Metro Bank says it will not, after all, be selling its residential mortgage portfolio despite widespread industry speculation that it was being used to raise £3 billion for the troubled lender.

The move follows the Metro’s recent cost reduction plan which will involve downsizing the workforce by 20 per cent, cutting opening hours of branches, and axing some customer perks.

In October Metro Bank announced a £325m capital raise and £600m debt refinancing in a bid to bolster its finances after a serious of problems including accounting errors, leadership departures and delayed regulatory approval for key capital relief. In one day that month, the bank’s share value fell by 25 per cent.

Metro Bank, which has some 2.7m customers, became the first new lender to open on Britain’s high streets in over 100 years when it launched in 2010.

It offers current accounts, business accounts, personal loans and insurance products, and employs about 4,000 people, operating from about 75 branches across the country.

Metro said over the Christmas period it did “carefully consider” the mortgage book sale but decided that “given the prevailing market environment, it is in the best interests of shareholders to retain the existing loan portfolio”.

Sky News last month had reported that Barclays was in exclusive talks to buy the mortgage book; other contenders included Spanish bank Santander.