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UK lender Lloyds has offloaded a € 1.1 billion portfolio of 4,000 Irish non-perfroming residential mortgages to US private equity fund Lone Star.
Lloyds, which operated in Ireland under the Bank of Scotland/Halifax brands, is understood to have sold the “Project Paris” loan book at a discount, but the scale of the write-down is not clear.
Lloyds withdrew from the Irish market in 2010, and has run down its non-core Irish loan book from about €16 billion in 2009 to €13.4 billion as of June 2014.
In a statement, Lloyds said that the transaction is in line with its strategy of deleveraging its balance sheet and reducing its non-core assets.
“Whilst we will not comment on individual transactions where there is no obligation to formally announce to the stock market, we can state that – in general – our non-core asset disposals involve assets where we have already largely provisioned for impairments and we continue to expect non-core reductions in aggregate to be capital accretive,” the bank said.
The move follows Lone Star’s acquisition of €677 in distressed Irish mortgages from Investec in September. Its acquisition of Start Mortgages also gave the US fund an Irish lending license and could see the fund make a move into mortgage lending.
Ciaran Callaghan, senior credit analyst with Merrion Capital, said that while Lone Star is likely to initially focus on Start’s existing loan portfolio, he says it may use the platform to move into the new mortgage lending market over coming periods.
“Due to its low capital intensity and high margin business, new mortgage Irish lending generates significantly more attractive returns than compared to other forms of lending.”