Embattled lender Metro Bank has confirmed that discussions are taking place over the sale of its loan portfolio.

The affirmation to investors follows reports that the high street bank is closing on a £500 million deal to offload its mortgage book to a US hedge fund.

Metro Bank has been eyeing up ways to improve its financial position following a torrid few months in the wake of a major accounting error.

US hedge fund Cerberus Capital Management is tipped to snap up the loan portfolio, according to Sky News.

Cerberus has had a long connection with Metro Bank and has sold the lender more than £1 billion worth of assets including a £520 million deal for its buy-to-let portfolio in February 2018.

In a statement to investors, the bank said: “The company regularly assesses various opportunities in the market and accordingly confirms that discussions regarding the potential sale of a loan portfolio are taking place.

“There can be no certainty at this stage that an agreement will be reached.

“A further announcement will be made if and when appropriate.”

The news comes just days before Metro Bank is set to provide its latest interim results announcement on Wednesday.

In the past 18 months, Metro Bank’s share value has tumbled by almost 88% following governance concerns and the major accounting blunder.

In January, the lender, which had 67 branches in London and the South East, said it had under-reported the risk element on some loans by almost £1 billion.

It later revealed a hit to profits and suffered a subsequent sharp decline in share price as it warned that it was short of the capital needed to grow.

The bank’s shareholders approved a £375 million equity raise in June which allayed immediate cash flow fears.

However, the retail bank’s need to fundraise prompted renewed speculation about the tenure of Vernon Hill, its founder and chairman.

Henry Saker-Clark is PA City Reporter.