chief executive and chairman.
Metro was forced to raise £375 million to stay in business after it discovered the accounting blunder.
It has been heavily loss-making for two years, slumping deeper into the red with a £311.4 million deficit in 2020 after hefty provisions for loans it expects to go bad because of Covid-19.
In its first-quarter update, Metro said credit impairments continued to be “benign” and in line with its forecasts at the full-year.
In February, it said the cost of lost credit was set to hit £100 million due to the pandemic, this was coupled with costs of more than £40 million associated with speeding up its exit from its central London headquarters.