Lloyds Banking Group reduced non-core UK commercial real estate loans by £2bn in the first three months of this year, taking the partly nationalised bank’s remaining legacy property debt to rundown at just £10.4bn.
In Lloyds first quarter results published this morning, the bank reported that its total non-core commercial real estate book was now down to £11.5bn – comprised of £10.4bn for the UK loan book and £1.1bn in other non-core commercial property.
Lloyds’ net exposure in the real estate sector – including global commercial and residential loans, social housing lending and house builders’ loans – was at £52.39bn at the end of 2012, which has fallen to around £50bn at the end of the first quarter, following this further £2bn reported rundown.
In respect of the latest rundowns, Lloyds wrote this morning: “They continue to be managed in a capital efficient manner, and were capital-accretive.”
So far this year, Lloyds has closed the sale of three commercial property non-performing loan portfolios (NPL):
- the €360m Irish Project Pittsburgh NPL, which traded to CarVal Investors for €95m, including €3m co-investment from Pepper Asset Servicing, reflecting a 73.6% discount;
- the €1.8bn (£1.46bn) Irish Project Lane NPL, which traded to Apollo Global Investors at an 89% discount, financed with a €90m loan from Credit Suisse;
- the €850m German Project Chamonix NPL, traded to Marathon Asset Management, reflecting a 52.9% discount.
However, CoStar News understands that projects Lane and Chamonix closed in April, which perhaps accounts for Lloyds’ single commercial real estate de-leveraging figure of £2bn confirmed this morning as reflecting its UK non-core loan book only.
In addition, Lloyds is expecting final bids for the £500m Project Thames, the bank’s fourth UK NPL, early next month, after which, Lloyds’ third Irish NPL is expected to emerge, which CoStar News understands is likely to be around €1bn in size.
Five weeks ago, CoStar News reported that three-strong shortlist for Project Thames – which was earlier known as Project Wagner – comprised Apollo, Cerberus and Kennedy Wilson.
Lloyds’ group underlying profit for the first quarter was £1.48bn, compared with £497m for the same period last year.
In its 2012 annual results, published two months ago, Lloyds’ reported that it’s combined non-core commercial and residential investment real estate loan exposure was £12.7bn – split £10.2bn in commercial real estate and £2.5bn in residential.
Over the four years to the end of last year, Lloyds de-leveraged £45.01bn in global commercial real estate loans, including shedding £12.36bn across its combined core and non-core property loan book in 2012.
In an analysis of Lloyds aggregate impairment charges for its £45bn global property loan book de-leveraging, CoStar News calculated that the total impairments taken over this four-year period was approximately £13.1bn.