Lloyds nears capital target with U.S. mortgage book sale

Fri May 31, 2013 12:40pm EDT
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By Jonathan Saul and Tommy Wilkes

LONDON (Reuters) - State-backed British bank Lloyds (LLOY.L: Quote) sold a book of U.S. mortgage-backed securities for 3.3 billion pounds ($5 billion), boosting its capital by 1.4 billion pounds and taking it close to a target set by the financial regulator.

Lloyds is also looking to sell a $500 million portfolio of shipping loans to shrink its exposure to the troubled maritime industry, as it gets rid of unwanted assets, trade finance sources told Reuters.

Shipping loans are proving the most difficult assets for many banks to sell after a five year industry slump, and Lloyds still has about 7 billion pounds of loans to the sector.

"Lloyds has been trying to sell off another portion of their (shipping) loan book and they have been trying to do it below the parapet using specialists," one industry source said. "They are taking a piecemeal approach to selling their overall loan book."

In October sources told Reuters Lloyds took a near-50 percent loss on a $750 million portfolio of shipping loans sold to U.S. private equity firm Oaktree Capital.

Shipping companies ordered large numbers of new vessels between 2007 and 2009, when freight rates hit record highs, but the extra capacity arrived just as Europe's recession was deepening and other economies were slowing.

Lloyds declined to comment on its shipping portfolio.

Since a 2008 bailout by the British government, which now owns 39 percent of Lloyds, the bank has been under pressure from lawmakers and regulators to make lending to British households and businesses a priority.   Continued...

A sign from a branch of a Lloyds bank is reflected in a window in central London May 13, 2013. REUTERS/Stefan Wermuth