NatWest Group through its subsidiary National Westminster Bank has agreed to acquire retail and commercial bank Metro Bank’s portfolio of prime UK residential mortgages in a deal worth up to £2.4bn.
The mortgage portfolio has a gross book value of £2.5bn with a weighted average rate of about 3.79%. It comprises primarily repayment mortgages with an average remaining fixed-rate term of around 2.3 years.
Besides, the portfolio has a similar geographic distribution to Metro Bank’s wider mortgage portfolio and has a weighted average current loan to value of approximately 62%.
Following the closing of the proposed deal, NatWest Group will gain around 10,000 customer accounts. It will be serviced by Metro Bank in line with current arrangements, following the transfer to NatWest Group.
NatWest Group CEO Paul Thwaite said: “Following today’s announcement, we are acquiring £2.5 billion of prime residential mortgages from Metro Bank and, as a result, look forward to welcoming around 10,000 customers to NatWest Group.
“This transaction is a further opportunity to accelerate the growth of our Retail mortgage book within our existing risk appetite, with attractive returns. It is in line with our strategic priorities and builds on our recent acquisition from Sainsbury’s Bank.”
For Metro Bank, the completion of the transaction will reduce risk-weighted assets by nearly £824m. It is also expected to result in a 31 December 2023 pro-forma improvement in the bank’s total capital plus MREL ratio.
Metro Bank said that the divestment aligns with its strategy to reposition the balance sheet and improve risk-adjusted returns on capital.
Metro Bank CEO Daniel Frumkin said: “The sale of part of our residential mortgage portfolio is earnings, NIM and capital ratio accretive. The sale is in-line with Metro Bank’s strategy to reposition its balance sheet for higher risk adjusted returns on regulatory capital.
“The additional lending capacity provided by this sale will enable us to continue our shift into high-yielding assets in niche and underserved markets and become a specialist lender of choice.”
Subject to a satisfactory response from the UK Competition and Markets Authority (CMA), the transaction is expected to be completed during the second half of 2024.
Earlier this month, NatWest became the first UK bank to integrate OneID into Adobe Acrobat Sign, utilising bank-verified digital identity for streamlined identity verification across multiple countries.
