Lloyds Banking Group has sold £1.8bn of property in the first half of the year, contributing to a £2.5bn reduction in loans in its business support unit.
In an interim management statement for the first six months of 2011, the state-owned lender said “further significant sales are anticipated in the second half” although warned it “remains cautious on its outlook for property”.
It said its Corporate Real Estate Business Support Unit (CRE BSU), which manages loans that require restructuring, had broadly maintained the disposal pace it achieved in 2010 when “more than £4bn” of sales were realised.
The CRE BSU loan book has in total reduced by £2.5bn, down to £23.7bn, of which £16.2bn or 68.5% of the book is classified as impaired property loans.
In its statement LBG said: “CRE BSU has continued to make good progress executing on its active asset management programme for the complex portfolio of over 1,800 cases it manages.
“Despite the market for capital values improving 17.3% from its trough in 2009, we have seen this improving trend in the market begin to weaken for all but prime or central London based real estate.
“With the exception of prime or central London real estate, the group remains cautious on its outlook for property.”
In the non-core business, which aggregates commercial real estate lending, corporate lending and treasury assets, it cut £31.3bn from its loan book to £162.4bn.
Loan impairments over the first half in the bank’s non-core book were higher than the second half of 2010, primarily reflecting a reduced benefit from a number of write-backs on asset sales, particularly in the CRE BSU and in wholesale markets division, as well as higher charges in the non-core leveraged finance portfolio.
LBG’s wholesale division loan impairment charge was 44% lower than the first half of last year – from £2.8bn in the first half of 2010 to £1.5bn in the first half of 2011 – driven by the HBOS heritage corporate real estate and real estate related asset portfolios, but with increased impairment on leveraged acquisition finance exposures.
The bank made a made a six-month pretax loss of £3.25bn, as a result of a £3.2bn provision to repay customers who were mis-sold insurance.
bridget.o’connell@estatesgazette.com
