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Deal set to be completed next week.
Lloyds Banking Group has announced that it has agreed the sale of a portfolio of US RMBS (residential mortgage backed securities) to a number of different institutions for a cash consideration of £3.3 billion. The transaction is part of the Group’s continued capital accretive non-core asset reduction.
The assets subject to the transaction have a book value of approximately £2.7 billion and as a result of the transaction the Group will realise a pre tax gain on sale of approximately £540 million. The sale proceeds will be used for general corporate purposes.
As part of the same transaction the Lloyds TSB Group Pension Trust (No. 1) Limited also sold its share of the portfolio of US RMBS with a book value of £805 million, realising a pre tax gain on sale of £360 million, which will reduce the deficit in the scheme.
Taking into account the gain on sale, the reduction in risk weighted assets and the benefit from the pension deficit reduction the sale is expected to increase the Group’s common equity tier 1 capital ratio, on a pro forma fully loaded CRD IV basis, by approximately 47 basis points (£1,400 million capital equivalent) and increase the Group’s core tier 1 capital ratio, under current capital rules, by approximately 33 basis points (£950 million capital equivalent).
The transaction is expected to complete in the first week of June.
In line with the transaction aggregation disclosure requirements of the UK listing rules we note that of the £2.7 billion portfolio, approximately £170 million has been sold to Goldman Sachs International Ltd for a cash consideration of approximately £200 million. The Group will realise a pre tax gain on sale of approximately £30 million on this portion of the portfolio.
