The UK's Metro Bank said on Friday that it is selling its portfolio of prime residential mortgages to NatWest Group for up to £2.4 billion (€2.85bn) in cash.
It comes after the bank struck a £925 million rescue deal last year and has since implemented cost cuts to heal its balance sheet.
The bank said the sale of the mortgage portfolio was in line with its strategy to "reposition its balance sheet and enhance risk-adjusted returns on capital".
NatWest echoes Lloyds earnings
Meanwhile, NatWest released it latest financial results on Friday and echoed the theme from Lloyds Banking on Thursday with a creditable half-yearly performance boosted by a strong second quarter.
However, NatWest’s first-half pretax operating profit fell by 16% to £3 billion.
“The similarities between the two businesses are evident across the board, but most promisingly the strength of the second quarter could mark an inflection point with inflation falling and interest rates likely to follow suit, to the benefit of the end customer," Richard Hunter, head of markets at Interactive Investor, said.
The bank's operating pre-tax profit for Q2 came in at £1.7 billion, leading to a figure of £3 billion for the half-year. Net Interest Income for the latest quarter was in line at £2.76 billion, with the Net Interest Margin figure improving from 2.05% to 2.1%, again suggesting some stabilisation.
NatWest moving to another level?
Hunter further noted that there are a number of other signs that NatWest is now moving to another level, with Return on Tangible Equity (ROTE) rising to 16.4% from 14.2% the previous quarter, leading to an upgrade on the full-year outlook to a figure in excess of 14%. "The total income figure was also subject to an upgrade to around £14 billion from a previously guided range of between £13 billion and £13.5 billion," he said.
In addition, the analyst noted, the bank has been busy in growing its lines of potential revenues.
"Quite apart from the previously announced acquisition of the majority of Sainsbury’s Bank, which is expected to add one million customers, NatWest added 200000 accounts over the period, while customer deposits rose by £6.1 billion. In addition, the NatWest has announced that it is acquiring £2.5 billion of UK residential mortgages from Metro Bank, which will further bolster its financial firepower," he said.
Meanwhile, the strength and stability of NatWest's balance sheet has also enabled an increase to the dividend, which gives a projected yield of 5.2%, with every likelihood of more hikes to come.
"The previously announced £1.2 billion share buyback programme was completed in May and, subject to a continuation of the most recent trends, a fresh announcement could quite conceivably follow over the coming months," Hunter added.
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