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Natwest buys Metro Bank’s mortgage portfolio for £3bn

LaToya Harding
·Contributor
·2-min read
Metro Bank in Sheffield, South Yorkhire. Photo credit should read: Tim Goode/PA Wire. (Photo by Mike Egerton/PA Images via Getty Images)
Metro, which was founded in 2015, bought peer-to-peer lender RateSetter in August in a bid to improve revenues. Photo: Mike Egerton/PA Images via Getty Images

Natwest (NWG.L) is set to purchase Metro Bank’s (MTRO.L) mortgage portfolio in a £3.1bn ($4.2bn) deal that would transfer 13,000 customers to the lender.

The purchase price represents a 2.7% premium on the gross book value, with the portfolio having a weighted average current loan-to-value ratio of about 60%. It will result in a rough £83m gain for Metro Bank.

Natwest chief executive Alison Rose said: “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.”

It comes after the Natwest, the high street bank which owns RBS, swung back in the black during the third quarter of this year, after taking a significant hit due to the outbreak of the coronavirus pandemic. It beat earnings forecasts after setting aside a smaller-than-expected amount to deal with bad loans.

Pre-tax profit was £355m for the three months to September on the back of a £1.9bn income. Although analysts had been expecting income to come in at £2.5bn, they were estimating a loss before tax of £75m for the period.

READ MORE: Bank of England warns on COVID drag as interest rate held at record low

In comparison, Metro Bank swung to a £240m loss in the first six months of the year, having been forced to take provisions to cover pandemic-related loan impairments. In October, it warned its capital levels remained below buffers expected by regulators as it grapples with the impact of the COVID-19 pandemic.

"The sale will 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," Metro chief executive Daniel Frumkin said.

Its share price has collapsed since the challenger bank became involved in an accounting scandal in January last year. It is currently about 45% down year to date.

Metro, which was founded in 2015, bought peer-to-peer lender RateSetter in August in a bid to improve revenues.

Watch: Will interest rates stay low forever?