Metro Bank PLC sells £3bn mortgage book to NatWest Group PLC

PLC () has said it will generate a one-off £83mln profit from the sale of a book of high-quality UK household mortgages to PLC ()  

The portfolio has a gross book value of £3.05bn with a weighted average rate of 2.08% and consists of primarily repayment mortgages, said the challenger bank.

There is an average remaining fixed-rate term of 2.5 years with a weighted average current loan to value of around 60%, it added.

In a statement Daniel Frumkin, ‘s CEO, said: “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,” he added.  

Although ownership will change hands and Natwest gets the economic benefit, Metro Bank will continue to service and handle the loans.

Metro Bank said the 2.7% premium on gross book value results in an estimated £83 million gain on the sale.

On completion, the disposal is expected to improve Metro Bank’s liquidity ratios significantly with 30 September 2020 pro-forma total capital plus MREL ratio of 400bps (4%) from 20.2% to 24.2% and its pro-forma CET1 ratio of 16.3%.

Alison Rose, NatWest’s chief executive, commented: “Growing our mortgage book is an important strategic priority as we build a bank that delivers sustainable returns for shareholders. The addition of this loan book will supplement the strong organic growth that we continue to achieve.”