Lloyds sheds £3bn of non-core loans

Bank makes progress on reducing unwanted positions

Lloyds Banking Group has reduced its UK non-core commercial real estate loans by £3bn in the first nine months of the year.

Lloyds logo CROPPEDThe total now stands at £4bn, a 43% drop over the period, the bank announced in its third quarter interim management statement this morning.

The part public-owned bank has made steady progress in decreasing its unwanted real estate exposures over the past few years and is steadily building back up its new property lending business.

Lloyds’ non-core commercial real estate exposures are not only those that are distressed or non-performing but also any that it no longer wishes to hold on its balance sheet and intends to just run-off.

Commercial real estate now makes up 17.4% of Lloyds’ £23bn run-off or non-core portfolio compared to 21.2% at the start of the year. Across Lloyds’ non-retail, non-core positions – which commercial real estate is classified as – it is forecasting a further 12.5% decrease by the end of the year. If this was applied to non-core real estate it would imply a further £500m reduction.

Richard Dakin resize2The Business Support Unit, which has been responsible for disposing of those exposures which Lloyds holds that have been distressed, will see its leader Richard Dakin (pictured) leave the bank next month as the unit closes in on completing its task.

Lloyds’ new real estate lending drive is being headed by global head of commercial real estate, John Feeney.

Also in Lloyds’ announcement it said that it would close 200 UK branches, open 50 and cut 9000 jobs. It also revealed that it was putting aside an additional £900m of provisions for complaints over miss sold payment protection insurance (PPI). It delivered a statutory profit before tax of £1.61bn in the first nine months of the year, a 4.7% drop on same period the previous year.