Bank of Ireland has sold its UK asset-based lender Burdale to the US bank Wells Fargo, netting about €690 million for the bank before the costs of the transaction are included.
The bank said that the sale would not "adversely impact" its core tier one capital ratios and that the money would be used to reduce the lender's central bank borrowings.
The business was sold at a discount of about 0.4 per cent to Burdale's total loan commitments of about £1.3 billion (€1.6 billion) at the end of November and a discount of about 0.8 per cent of total drawn balances of about £575 million at the same date, the bank said.
Bank of Ireland purchased Burdale for €71 million in 2005. The specialist lender financed the purchase of retailer Woolworths, car company Jaguar and the UK pottery firm Royal Worcester and Spode, as well as the management buyout of Glanbia's Irish meats division. The company made a pretax profit of £20.7 million in 2010.
Burdale had also established a business in asset-based lending in the US from a base in Stamford, Connecticut. This business is also being sold to Wells Fargo, which also acquired a portfolio of US commercial property loans from Bank of Ireland earlier this year.
Bank of Ireland gave an update on the progress of its deleveraging, saying that it had divested itself of €8.6 billion in loans, businesses and other assets at an average discount of 7.1 per cent.
"It shows that they are getting on top of it and ahead of the curve [on deleveraging]. What was interesting was the discount was small which is very positive," said Colm Ryan, co-head of fixed income at Goodbody Stockbrokers.
The deleveraging is a condition of the EU-IMF bailout to reduce the bank's reliance on funding from the European and Irish Central Banks.
The divestments are "expected to have a marginal net positive impact" on the bank's core tier one capital ratio, the bank said, and the lender expects that it will be able to complete the remaining divestments under the base case discount assumptions used in the Central Bank stress tests last March.
The bank sold a UK commercial property loan portfolio and a UK mortgage portfolio and has also disposed of project finance portfolio and other international loans earlier this year.
Following the stress tests, the bank said that it planned to reduce the size of its loan book from €114 billion at the end of 2010 to about €90 billion by the end of 2013, a target set under the terms of the EU-IMF bailout agreement.
Bank of Ireland said that it planned to divest of €10 billion of certain loan portfolios and lending businesses. The bank had drawn €22 billion from the European Central Bank and a further €7 billion from the Irish Central Bank at June 2011, according to its half-year results.
Wells Fargo has purchased three loan portfolios from Irish banks as they try to return to self-sufficiency. The US bank agreed to buy $3.3 billion (€2.5 billion) of US commercial property loans from Irish Bank Resolution Corporation, formerly Anglo Irish Bank, and part of Allied Irish Banks' $1 billion US loan portfolio.
Shares in Bank of Ireland were trading at 8 cent at 10.55am, up 2.5 per cent.