Royal Bank of Scotland’s troubled Ulster Bank subsidiary is selling off more than £1.6 billion worth of loans to American vulture funds for £360m.
RBS was last week singled out by the Bank of England – alongside Standard Chartered – as one of the two weakest performing UK banks in its stress test.
The Bank said neither Standard nor RBS had enough capital to withstand financial shocks.
Ulster Bank is selling off a £1.63 billion portfolio, Project Clear, which includes 20 per cent of all the residential zoned space in Dublin, to Dublin-based house-builder Cairn Homes and to an affiliate of global private equity firm Lone Star Funds for £360m.
The loans will be split between the buyers, with Cairn paying £271 million ($410 million) of the cost for its 75 per cent share giving it capacity to build 14,000 new homes.
A year ago sold a portfolio of distressed property loans to US private equity firm Cerberus for £1,1 billion.
RBS said the deal was part of its plan to strengthen its capital position and reduce its exposure to risk. Proceeds from the sale of the portfolio will be used for “general corporate purposes”.
The carrying value of the loans as at the end of last year was about £115m. The loans generated a loss of about £28m over the year.
RBS took a major hit on its Irish assets in the credit crunch and Ulster Bank was its most troubled unit as parent RBS put £15.3 billion into it between 2008 and 2013 and moved billions of euros of risky real estate assets from the unit’s balance sheet.
Last year, RBS considered selling or closing the Ulster Bank unit as it was still making heavy losses six years on from the group’s crash and bailout in 2008. But Ulster Bank made a surprise turnaround in 2014 and group chief executive Ross McEwan decided to keep the operations.