Metro Bank Eyes Selling Part of Mortgage Portfolio to Raise Cash

(Bloomberg) — Metro Bank Holdings Plc’s shares rebounded Friday as it emerged the lender is considering the sale of a portion of its mortgage portfolio to shore up confidence in its shares and finances.

The challenger bank approached larger rivals this week about selling a portfolio of residential mortgages, according to people familiar with the matter. The company is aiming to ink any deals before the end of the year, the people said, asking not to be identified discussing internal deliberations.

Metro Bank had been in discussions over the summer with existing investors about potential options for raising capital, one of the people said. Those talks hit a stumbling block after the bank disclosed on September 12 that the Bank of England’s Prudential Regulation Authority would not allow it to use a new model for assessing the risk weighting it assigns to mortgage loans that would allow it to bolster capital ratios.

The lender’s shares were up 29% at 12:43 p.m. in London, after falling by a quarter on Thursday and more than halving in the weeks following the announcement, adding urgency to the company’s plans to bolster capital. 

Bonds issued by Metro Bank maturing in October 2025 fell 6 pence on the pound to 51.2 pence, according to data compiled by Bloomberg, after closing on a record daily drop of 12.9 pence on Thursday.

Metro Bank is still hoping to raise capital from investors, alongside asset sales, the person said. Its major existing shareholders include Colombian financier Jaime Gilinski, who could not be reached for comment over whether he had been approached.

The company said in a statement Thursday it was exploring various options including “a combination of equity issuance, debt issuance and / or refinancing and asset sales.” The latest announcement sparked another selloff in the company’s shares and a £350 million senior bond fell 8.3 pence to 61.8 pence, a record low, based on prices compiled by Bloomberg.

The company has held talks with Lloyds Banking Group Plc and NatWest Group Plc about the potential sale of roughly £3 billion of mortgages, according to Sky News, which reported the talks earlier.

–With assistance from Ruth David and Libby Cherry.

(Updates with share price, bonds in fourth paragraph.)

©2023 Bloomberg L.P.

The post Metro Bank Eyes Selling Part of Mortgage Portfolio to Raise Cash appeared first on Bloomberg.

Leave a Comment