Barclays in £1billion battle for mortgage lender Kensington

BARCLAYS is bidding for mortgage business kensington in a deal that would value it at £1bn.

The British bank is understood to be competing against digital bank Starling for the lender, which is backed by investment giants Blackstone and Sixth Street. Fund groups M&G and Pimco are vying to pick off kensington’s mortgage portfolios.

kensington was put up for sale last year in an auction process led by investment bankers at Morgan Stanley. A source said Natwest has also looked at the deal, although it is no longer in the bidding process.

kensington, led by chief executive Mark Arnold, focuses on home loans to the over-55s and the self-employed. it is not clear if Barclays is aiming to acquire the entire company or pick off parts of the business, which includes a mortgage servicing platform and portfolios of home loans.

The move comes under new Barclays boss CS Venkatakrishnan, who is known as Venkat and was promoted to chief executive in November following the shock resignation of Jes Staley amid a row over his relationship with sex offender Jeffrey epstein.

Asset managers are also eyeing the mortgage portfolios in the hunt for income-generating assets, a source said. kensington launched in 1995, lending to customers who find it tough to borrow from the high street banks.

it was owned by the bank investec until 2014, when it offloaded the company to private equity companies Blackstone and TPG, which has since spun out Sixth Street. Last year, kensington sold a mortgage book worth around £1bn to digital bank Starling, founded by Anne Boden.

it also launched one of the first 40-year fixed rate mortgages, allowing borrowers to stay on the same interest rate for the entire term of the mortgage.

kensington teamed up with insurance giant rothesay to fund the deals, which offer fixed rates below 3pc. Arnold said at the time: ‘it looks very likely that we will see a succession of interest rate hikes and we may begin to slowly approach again an historical average.’

The deals were launched just before the Bank of england raised interest rates from a record-low 0.1pc to 0.25pc. Analysts expect the Bank to increase rates again next week to 0.5pc to stem surging inflation, which has hit a 30-year high of 5.4pc.

With energy bills soaring, some economists believe interest rates could hit 1.25pc this year.

kensington, Barclays and NatWest declined to comment.