Lloyds Banking Group Plc (LYG,LLOY.L) Friday announced that it has agreed to sell a portfolio of US residential mortgage backed securities or RMBS to various institutions for a cash consideration of 3.3 billion pounds or about $5 billion. The British banking major said the transaction is part of its continued capital accretive non-core asset reduction, and will boost its capital ratio.
The related assets for the transaction have a book value of around 2.7 billion pounds. According to the company, the transaction will result in a pre-tax gain on sale of about 540 million pounds.
The deal is expected to complete in the first week of June. The firm intends to use the sale proceeds for general corporate purposes.
As part of the same transaction, Lloyds TSB Group Pension Trust (No. 1) Ltd., has also sold its share of the portfolio of US RMBS with a book value of 805 million pounds, realizing a pre tax gain on sale of 360 million pounds, which will reduce the deficit in the scheme, Lloyds noted.
The Group noted that of the 2.7 billion pounds portfolio, nearly 170 million pounds has been sold to Goldman Sachs International Ltd (GS) for a cash consideration of around 200 million pounds. The deal will result in a pre tax gain of approximately 30 million pounds on this portion of the portfolio.
The portfolio sale is expected to increase the Group's common equity tier 1 capital ratio, on a pro forma fully loaded CRD IV basis, by about 47 basis points and increase its core tier 1 capital ratio by around 33 basis points. The current view takes into account the gain on sale, reduction in risk weighted assets and benefit from pension deficit reduction.
On Wednesday, Lloyds announced proposed sale of its International Private Banking business to Union Bancaire Privée, for a cash consideration of up to about 100 million pounds.
Earlier this month, the firm agreed sale of a portfolio of UK commercial real estate loans to Promontoria Thames Ltd., an entity affiliated to Cerberus Global Investments, for 325 million pounds in cash.
LLOY.L is currently trading at 61.49 pence, down 0.31 pence or 0.49 percent, on a volume of 39.27 million shares on the LSE.
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