Barclays acquires Standard Life Bank at 22.9% discount to NAV

Posted on 26 October 2009 by Ray Boulger

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The announcement this afternoon that Barclays are acquiring Standard Life Bank is sad news for consumers, not because of anything negative about Barclays but because it means that one of the dwindling number of brands still active in the mortgage market will no doubt disappear next year when the sale is concluded, or soon afterwards.

Standard Life Bank is one of the few lenders still offering mortgages with fixed rates for longer than 5 years and is also one of a relatively small number of lenders still in the Buy-to-Let market. It is still a young bank, having been launched only 11 years ago, but has been innovative, with one of its initial products being a 25 year capped rate mortgage. However, its rates have been uncompetitive for some time, which is an indication it currently has little appetite to lend.

In the current market the stronger banks like Barclays are in prime position to pick up assets cheaply and that is certainly what Barclays appears to have done here. It is paying £226m for the profitable Standard Life Bank, based on its estimated £293m of tangible net assets, i.e. a 22.9% discount to net asset value.

With outstanding mortgage balances of £8.8bn Standard Life Bank only has about 0.7% of total UK residential mortgage balances but its average indexed LTV of 48% indicates a good quality book. A better assessment of quality could be made if a breakdown of the proportion of mortgages in different LTV bands was provided, but even though Standard Life offered mortgages to 100% LTV it only offered these to a fairly limited range of professionals and so I would expect even its high LTV book to be of good quality.

Categories: Buy to let, Mortgages

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