Metro Bank buys mortgages portfolio from investment firm Cerberus in £600m deal

Metro Bank has splashed out almost £600 million on acquiring a package of UK mortgages from investment firm Cerberus.

The deal, for £596.7 million, will see the challenger bank pick up a portfolio that consists of 92% buy-to-let mortgages, with the remainder owner-occupied.

Metro Bank chief executive Craig Donaldson said: “Our lending and deposit growth has gone from strength to strength and the acquisition of this high-quality loan portfolio supports our high-growth, organic business model as we track ever closer to our 2020 guidance.”

“In particular the acquisition increases the loan to deposit ratio to circa 78% (2020 guidance circa 80%). The portfolio complements our existing mortgage book and demonstrates our willingness and ability, helped by our strong deposit growth, to take advantage of opportunities as they arise.”

The deal is being financed using cash from existing resources, with the portfolio acquired at a discount to par, Metro Bank said.

All lending in the loan book is secured on property, which Metro Bank said is “well diversified across the UK” and has a similar credit risk profile to the group’s current mortgage book.

The lender added that the portfolio has a weighted average seasoning of around 10 years and the weighted average loan to value is circa 70%, with a current expected pay rate of 1.6%.

Metro Bank has gone from strength to strength in recent years, and last month celebrated its one millionth customer.

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In its last trading update in April, the bank saw a 13% increase in deposit growth to £9 billion quarter on quarter, while underlying pre-tax profits rose from £1.5 million to £2 million.

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