Metro Bank has completed its sale of prime residential mortgages to NatWest as it seeks to reposition its balance sheet and enhance risk adjusted returns on capital.
The value of £2.5bn was apportioned to the loan book on 31 March. On completion of the sale, the book value was around £2.4bn resulting in a total cash consideration of around £2.3bn.
The Bank of England Term Funding Scheme with additional incentives for SMEs will be repaid from the proceeds.
The transaction is earnings, net interest margin and capital ratio accretive. The sale creates additional lending capacity to enable Metro Bank to continue its asset rotation towards higher yielding commercial, corporate, SME lending and specialist mortgages.
NatWest to take on 10,000 borrowers
When the news of the mortgage book sale was announced in July, Nat West said it expected to take on around 10,000 borrowers.
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It noted that these would continue to be serviced by Metro Bank following the transfer to NatWest Group.
The acquisition is expected to lead to a reduction of fewer than 10 basis points to NatWest Group’s Common Equity Tier 1 (CET1) ratio. This compares a bank’s capital against its assets.
The lender said that the current weighted average loan to value (LTV) was circa 62%.
Metro Bank said that, on completion, the sale is expected to “reduce risk-weighted assets” by around £824m and improve its CET1 ratio along with its total capital.
