BOI to acquire stake in Lloyds €1.2bn property sale

UK bank Lloyds is to sell a portfolio of impaired Irish commercial loans to a group of investors including Bank of Ireland for about £827 million (€1.2bn). The sale, which is expected to close by the end of the year, will reduce the banking group's exposure to Irish commercial assets to less than £30m.

The consortium also includes Ennis Property Finance, an entity affiliated to Goldman Sachs and Feniton Property Finance, an entity affiliated to CarVal, a private equity group.

Bank of Ireland will acquire a portfolio of approximately € 200m performing commercial loans, comprising over 650 customers in the SME and CRE sectors.

Mark Cunningham, director of Bank of Ireland Business Banking, said that the acquisitions demonstrate’s the bank’s “ongoing focus on further growing and developing our strong position in serving the business banking sector in Ireland”.

The value of the assets in the portfolio is £2.6bn, of which £2.3 bn were impaired. In the year to December 31st 2014 the portfolio generated pre-tax losses of about €130m.

In a statement, Lloyds said that it would use the proceeds for general corporate purposes and the transaction is not expected to have a material impact on the group but will be capital accretive.

Lloyds first announced its exit from the Irish market in 2010, when it pulled its loss-making subsidiary Bank of Scotland (Ireland). The bank said that the latest sale of the assets is in line with its strategy of " deleveraging its balance sheet by reducing run off assets and creating a low risk, UK focused bank". The sale of the assets will reduce the banking group's impaired loans as a percentage of closing advances to 2.2 per cent and reduce provisions as a percentage of impaired loans to 48.3 per cent.

Last December, Lloyds sold a £1.6bn portfolio of Irish buy-to-let residential and commercial mortgages to Goldman Sachs and Carval.