Lloyds nets £540m profit in sale of US mortgage bonds
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0131-620 8462 LLOyDS Banking Group has made a £540 million profit from selling a portfolio of US mortgage bonds to help strengthen its balance sheet.
The mortgage-backed securities were acquired for £3.3 billion by a number of institutions, including Goldman Sachs.
Lloyds, 39 per cent owned by the taxpayer, inherited the bonds when it rescued Halifax Bank of Scotland at the height of the financial crisis in 2008 that also triggered its £17bn state bailout.
The bank said yesterday that the transaction would beef up its tier 1 capital ratio by £1.4bn and its core tier 1 capital ratio by £950m.
“This move fits neatly with Lloyds’s determination to exit businesses it doesn’t regard as core and build up its capital reserves in doing so. It makes sense,” one banking analyst said.
Since the group’s taxpayer rescue, it and Royal Bank of Scotland have faced political pressure to ramp up lending to UK households and businesses.
The sale comes amid a growing recovery in the US housing market, with residential prices posting their largest gain in March since the peak of a housing boom in 2006.
Analysts said it marked a turnaround in appetite for US mortgage-backed securities, the controversial products at the heat of so-called “sub-prime lending” that was seen as the main cause of the global banking meltdown.
Banks worldwide were forced to take hefty bad debt losses as they wrote down the values of their US mortgage bond portfolios.
Britain’s banks have also recently by the Bank of England to strengthen their reserves against potential future financial crises, warning of a £25bn “black hole” in their collective balances sheets.
Lloyds has been steadily exiting busi- private banking arm to Switzerland’s Union Bancaire Privee. The business, which manages assets worth £7.2bn, reported a loss of £50m in 2012. The sale included Lloyds’s Geneva-based Private Bank and branches in Gibraltar, Mona-
“this move fits neatly with Lloyds’s determination to exit businesses it doesn’t regard as core and build up its capital reserves. it makes sense”
Banking analyst