January 17, 2021
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NatWest says it will buy Metro Bank’s mortgage portfolio for £3.13 billion

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  • NatWest says it will buy Metro Bank’s mortgage portfolio for £31.13 billion.
  • The deal will result in roughly £83 million of gain for Metro Bank.
  • Metro Bank is currently about 45% down year to date in the stock market.

NatWest Group plc (LON: NWG) said on Friday that it will buy Metro Bank’s (LON: MTRO) owner-occupied residential mortgage portfolio for £3.13 billion. The agreement will help the British retail and commercial bank to boost its capital amidst the ongoing Coronavirus pandemic that has weighed heavily on its business in recent months.

Metro Bank’s shares, that you can learn to buy online here, slipped more than 2% on Friday. At 115 pence per share, its shares are now roughly 45% down year to date in the stock market after recovering from an even lower 59 pence per share in the first week of November.

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In comparison, Metro Bank performed largely downbeat in the stock market last year with an annual decline of more than 85%. At the time of writing, it is valued at £198 million. In a report published in August, Metro Bank said it concluded the fiscal first half with £240 million of loss.

The deal will result in roughly £83 million of gain

According to Metro Bank, the agreement with NatWest represents a 2.7% premium on its portfolio’s gross book value. The deal will result in roughly £83 million of gain. At 20%, the London-headquartered bank’s core capital ratio was short of the excess buffer level required by regulators. JP Morgan downgraded NatWest to “Neutral” from “Overweight” last week.

CEO Alison Rose commented on the news on Friday and 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.”

CEO Daniel Frumkin of Metro Bank comments on Friday

Once the deal is completed, Metro Bank’s total capital plus MREL ratio is likely to jump to 24.2%. CEO Daniel Frumkin also commented on Friday and said:

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

NatWest Group plc closed the regular session about 3% down on Friday. On a year-to-date basis, the banking and insurance holding company is currently 35% down in the stock market despite an over 60% growth since late September.

At the time of writing, NatWest Group is valued at £19 billion and has a price to earnings ratio 24.94.