Talk circulated over the weekend that Metro was discussing selling £500m of buy-to-let mortgages back to US private equity investor Cerberus to shore up its balance sheet.
Just over a year ago the bank bought a portfolio of UK mortgages from Cerberus for £523m. Half of the loans were secured on property in London and the South East ‘with the remainder spread across the UK’ with a similar risk profile to Metro’s existing mortgage book according to the bank.
Metro has confirmed that ‘discussions regarding the potential sale of a loan portfolio are taking place’ although it hasn’t admitted whether they are the same loans it bought in March 2018.
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Shares in Metro Bank have lost more than 70% this year after the company admitted in January that it mis-labelled some of its buy-to-let mortgages and had to increase its provisions. The error was picked up by the Bank of England rather than the bank itself, raising questions about internal governance.
The fall in the share price this year meant that the value of the bank’s equity plunged, to the point where in May it had to launch a rights issue to recapitalise.
The bank issued 75m new shares at 500p to raise £375m which it described as ‘growth capital to expand the business and implement our strategic initiatives’.
Now it seems as though it is shrinking its business instead with the sale of a loan portfolio rather than expanding it.
Metro is due to report half-year earnings this Wednesday. In the first quarter the bank warned that adverse sentiment following January’s news had ‘impacted deposit growth, with a small number of large commercial and partnership customers making withdrawals’.