Metro Bank has struck a deal to refinance £600m of debt and confirmed it is in talks to sell £3bn of its mortgage book.
The bank has raised £325m in new funding, comprising £150m of new equity and £175m of regulatory equity and debt issuance, it said in a statement on Sunday.
It said the move: “Provides an opportunity to grow assets significantly over the coming years, via a gradual shift in asset side growth towards specialist mortgages and commercial lending.”
The lender also confirmed it was “in discussions” with firms over a sale of up to £3bn of its residential mortgages, which will add to its capital buffers and reduce its risk-weighted assets by up to £1bn.
The business has approached a range of lenders, including Lloyds Banking Group, JP Morgan Chase and NatWest Group, according to reports. It is unclear what bidders would be willing to pay for the portfolio of loans.
Metro Bank expects to complete a sale in the final quarter of this year. The sale is being handled by Morgan Stanley.
The lender said: “The transaction and asset sale will put Metro Bank in a strong position to accelerate earnings growth.”
Metro Bank chief executive Daniel Frumkin added: “Today’s announcement marks a new chapter for Metro Bank, facilitating the delivery of continued profitable growth over the coming years.”
The move sees Colombian billionaire Jaime Gilinski Bacal’s Spaldy Investments inject £102m of cash into the bank, raising his stake in the lender to around 53% from 9%, after becoming an active investor in 2019.
Bacal said: “The opportunity to become the Bank’s major shareholder is driven by my belief in the need for physical and digital banking underpinned by a focus on exceptional customer service.
“I believe that the package announced today enables the Bank to pursue growth and build on the foundational work undertaken over the past three years.”
The PRA said: “The Prudential Regulation Authority welcomes the steps taken by Metro Bank to strengthen its capital position.”
The announcement saw Metro Bank shares jump 27% in Monday’s early morning trading to 58p, valuing the business at £127m.
However, the firm has lost 50% of its value in recent weeks. At its 2018 peak, the bank was worth £3.5bn.
Last week, the bank’s stock tumbled by more than a quarter after reports that it was looking to refinance £600m of debt and sell £3bn of mortgages, ahead of £350m of loan notes that fall due next October.
Regulators, the Prudential Regulation Authority and Financial Conduct Authority, had summoned Metro’s chair Robert Sharpe chief and Frumkin to discuss the bank’s financial position.
The lender, which has around 2.7 million customers and holds about £15bn worth of deposits, was founded in 2010 and was the first high-street bank launch in more than 100 years. It operates from around 75 branches across the UK.
In 2019, the bank suffered a £900m accounting scandal, when it emerged that the risk attached to some of its loans had been underestimated. The business and some of its senior officers were fined £10m for misleading investors.
The bank says its gross mortgage balance slipped 0.8% to 7.59bn in the six months to June from the end of last year, according to its 2023 half-year report.
Residential owner-occupied home loans make up 72% of the firm’s mortgage portfolio.
