Lloyds Banking Group reduced its combined gross UK and Irish commercial real estate lending last year by £8bn to just £5.1bn, with the bank finally close to lifting the albatross of its profligate property lending past.
In its 2014 annual results published this morning, Lloyds reported that Irish commercial real estate exposure had fallen by £3.7bn to £1.8bn. In addition, gross exposure to UK commercial real estate lending fell by £4.3bn to £3.3bn.
Of the remaining £1.8bn in gross Irish CRE exposure, £1bn is secured on assets at above 100% LTV, while a further £236m is unsecured and another £480m of loans are each sub €5m in size. Net of £1.4bn in provisions, Lloyd’s net exposure to Irish CRE is now just £412m.
The remaining £3.3bn in gross UK CRE exposure is comprised of £1.3bn in impaired loans and £2.0bn in unimpaired loans. Of the £1.3bn impaired loans, £819m are at LTVs above 100%.
Lloyds has made no provisions against the remaining £2.0bn in unimpaired loans, while taking £547m in provisions against the £1.3bn impaired loans, taking its net exposure of UK CRE debt in run-off to £2.8bn.
Six years ago, when Lloyds first established Lloyds Banking Group and reported for the first time the merged commercial property and residential lending books of HBOS and TSB, the combined book was £97.4bn – comprised of HBOS’s £44.bn UK and £29.4bn overseas loan books, with TSB’s UKCRE book at £23.3bn.
The combined HBOS and TSB UK commercial property loan book was £44.7bn at the end of 2008, which is now comprised of £3.3bn in remaining run-off and £17.9bn in Lloyd’s ongoing “good bank”, the Commercial Banking division.
Lloyd’s net UK commercial real estate in its Commercial Banking division fell £1.8bn to £17.9bn in 2014, as the net result of new business and repayments over the year.
Lloyds reported £1.1bn in impaired loans within this division at the end of 2014, down from £1.8bn the previous year. Across the loan book, only £235m of loans were currently booked at LTVs above 100%.