Sale of £3bn residential mortgage portfolio
18 December 2020
Metro Bank PLC ("Metro Bank")
Legal Entity Identifier: 213800X5WU57YL9GPK89
Metro Bank confirms sale of £3bn residential mortgage portfolio to NatWest Group plc ("NatWest")
Metro Bank today confirms the sale of a portfolio of owner occupied residential mortgages (the "Portfolio") to NatWest for a cash consideration of up to £3,128 million[1].
The Portfolio has a gross book value of £3,045 million with a weighted average rate of 2.08%. The Portfolio consists of primarily repayment mortgages with an average remaining fixed-rate term of c.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 c.60%.
The 2.7% premium on gross book value results in an estimated £83 million gain on sale. On completion, the disposal is expected to result in a 30 September 2020 pro-forma improvement in Metro Bank's total capital plus MREL ratio of 400bps from 20.2% to 24.2%, and a 30 September 2020 pro-forma CET1 ratio of 16.3%. The transaction removes any current need to issue MREL qualifying debt.
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.
Commenting on the disposal, Daniel Frumkin, Metro Bank's Chief Executive Officer, 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."
ENDS
The information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 and was authorised for release by David Arden, Chief Financial Officer.
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About Metro Bank
Metro Bank serves more than two million customer accounts and is celebrated for its exceptional customer experience. It is the highest rated high street bank for overall service quality, in store service, and online and mobile banking services for personal customers in the Competition and Market Authority's Service Quality Survey in August 2020; the bank also ranked in the top two for overall service, store service and digital services for business customers. It was recognised as 'Bank of the Year' at the 2020 MoneyAge Awards.
The community bank offers retail, business, commercial and private banking services, and prides itself on giving customers the choice to bank however, whenever and wherever they choose, and supporting the customers and communities it serves. Whether that's through its network of 77 stores open seven days a week, early until late, 362 days a year; on the phone through its UK-based 24/7 contact centres; or online through its internet banking or award-winning mobile app: the bank offers customers real choice.
Metro Bank PLC. Registered in England and Wales. Company number: 6419578. Registered office: One Southampton Row, London, WC1B 5HA. 'Metrobank' is the registered trademark of Metro Bank PLC.
It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Most relevant deposits are protected by the Financial Services Compensation Scheme. For further information about the Scheme refer to the FSCS website www.fscs.org.uk .
All Metro Bank products are subject to status and approval.
Metro Bank PLC is an independent UK bank - it is not affiliated with any other bank or organisation (including the METRO newspaper or its publishers) anywhere in the world. Please refer to Metro Bank using the full name.
[1]There may be an adjustment to the financial impact and consideration paid at completion under which loans representing up to 10% by value of the Portfolio may be excluded from the sale, equal to a potential reduction in consideration of less than £313 million. Beneficial risks and rewards of the Portfolio will transfer to NatWest as at the date of this announcement and the transaction is expected to financially close during the first quarter of 2021.
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