Crisis-hit Metro Bank in £3 billion mortgage book sell-off

The crisis hit Metro Bank is in talks to sell off at least a £3 billion portion of its mortgage book.

The bank's shares sank by a third at the end of last week following media reports that it needed to raise up to £600m.

Metro was founded just after the 2010 financial crisis and was the first bank to open in the UK in over 100 years. It described itself as a “challenger" bank to prominent High Street names and it now has about 2.7m customers.

At the end of last week Metro was in a series of talks.

One set was between Metro’s chair Robert Sharpe and officials from the Bank of England’s Prudential Regulation Authority and Financial Conduct Authority to discuss the bank’s overall dire position. 

The second set of talks was to find a buyer for its mortgage book, which is widely considered to be a safe and sought-after asset.

The third talks concerned a possible overall buyer for the bank - media reports suggest Lloyds Banking Group and NatWest have been approached.

One informed media report, from Sky News, says: “One insider said the sale process for the Metro Bank mortgages was designed to form part of a wider capital-raising exercise. This … would include raising more than £100m of new equity and refinancing a £350m debt instrument which falls due in 12 months time.”

Metro Bank has stressed that no decision had been made as yet and that it is meeting all of the minimum cash requirements set out by financial watchdogs. It returned to profit in the six months to the end of June this year, partly helped by higher interest rates.

This marked the first half-year profit the bank had seen since an accounting scandal in 2019, when it emerged that risk attached to some of its loans was underestimated.