Lloyds to spin off billions in property assets
Sunday 14 March 2010
Lloyds Banking Group is believed to be considering plans to hive off a portion of its giant commercial property portfolio into a separate, tax-efficient company.
Senior figures within the bank are thought to have put forward the idea, which would see some of the £50bn to £75bn worth of assets and loans inherited by Lloyds following its merger with HBOS spun off into a real estate investment trust (Reit).
Any move would happen after the general election, and with the taxpayer owning 41.3 per cent of the bank, any deal would require the Government to retain a stake in the new property vehicle.
Sources said that the plan to move some of Lloyds' commercial property interests into a separate structure were at an early stage and other options to tackle the bank's troubled commercial property portfolio remain on the table.
"It's a sensible idea but the key will be who they get to manage it and what they put in there," said a source. "It will be much cleaner and will make it easier for Lloyds to sell off assets too."
Last September, Lloyds parachuted in Mark Collins, the former chief operating officer at Land Securities and a one-time adviser to a property fund backed by the Prince of Wales, to help restructure the bank's commercial property book. Mr Collins, who declined to comment on plans to create a Reit, has been working to clear up the property mess left by Peter Cummings, the discredited former head of property lending at HBOS.
Estimates suggest that around 20 per cent of Mr Cummings's deals by value, have turned sour and will not be recovered.
Mr Collins has been managing assets now under the control of the bank as part of the ending of loans that cannot be saved.
Lloyds' chief executive, Eric Daniels, was forced to admit last month that write-downs on assets at the bank rocketed to £24bn in 2009. Mr Daniels said the increase in impairments, which forced Lloyds to post an overall loss of more than £6bn for the year, was "principally due to the HBOS portfolios and their high level of exposure to commercial property".
Mr Daniels and the chairman, Sir Win Bischoff, aim to shrink Lloyds' huge loan book by as much as £200bn in the coming years.
The group raised £22.5bn from its investors in 2009 in the biggest rights issue of the year. However, some city analysts believe that the bank could be forced to raise additional capital if the dreaded "double dip" in markets becomes a reality.
A spokesman for Lloyds said: "We do not comment on speculation."
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...
£20000 - £25000 per annum + OTE £35K - £45K: SThree: SThree Group have been we...