(Reuters) -Britain's Metro Bank is selling its portfolio of prime residential mortgages to NatWest Group for up to 2.4 billion pounds ($3.1 billion) in cash, it said on Friday.

The sale is expected to reduce Metro's risk-weighted assets by approximately 824 million pounds, leading to an improvement in the British lender's Common Equity Tier 1 (CET1) ratio of about five basis points, its statement said.

Metro Bank launched to challenge the dominance of the Britain's big banks in the wake of the global financial crisis, but struck a 925 million pound rescue deal last year and has since implemented cost cuts to heal its balance sheet.

The bank said the sale of the mortgage portfolio was in line with its strategy to "reposition its balance sheet and enhance risk-adjusted returns on capital".

However, Metro Bank said the mortgage book had been originated when interest rates were lower and it would realise a 105 million pound loss on completion of the sale.

($1 = 0.7775 pounds)