(Adds details, share movement, analyst comments)
By Noor Zainab Hussain
June 2 Metro Bank Plc said it bought a
mortgage portfolio from a company owned by U.S. private equity
firm Cerberus Capital Management LP for 596.7 million
pounds ($768.2 million), augmenting its loan book with primarily
The British lender, which offers retail, business and
private banking, said all lending in the portfolio is secured on
property and has a similar credit risk profile to its current
"The acquisition of this high-quality loan Portfolio
supports our high-growth, organic business model as we track
ever closer to our 2020 guidance," Chief Executive of Metro
Bank, Craig Donaldson, said.
The acquisition of UK mortgages will increase the
loan-to-deposit ratio to about 78 percent, compared with the
2020 guidance of 80 percent, Donaldson added.
"While the loan book grows 9 percent to 7.1 billion pounds,
we regard this portfolio acquisition as incremental as opposed
to transformational," analysts at Jefferies, who rate the
company a "buy" said.
"The company has provided limited detail on terms of the
transaction. While terms were not disclosed, we believe it is
likely that Metro would have sought a transaction that is
accretive to earnings," the analysts said.
Metro, which listed on the London Stock Exchange last year
and is Britain's first new High Street bank in over 100 years,
has said it was on track to deliver a full year of profitability
The acquisition of the mortgages, being bought at a discount
to face value, will be financed using cash from existing
The portfolio, bought from Cerberus European Residential
Holdings B.V, is made up primarily of buy-to-let mortgages, with
the rest being owner-occupied.
Buy-to-let is a form of residential investment in which you
buy a property, typically with a mortgage, with the view of
renting it out.
According to the Council of Mortgage Lenders, the UK
mortgage market is worth 1.3 trillion pounds, representative of
11.1 million mortgages, and is the largest in Europe in terms of
amount lent per year and the total value of outstanding loans.
Throughout the final months of 2016 the buy-to-let market
saw lenders tightening criteria ahead of the Prudential
Regulation Authority's (PRA) underwriting changes.
However, Metro said in April that its residential mortgages
stood at 4.02 billion pounds at the end of March, up from 2.56
billion pounds at the same time in 2016.
Shares in Metro Bank were up 0.4 percent at 3,733 pence.
($1 = 0.7768 pounds)
(Reporting by Noor Zainab Hussain in Bengaluru; Editing by