Metro Bank sells £584m mortgage e book because it prioritises specialist lending

Metro Bank has agreed to sell a £584million portfolio of personal loans in an ‘acceleration’ of the bank’s strategy to prioritise specialist lending.

The high street challenger said the disposal of the unsecured loan book, whose average remaining fixed-rate term is 2.4 years, to an unnamed buyer would deliver an estimated £11million day-one gain for the company once finalised.

It also expects the deal to bolster its common equity tier 1 ratio – a measure of capital strength – by around 81 basis points.

Metro said the transaction will give it greater lending capacity to focus on areas like commercial, corporate, and specialist mortgages and loans for small and medium-sized businesses.

The London-based firm has not provided any personal and unsecured lending since late 2023 as part of its transition towards specialist lending.

At the same time, it has undertaken an £80million cost-cutting programme by making 1,000 staff redundant, reducing opening hours, and axing seven-day trading in all branches.

Deal: Metro Bank has agreed to sell a £584million portfolio of personal loans in an ‘acceleration’ of the bank’s strategy to prioritise specialist lending 

It launched the cost savings plan after securing a £925million rescue package that involved Colombian billionaire Jaime Gilinski Bacal becoming the group’s majority shareholder with a 53 per cent stake.

Metro’s financial performance has struggled since it acknowledged misclassifying the risk levels of some commercial loans in early 2019, which led to its shares plummeting by almost 90 per cent in a year.

But after years of losses, the company recently revealed it had rebounded to profit in October, with chief executive Daniel Frumkin crediting the ‘continued emphasis on cost discipline and balance sheet management.’

The following month, the Financial Conduct Authority fined Metro £16.7million after an investigation uncovered historical failures in the firm’s money laundering checks.

Frumkin told investors on Wednesday: ‘The sale of our unsecured personal loan book is in line with our strategy and positions Metro Bank strongly for future growth.

‘Upon completion, the transaction is capital accretive and will allow us to further optimise our balance sheet as we strengthen our position as a specialist lender of choice.’

Metro was Britain’s first high street bank for over 150 years after being founded in 2010 by Anthony Thomson and US-born Vernon Hill.

It currently has around 3 million customers and 77 branches across Britain, mainly in London and the south of England.

Russ Mould, investment director at AJ Bell, said: ‘Having returned to profitability last October, the personal loans sale is another step forward for the bank as it tries to get back on top after a patchy period.’

Analysts at Peel Hunt noted that while the sale results in no changes to performance guidance, it marks an ‘acceleration’ of its strategy to reposition its balance sheet, ‘leading to higher returns’.

They added: ‘The steadily rising groundswell of positive news for Metro continues. 

‘Having set out an ambitious and transformative strategy aiming to generate returns above the sector average (from a historic, perennially loss-making position), management is now showing how it may be able to deliver on its plans even more rapidly than its already tight stated timeframe.’ 

Metro Bank shares were up 1.2 per cent to 94.9p on Wednesday morning but have soared by approximately 167 per cent over the past year.