Co-operative progresses piecemeal £1.7bn commercial property loan disposals

Co-op logoOver the six months to the end of June, the Co-op reduced its legacy non-core UK commercial property loan exposure by £536m to £1.65bn within the troubled cooperative’s corporate loan book.

CoStar News understands that the C0-op is already in discussions with several potential loan buyers for differing sub-pools.

The Co-op’s £1.65bn commercial property investment loan book is comprised of £887.8m of loans in default, with a further £51.7m of loans classified as “weak”.  The balance of £714.2m of loans is within “standardised”, “strong”, “good” and “satisfactory” – including £562.8m of “good” loans.

Additionally within that book, the Co-op has £239.2m of commercial property development loans, of which, £78.5m are in default.

In an analyst presentation, the Co-op described its remaining CRE non-core exposure as “concentrated with high NPL ratio,” “poorly structured” and “capital intensive”.   The C0-op is holding £1.5bn in risk-weighted assets against its £1.7bn commercial real estate loan book.

The CRE non-core portfolio is “marked to monetisation strategy”, in a reference to the current disposal talks underway.

Within the Co-op’s Business and Commercial Banking (BaCB) loan book, there is a further £198.3m in commercial property loans and £11.5m in development loans.

In its interim results published this morning, Niall Booker, Co-op Bank CEO, wrote: “The speed of the disposal of Non-core assets and the reduction in risk weighted assets reflects the headway made by the dedicated team we established to manage the run down and disposal of these assets together with favourable economic conditions.”

In the first half of 2014, the financial performance of the Co-op was considerably improved on last year, with pre-tax losses down to £76m, compared to £845m at half year 2013.

The main driver for change has been significant reductions in the level of credit impairments from a charge of £496m in the first half of 2013 to a credit of £87m in the first half of 2014

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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