Metro Bank looks to raise 3.13 billion stg from portfolio sale to NatWest

FILE PHOTO: Signage is seen outside of a Metro Bank in London, Britain, May 22, 2019. REUTERS/Hannah McKay

(Reuters) - Britain’s Metro Bank Plc said on Friday it will sell a portfolio of owner-occupied residential mortgages to NatWest Group Plc for up to 3.13 billion pounds ($4.23 billion), as it looks to boost its capital levels hit by the COVID-19 pandemic.

The deal is at a 2.7% premium on gross book value of the portfolio and is expected to result in a gain of about 83 million pounds, Metro said.

In October, it warned that its capital levels were below buffers expected by regulators. Its core capital ratio including additional funding, known as MREL, stood at 20%, below the required excess buffer level.

NatWest Chief Executive Officer 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,” she added.

On completion of the deal, Metro Bank’s Sept. 30, 2020 total capital plus MREL ratio is expected to improve 400bps to 24.2%.

“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 CEO Daniel Frumkin said.

“The transaction also removes any current need to issue MREL qualifying debt.”

Bank of England is expected to complete the review of corporate banks’ approach to setting a minimum requirement for own funds and eligible liabilities (MREL) by the end of the year.

Reporting by Aakriti Bhalla in Bengaluru; Editing by Shinjini Ganguli