NatWest has agreed a deal with Metro Bank to acquire its mortgage portfolio, valued at £2.5bn.

The Metro Bank portfolio has a weighted average current LTV of 62%, and the acquisition will see around 10,000 customer accounts be transferred over to NatWest.

Following completion of the transfer, the portfolio will still be managed by Metro Bank.

Chief executive officer at NatWest, Paul Thwaite, said: "Following today's announcement, we are acquiring £2.5bn of prime residential mortgages from Metro Bank and, as a result, look forward to welcoming around 10,000 customers to NatWest Group.

"This transaction is a further opportunity to accelerate the growth of our retail mortgage book within our existing risk appetite, with attractive returns. It is in line with our strategic priorities and builds on our recent acquisition from Sainsbury's Bank.

"We are focussed on a smooth transition and have a strong track record of successful integration with Metro Bank, following our previous acquisition of mortgages in 2020."

The news comes as NatWest announced that it had beat expectations in the second quarter, with operating profits before tax reaching £1.7bn, following an estimated £1.3bn.

As a result, it now expects its return on tangible equity to hit over 14% for the year, up from a previous forecast of 12%.

The FT has reported that NatWest shares increased by as much as 8% in early trading, with gains for the year jumping by more than 60%.

Head of financial analysis at AJ Bell, Danni Hewson, added: "NatWest’s long, long recovery from the financial crisis looks as meaningful as it has done at any point in the last 16 years or so with the company’s latest results including plenty to like from the point of view of shareholders.

"Unlike Lloyds, whose own better than expected numbers received a muted response from the market, NatWest is not only benefitting from lower impairments but also higher than anticipated income and the company not only beat on the second quarter but it is lifting guidance for the full year too.

"The company has enjoyed strong share price gains so far this year despite the overhang presented by the UK government’s stake. This has been reduced by consistent selling through the course of 2024 from 38% to less than 20%.

"Conservative plans to launch a public share offer in NatWest may not now come to fruition with Labour chancellor Rachel Reeves reported to be leaning towards a plan of offloading a big chunk of the government’s remaining stake to institutions."

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