Lloyds cuts UK property bad book to £1.3bn

The sell-off of Lloyds Banking Group’s UK real estate loan book is close to completion.

The sell-off of Lloyds Banking Group’s UK real estate loan book is close to completion.

In its annual results today the bank revealed that it had only £1.3bn of impaired UK property loans on its books. These have £547m of impairment provisions held against them, meaning that Lloyds values them at £737m.

The bank has a further £2bn of unimpaired loans in its run-off book, which it is also looking to offload. It therefore has a total £3.3bn of gross UK loans within its run-off book which it values at £2.76bn.

In addition, the UK clearer still has £1.8bn of gross unwanted exposure to Irish commercial real estate. This is much more heavily distressed and has £1.4bn of provisions held against it, valued at only £412m.

The bank had one of the UK’s biggest problem property loan books following its merger with Bank of Scotland in 2009. At that time its loanbook had £55bn of problem positions.

The book was wound down under the bank’s business support unit, which until November was headed by Richard Dakin. Dakin is now managing director at CBRE Capital Advisors.

Of the bank’s £2bn of unimpaired UK loans, £1.13bn is held by Secure Income REIT, the listed company headed by Nick Leslau and Mike Brown which kicked-off a refinancing process earlier this week.

During 2014 the bank sold off £4.3bn of gross UK commercial real estate loans, recouping £2.3bn.  Lloyds also cut gross exposure in Ireland, by £3.7bn from £5.5bn, recouping £1.3bn.

Lloyds is still 24% owned by the UK government, which is in the process of selling-off its stake. The bank announced a dividend of 0.75p per share as part of its results, the first dividend since it was bailed out in 2008.

António Horta-Osório, chief executive, said: “Over the last four years we have transformed Lloyds Banking Group into a low cost, low risk, UK focused retail and commercial bank… Today’s results also demonstrate that our profitability and capital position have improved significantly, and this has enabled the board, for the first time in over six years, to recommend we pay a dividend to our shareholders.”