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Australian lender NAB sells nearly $2bn of UK loans RBS shrinks Irish arm as it sells £4.8bn property loans
(about 11 hours later)
National Australia Bank (NAB) will sell a package of bad loans in the UK as part of a strategy to exit an unprofitable business. Royal Bank of Scotland is to sell £4.8bn ($7.5bn) of problem Irish property loans to US private equity firm Cerberus.
NAB is offloading £1.2bn ($1.89bn) of higher risk loans from its UK Commercial Real Estate portfolio to Cerberus Global Investors. RBS said the deal was part of its plan to strengthen its capital position and reduce its exposure to risk.
The sale will generate a small profit for the Australian lender. RBS will receive £1.1bn for the loans, which made a loss of £0.8bn last year.
The deal with the private equity firm will also release £127m in capital. Earlier, National Australia Bank, which owns Clydesdale and Yorkshire banks, said it had sold £1.2bn of risky UK commercial property loans to Cerberus.
With the sale of the mainly defaulted loans, NAB will be reducing higher risk loans in its commercial real estate business by 93%. NAB said the deal was part of its strategy to exit an unprofitable business.
In a filing to the Australian stock exchange the lender's Group Chief Executive Andrew Thorburn said, "the sale of these higher risk loans in the NAB UK CRE portfolio is another important milestone in our strategy to of reducing our low returning legacy assets and sharpening our focus on our core Australian and New Zealand franchises." Strengthening finances
UK offload Cerberus, which aims to squeeze value out of problem assets, has been buying up packages of risky loans from UK banks as they offload problem assets.
The bank also said the deal will not be subjected to regulatory approvals, and the assets will immediately be removed from the group's balance sheet. RBS' announcement came just after it was revealed that the Bank of England had found the lender, alongside Lloyds Banking Group, at risk in the event of a "severe economic downturn".
Earlier this year, the bank sold £625m of mostly bad UK commercial property loans. The Bank of England tested the lenders' resilience to a 35% fall in house prices, and a 30% drop in the value of the pound, among other factors.
NAB is Australia's fourth largest bank. It owns the Clydesdale and Yorkshire Banks in Britain. "The transaction... is in line with the bank's plan to strengthen its capital position and reduce higher risk exposures," RBS said in a statement.
But the UK business has been a drag on earnings. Bad debt charges have led to repeated falls in the bank's annual profit - which have declined four times since 2008. Meanwhile, NAB said the sale of the mainly defaulted loans would reduce higher risk loans in its commercial real estate business by 93%.
In a filing to the Australian stock exchange, the lender's group chief executive Andrew Thorburn said the sale of the loans was "another important milestone in our strategy of reducing our low returning legacy assets and sharpening our focus on our core Australian and New Zealand franchises".
The UK business has been a drag on NAB's earnings. Bad debt charges have led to repeated falls in the bank's annual profit.