Metro Bank Sells A Third of Its Mortgage Book to NatWest

Metro Bank has sold a third of its residential, owner-occupier mortgages to NatWest, impacting 13,000 homeowners.

The portfolio mostly consists of repayment mortgages with an average of £238,000 outstanding, a weighted average loan to value (LTV) ratio of around 60% and an average remaining fixed-rate term of two and a half years.

While the sale has already been completed, “there are no immediate impacts on our existing mortgages,” a spokesperson for Metro Bank said. The loans will be transferred over the next 12 to 18 months. Metro Bank also said it is still accepting new mortgage applications.

Metro Bank is selling the portfolio, with an estimated value of £3.1 billion, to fund a move into personal loan and credit card lending.

Daniel Frumkin, chief executive of Metro Bank, said: “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.”

The sale follows a tough few years for Metro Bank. The challenger bank, founded in 2010, drew headlines in 2019 when regulators discovered a major accounting error in its books, sending share prices tumbling. It embarked on an ambitious four-year turnout plan, which was quickly derailed by the coronavirus pandemic. In its half-year results in August, Metro Bank reported it had lost £109 million due to the pandemic.

News of the sale of the mortgages took Metro Bank’s shares up 28% in trading Monday, to their highest point since before the pandemic.

The NatWest Group, through its brands NatWest, Royal Bank of Scotland and Ulster Bank, was the fourth-largest mortgage lender in 2019, with a 10.1% market share. Chief executive Alison Rose said expanding the group’s mortgage book is an “important strategic priority” as it becomes “a bank that delivers sustainable returns for shareholders.”

Last week, NatWest relaunched 90% mortgages, one of the first banks to venture back into the low-deposit mortgage market following the coronavirus crisis.

In October it launched a range of green mortgages, giving discounted interest rates to customers purchasing properties with energy efficiency ratings of A or B. It’s part of NatWest’s target that half of its mortgage book will hold an EPC C rating or higher by the end of the decade.