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Metro Bank buys up £600m mortgage portfolio from Cerberus

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  • 02/06/2017
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Metro Bank buys up £600m mortgage portfolio from Cerberus
Metro Bank has spent almost £600m on acquiring a package of UK mortgages from US investment firm Cerberus.

The deal, for £596.7m, 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.

 

Diversified risk

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 seen a substantial increase in new mortgage lending over the last year as the bank continues its expansion.

Gross lending grew 12% in Q1 2017 compared to the last three months of 2016, and was up 57% on Q1 2016.

The bank made £4.023bn in total residential mortgage gross lending and advances to customers in the three months to March this year and reached its one millionth customer last month.

In its last trading update in April, the bank saw a 13% increase in deposit growth and underlying pre-tax profits rose from £1.5m to £2m.

International investment vulture funds from Cerberus, Goldman Sachs and Lone Star snapped up mortgage debt, development land and properties in Europe at bargain prices after the credit crunch. The funds provided much-needed capital, particularly for the Irish economy when other investors retreated and UKAR sold Northern Rock’s assets to Cerberus in November 2016.

However, their treatment of customers led the Irish Government to regulate debt purchase more stringently.

Cerberus has attracted consumer complaints in the UK and Ireland caused by heavy-handed debt collection practices and a failure to pass on SVR cuts to Northern Rock borrowers.

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