Lloyds sells £3.3bn of US subprime debt

Lloyds Banking Group has sold a large slug of US mortgage securities through an auction that raised a total of £3.3bn as part of its ongoing plan to reduce its assets and strengthen its balance sheet.

The five tranches of residential mortgage-backed securities had a face value of $8.7bn (£5.7bn) but had already been written down by Lloyds to just £2.7bn. That means the sale produced a pre-tax profit of some £540m. The buyers were Goldman Sachs, Bank of America, Credit Suisse and Morgan Stanley, which picked up two tranches.

Lloyds auctioned the securities on the back of a strongly recovering US housing market which saw annual price rises of 10.5 per cent up to March.

The auction followed the sale of Lloyds’ private banking businesses earlier this week for some £100m and the previous week’s £450m placing of shares in wealth manager St James’s Place.