Lloyds Banking Group has slashed a further £6.8bn from its exposure to non-core UK commercial real estate.
In its annual results released this morning, the lender said the non-core corporate real estate business support unit (BSU) portfolio reduced from £15.7bn to £8.9bn during 2013.
It added that there was considerable progress on the European exposure within this portfolio, where loan balances fell from £3.7bn to £0.7bn.
The bank said the reduction was “significantly ahead of expectations, primarily due to the momentum on various deleveraging strategies including consensual asset sales by customers, loan sales and asset disposals which totalled £7.4bn (net book value) in the year”.
The impairment charge on the non-core commercial book fell to £522m compared with £1.5bn in 2012.
This reflected lower gross charges on a reduced portfolio, favourable market movements on impaired derivatives, and the continuing proactive management enabling some write backs on previously impaired loans.
At the end of 2013 Lloyds’ total non-core assets were £63.5bn, 35% lower than at the end of 2012.
Because the non-core portfolio “now poses substantially less risk to the group” some £31bn of retail non-core assets including, UK and Dutch mortgage portfolios and the majority of the UK asset finance business will be reabsorbed into the core business, with the remaining non-core assets managed in a separate run-off unit.
Lloyds added that is will no longer report on a core/non-core basis in 2014, but will continue to report separately on those assets that remain in run-off.
bridget.o’connell@estatesgazette.com
