February 23, 2018 / 4:39 PM / 22 days ago

UPDATE 1-Metro Bank buys $731 mln mortgage portfolio from Cerberus

(Recasts, adds further details)

By Emma Rumney and Lawrence White

LONDON, Feb 23 (Reuters) - Britain’s Metro Bank will acquire a 523 million pound ($731 million) mortgage portfolio from two companies controlled by U.S. private equity firm Cerberus, the bank said on Friday.

The portfolio was purchased from buy-to-let mortgage provider Capital Home Loans, previously owned by Ireland’s Permanent TSB which sold the portfolio to Cerberus, and CERH RSMC Sub B.V., also owned by Cerberus.

The investment firm has been among the most active buyers of bad debts in Europe in the years following the 2008 financial crisis, snapping up cheap loans from Ireland to Italy and selling them on as market conditions improved.

Metro Bank said the portfolio was secured mostly on properties in London and the south east of England and had a similar credit profile to its current mortgage book.

“This high-quality loan portfolio further strengthens our high growth, organic business model and complements our conservative risk appetite,” CEO Craig Donaldson said in a statement.

Metro Bank is one of a number of challenger banks in Britain that are struggling to grow their loan books amid the dominance of Britain’s big high-street banks.

It is targeting a loan to deposit ratio of 85 to 90 percent by 2020, up from the previously stated target of around 85 percent. Before upgrading its target, analysts had wondered whether Metro Bank would have to compromise on credit quality in order to meet its goals.

The deal, financed using cash from the bank’s existing resources, is expected to complete on March 1.

Metro Bank on Wednesday reported its first annual profit, raising its 2020 targets and saying it would open 12 branches this year, creating 900 jobs. ($1 = 0.7155 pounds) (Reporting by Emma Rumney, editing by David Evans)

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