Metro Bank buys mortgage portfolio from Cerberus

Metro Bank has completed the purchase of a portfolio of UK mortgages from Cerberus European Residential Holdings for £596.7m

All lending in the portfolio - which consists of around 92% buy-to-let mortgages, with the remainder being owner occupied - is secured on property, well diversified across the UK, and has a similar credit risk profile to Metro Bank's current mortgage book.

The portfolio has a weighted average seasoning of around 10 years and the weighted average loan to value is approximately.70%, with a current expected pay rate of circa 1.6% principally linked to the Bank of England base rate.

The consideration of £596.7m represents the value at which the acquired mortgages will be taken on to Metro’s balance sheet and is being financed using cash from existing resources.

Chief executive officer 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 around 78% (2020 guidance around 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."

Cerberus last year purchased £13bn of Northern Rock mortgages from the UK government and a £2bn UK loan book from Ireland's Permanent TSB.

Numis said this small portfolio acquisition does little to cover Metro’s very high cost base. “We also question whether it is the right decision to be acquiring a portfolio of BTL mortgages at this point in the cycle,” it added.

At 1013 BST, the shares were up 1.4% to 3,770p.