UK Edition
Metro Bank to sell £500m of mortgages to US hedge fund
Metro Bank is racing to offload around half a billion pounds of mortgages to a US hedge fund in the hope it will boost its latest numbers after a “particularly tough” quarter.
The under-pressure FTSE 250 lender, which reports first-half results on Wednesday, has had a difficult year after admitting in January that £900m of risky loans had been miscalculated.
It was later forced to admit that it was actually the Bank of England that found the error, despite previously insisting it spotted the flaw itself.
Last night it emerged that Metro is preparing to sell a £500m slice of its mortgage book to Cerberus Capital Management, a US hedge fund that specialises in buying distressed loans. The deal could be completed as early as Wednesday, boosting its capital position, Sky News reported.
Metro Bank said today that it "regularly assesses various opportunities in the market and accordingly confirms that discussions regarding the potential sale of a loan portfolio are taking place".
It added there was no certainty that an agreement would be reached.
John Cronin, a UK banks analyst at Goodbody, said he was “concerned regarding deposit outflows” for the latest upcoming set of results as he suspects the lender will have faced “material further net outflows” over the last three months.
He said the fake social media rumours, which went viral in May and questioned the bank’s health, will not have helped. “However, we do know that Metro still had sufficient liquidity in late May. So, I’m not talking about a funding gap opening up – but further material outflows nonetheless,” he added.
At the time Metro Bank said it “experienced a short period of deposit net outflows following the intense press speculation” ahead of the raise.
Ian Gordon, an analyst at Investec, said the last quarter would have been “particularly tough” for the bank and he was expecting zero loan growth over the period. He forecast deposit outflows of £550m for the second quarter, slightly down on the first quarter.
“After consistently delivering quite extraordinary growth over the past nine years, the story has effectively been on hold for the past two quarters,” he said.
Metro’s last results were described as a “truly horrible set of numbers” as it revealed profits had halved to £6.1m.