Metro Bank Holdings Plc is weighing offloading a portion of its mortgage portfolio to rivals as it hastens plans to strengthen its finances and shore up confidence in its shares.
The company is aiming to ink any deals that would shore up its finances before the end of the year, according to people familiar with the matter. To that end, the challenger bank has approached larger rivals this week about selling a portfolio of residential mortgages, 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.
Share were up 6.8% at 9:09 a.m. in London. The lender’s shares slumped 50% in the weeks following the announcement, adding urgency to the company’s plans to bolster capital.
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.
(Adds share price in fourth paragraph.)
Author: Katherine Griffiths and Jan-Henrik Förster