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Barclays has agreed to buy specialist lender Kensington Mortgages from private equity firms Blackstone and Sixth Street in a bid to broaden its product range as well as its loan book.
The deal also includes the lender’s £1.2bn loan book, which is around 70 per cent owner-occupied and 30 per cent buy-to-let.
Barclays said in an announcement today (June 24) it expects to pay around £2.3bn, providing the deal goes through at the beginning of December and that Kensington’s mortgage book holds around £2bn of loans by then.
Kensington is based in Maidenhead, employs some 600 employees and services mortgages for a handful of other parties.
In a statement, the bank said the acquisition will enable Barclays to broaden its product offering in the UK mortgage market, extending the number of customers it can serve and increasing how many mortgages it can originate.
Kensington describes itself as a specialist lender catering to those clients of brokers who have “complex incomes” - i.e. self-employed and customers who have multiple or variable incomes.
In November last year, the lender launched a rare 40-year fixed rate mortgage. The product, funded by pension insurer Rothesay, does not need to include a buffer for potentially higher rates, which it said allows borrowers to take out larger loans.
According to FTAdviser's sister title the Financial Times, Kensington has attracted a range of bidders, including Starling Bank which is set to buy Masthaven’s £500mn loan portfolio.
Kensington was previously owned by Investec before it was bought by private equity in 2014.
The lender generated a pre-tax profit of £500,000 in the year ended March 31, 2021, with gross assets of approximately £66.7mn.
Deal will add specialist prime mortgage origination
Historically Kensington did not hold mortgages on its balance sheet. But following completion of the transaction, the lender is to retain the majority of mortgages that it originates which totalled - excluding retentions - £1.6bn at the end of March last year.
Barclays chief executive, Matt Hammerstein, said: "The transaction reinforces our commitment to the UK residential mortgage market and presents an exciting opportunity to broaden our product range and capabilities.
He described Kensington as a best-in-class specialist mortgage lender with an established track record in the UK market, “strong” broker and customer relationships and data analytics capabilities.
“Kensington 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,” he explained.
“The transaction should generate attractive returns for Barclays over the medium term as the KMC [Kensington] Mortgage Portfolio increases in size through the ongoing origination of new mortgages.”
ruby.hinchliffe@ft.com
