Barclays PLC (LSE:BARC) has bought residential mortgage lender Kensington Mortgage Company Limited (KMC) from private-equity firms Blackstone and Sixth Street Partners in a deal it expects will broaden its UK mortgage portfolio, it said in a statement today.
The bank said the purchase will allow it to expand its offering in the mortgage market, increase its customer base and grow “mortgage initiations to better utilise our strong UK funding base”.
KMC, which was previously jointly held by the Blackstone Tactical Opportunities Advisors LLC fund portfolio and San Francisco-based investment firm Sixth Street, specialises in residential mortgages offered through brokers to borrowers with complex incomes. Its customers include self-employed people and those with multiple or variable incomes. Based in Kent and employing 600 staff, it also services mortgages on behalf of third parties.
The mortgage provider will keep most of its mortgages on its balance sheet after the transaction, Barclays said in a statement.
Its mortgage portfolio was worth about £1.2bn as of 31 May, 70% of which were owner-occupied and 30% were buy-to-let residential mortgages. The weighted average loan-to-value ratio on its mortgages was about 77% at the time of origination, according to the statement.
Barclays said it has agreed to buy a portfolio of UK mortgages originated by KMC since last October.
It will pay £2.3bn for the lender, conditional on whether the mortgage portfolio is worth £2bn by December.
Barclays said it plans to finance the deal with existing capital. After the transaction, it expects its CET1 ratio, which compares a bank’s capital against its assets, to reduce by 12 basis points compared to 31 March.
KMC generated £1.1mln of pre-tax profit in the six months ending 31 March, while also making hedging gains.
The lender was incorporated in October 2020, following the pandemic, and has £100 of issued share capital.
Matt Hammerstein, chief executive of Barclays Bank UK, said: "The transaction reinforces our commitment to the UK residential mortgage market and presents an exciting opportunity to broaden our product range and capabilities.
“KMC complements our existing UK mortgage business and broker relationships through the addition of a specialist prime mortgage originator and the utilisation of our strong UK funding base.
“The transaction should generate attractive returns for Barclays over the medium term as the KMC mortgage portfolio increases in size through the ongoing origination of new mortgages.”