Barclays reaches agreement to acquire Kensington Mortgages
Barclays reaches agreement to acquire Kensington Mortgages

Barclays reaches agreement to acquire Kensington Mortgages

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  1. Barclays plans to pay nearly £2.3 billion for Kensington Mortgages.
  2. The British Bank will also buy the £1.2 billion Kensington home loan portfolio.
  3. Kensington is a specialist mortgage lender focused on providing residential property loans through brokers.

Barclays has agreed to acquire UK-based specialist mortgage lender Kensington from private equity firms Blackstone and Sixth Street in a bid to expand its presence in the mortgage market.

As part of the acquisition, the British bank will also buy Kensington’s £1.2 billion loan portfolio.

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Barclays plans to pay around £2.3 billion if the purchase closes in December, and Kensington’s mortgage book contains loans of around £2 billion at the time.

Several bidders, including Starling Bank, participated in an auction that led to the sale, according to people familiar with the matter.

The move comes in response to intense competition in the UK mortgage market and rising interest rates, which are boosting the profitability of lenders.

Kensington, headquartered in Maidenhead, is a specialist real estate lender focused on providing residential property loans through brokers to individuals who may have difficulty borrowing from major banks, such as the self-employed.

Investec was the owner of the lender until 2014 when it was sold to private equity.

Matt Hammerstein, Chief Executive Officer of Barclays UK, said the transaction “reinforces” the bank’s commitment to the UK residential mortgage market and “presents an exciting opportunity to expand our products and capabilities”.

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About 70% of Kensington’s mortgage portfolio is owner-occupied, while 30% is investment property. The average loan-to-value ratio for the portfolio is 77%.

Barclays expects the transaction to close in the fourth quarter of this year, at which point the Tier 1 ratio of common stock, an important indicator of financial health, will drop by about 12 basis points.

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