Lloyds Banking Group has agreed to sell 4,000 non-performing Irish mortgage loans to Lone Star Funds, a US investment company, according to sources.
The bank is selling the assets, known as Project Paris, at a discount to their €1.1bn face value.
“Lloyds has long stated it’s deleveraging its balance sheet and will do this by reducing its non-core assets — this includes its Republic of Ireland book,” said Ian Kitts, a spokesman in London.
Lone Star, based in Dallas, has emerged as a buyer of commercial property assets being sold following western Europe’s worst property crash. Lloyds had £13.4bn (€16.8bn) of Irish loans at the end of June, down from £29.1bn in December 2009.
A Lone Star official declined to comment. Last month, an affiliate of Lone Star Funds agreed to buy subprime lender Start Mortgage Holdings and some other home loans from Investec, amounting to £540m of assets. The accord gives Lone Star an Irish lending license.
“Lone Star has been following an aggressive acquisition strategy in Ireland over the last number of years,” said Ciaran Callaghan, an analyst with Merrion Capital in Dublin, adding that the company may use its Start Mortgage platform “to move into the new mortgage-lending market”.
Lloyds is extricating itself from Ireland, having handed back its local banking license in 2010.
“In general, our non-core asset disposals involve assets where we have already largely provisioned for impairments,” said Mr Kitts.
About 17% of Lloyds’s Irish consumer loan book was impaired at the end of June, while 95% of its commercial real estate and 88% of its corporate loans were in similar trouble.
House prices rose an annual 14.9% in August, the CSO said last month, led by a 25% jump in Dublin values amid a shortage of housing in the capital. Values nationally remain 41% off their 2007 peak.