£500m deals raise hope of early Lloyds' sell-off


Lloyds Banking Group increased hopes that the Government will be able to start the sale of some of the taxpayers' 39 per cent shareholding as early as next month with the news that it has replenished its coffers with another £500 million.

The bank has sold its German life insurance business, Heidelberger Leben, to a joint venture between private equity firm CinVen and Hannover Re for €300 million  (£250 million). It also offloaded a portfolio of UK commercial loans, most of which are to private equity-backed businesses, to Goldman Sachs for £254 million.

The two deals will bolster Lloyds' monetary buffers and brings it within less than £1.5 billion of the extra capital which the Prudential Regulatory Authority recently said it needs to find by the end of this year.

Lloyds, headed by chief executive Antonio Horta-Osorio, already has its Australian commercial banking business on the auction block with all the country's big four banks reported to have put in bids around A$1 billion (£575 million).

At the start of this month Lloyds announced it had swung back into profit and started negotiations with regulators to allow it to start paying dividends again at the end of the year.

Lloyds will book a loss of  £330 million on the disposal of the German life business which was bought by HBOS in 2005. But the release of capital tied up in the business and proceeds of the sale will bolster the bank's key tier 1 capital by around £400 million or 13 basis points.

Heidelberger Leben has 300,000 customers and looks after £7.2 billion of assets. The business lost £38 million last year and it is understood CinVen plans to use it as the first building block in consolidating the fragmented German life industry.

The loan portfolio being bought by Goldman Sachs for £254 million has gross assets of £283 million which implies a discount of just 10 per cent. These are good rather than toxic loans and generally made to manufacturing, retail and healthcare businesses which are backed by private equity.

Lloyds said this deal would "result in a small core tier 1 increase".

"It's another step along the road to just focusing on the domestic retail business, and another step along the road to a fourth-quarter dividend," said Mike Trippitt at Numis Securities.