(Alliance News) - Challenger bank Metro Bank PLC on Friday confirmed it sold a portfolio of owner occupied residential mortgages to FTSE 100-listed NatWest Group PLC for a cash consideration of up to GBP3.13 billion.
The portfolio has a gross book value of GBP3.05 billion with a weighted average rate of 2.08%, Metro noted.
The portfolio consists of primarily repayment mortgages with an average remaining fixed-rate term of about 2.5 years. The portfolio has a similar geographic distribution to Metro Bank's wider mortgage portfolio and has a weighted average current loan to value of about 60%.
"The transaction is in line with Metro Bank's strategy to enhance risk-adjusted returns on capital through the ongoing focus on balance sheet optimisation. In addition to increasing the bank's MREL resources, the sale creates additional lending capacity and enables Metro Bank to rebalance asset mix towards higher yielding assets such as specialist mortgages and unsecured loans," the challenger bank said.
The 2.7% premium on gross book value results in an estimated GBP83 million gain on sale, Metro said.
On completion, the disposal is expected to result in a September 30 pro-forma improvement in Metro Bank's total capital plus MREL ratio of 400 basis points to 24.2% from 20.2%, and a September 30 pro-forma CET1 ratio of 16.3%.
Metro Chief Executive Daniel Frumkin added: "As part of the transformation strategy we set out at the start of 2020, we have been focusing on balance sheet optimisation to drive better risk-adjusted returns on capital. The sale of part of our residential mortgage portfolio will provide us with further lending capacity and enable us to shift our asset mix and expand our unsecured lending portfolio, following our entry into the market with the acquisition of RateSetter earlier this year. The transaction also removes any current need to issue MREL qualifying debt."
Shares in Metro Bank closed 0.4% higher at 114.80 pence each in London on Friday. NatWest Group lost 3.3% to 157.35p.
By Paul McGowan; paulmcgowan@alliancenews.com
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Metro Bank (MTRO)
Natwest (NWG)