LendInvest PLC on Tuesday announced the sale of a portfolio of buy-to-let residential mortgages to Chetwood Financial Ltd for around £243 million.
The London-based non-bank mortgage lender said it will continue to manage and service the portfolio, which includes mortgages from March 1, 2022 to November 30, 2022, on behalf of Chetwood following the completion of the sale.
LendInvest noted that within those nine months, there was a substantial rise in overnight indexed swap rates due to increases made to the UK base rate, which rose from 0.5% to 3.0%. This caused the profitability of these mortgages to decline, it said.
LendInvest will use the sale proceeds to repay the facilities that financed the assets, it said, allowing the capital to be redeployed to originate new mortgages with stronger margins.
‘This sale is another demonstration of LendInvest’s commitment to optimising its funds under management, while at the same time reducing the proportion of its platform assets under management on its balance sheet,’ LendInvest said.
LendInvest said the book value of the portfolio being sold was around £250 million on Friday last week, meaning it will realise a net pretax loss on the sale of the portfolio and the cancellation of the related derivatives of around £10.5 million, which will be recognised in the financial year ending March 31, 2024.
This largely offsets the net pretax profit of £10.8 million generated from the sale of residual economic interests, which LendInvest had announced last month, leaving the profit-and-loss impact ‘marginally positive’, it said.
‘This transaction demonstrates our proactive approach to capital management and supports our longer term strategy to manage an increasing proportion of platform assets for third parties,’ said Chief Executive Officer Rod Lockhart.
‘It also initiates a new partnership, adding to a growing list of global financial institutions choosing to back our mortgage products. We believe the diversity, sophistication and continued commitment of our funding partners is a powerful demonstration of their trust in our capabilities.’
LendInvest shares were trading flat in London on Tuesday before midday.
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