In an effort to expand its influence in the mortgage industry, Barclays has agreed to acquire specialist UK mortgage lender Kensington from private equity firms Blackstone and Sixth Street.
As part of the agreement, the British bank would purchase Kensington’s home loan portfolio for £1.2 billion.
Barclays plans to pay around £2.3 billion if the acquisition is finalised in December and Kensington’s mortgage book includes approximately £2 billion in loans at that time.
Multiple bidders, including Starling Bank, engaged in the auction that led to the sale, according to those familiar with the matter.
This action is a response to the increased competition in the UK mortgage market and rising interest rates, which are increasing the profitability of lenders.
Kensington, based in Maidenhead, is a specialised mortgage lender that focuses on delivering residential property loans through brokers to customers who may have problems borrowing from large high street banks, such as the self-employed.
The lender was previously owned by Investec until 2014, when it was sold to private equity.
CEO of Barclays Bank UK, Matt Hammerstein, commented that the deal “reinforces” the bank’s commitment to the UK residential mortgage market and “presents an intriguing opportunity to expand our product offerings and capabilities.”
About 70% of Kensington’s mortgage portfolio consists of owner-occupied homes, while 30% consists of investment properties. The average loan-to-value ratio of the portfolio is 77%.
Barclays anticipates that the transaction will occur in the fourth quarter of this year, at which time its common stock tier one ratio, a key sign of financial soundness, will decline by approximately 12 basis points.