RBS to sell €1.4bn portfolio of Irish property loans

Move is in line with bank’s plan to strengthen its capital position

RBS will receive up to £1.1 billion (€1.4bn) in cash for the portfolio. (Photograph: Simon Dawson/Bloomberg)

RBS will receive up to £1.1 billion (€1.4bn) in cash for the portfolio. (Photograph: Simon Dawson/Bloomberg)

 

Ulster Bank’s parent the Royal Bank of Scotland Group (RBS) is to sell a portfolio of Irish prooperty loans to an entity controlled by Cerberus, a US private investment manager.

RBS will receive up to £1.1 billion (€1.4 billion) in cash for the portfolio and the transaction is expected to close in the first quarter of 2015.

The deal follows RBS’s plan to reduce assets in its RBS Capital Resolution division - its internal bad bank - and is in line with the bank’s plan “to strengthen its capital position and reduce higher risk exposures”.

RBS said that the carrying value of the loans is £1 billion, the gross assets are £4.8 billion and generated a loss of €800 million, principally impairment provisions, in the year to December 31st 2013.

Cerberus has aquired other Irish assets of late, including Nama’s entire Northern Ireland property book known as Project Eagle, and waste firm Greenstar.

RBS has lost billion of pounds in the Irish property crash, but in October decided to keep the business after a five-month review. Chief executive Ross McEwan put the Irish loans that RBS does not want into a “bad bank” of assets it wants to sell or run down and said the remaining smaller Irish business could deliver attractive returns in the future.

Mr McEwan last week said he did not expect to get back the £15 billion in capital the bank had sunk into its local Ulster Bank business since the financial crash, however.

He told The Irish Times that was “part of the price of us actually having to save the business” and said the business could deliver 10-12 per cent return on equity in the next four to five years.