Royal Bank of Scotland has sold £4.8 billion of Irish property loans to US private equity firm Cerberus, shedding a big chunk of problem loans under its plan to shrink its Irish business.
RBS, which is 80% owned by the UK government and is cutting back its overseas operations, said it would receive up to £1.1 billion in cash from the sale of the Irish loans, subject to some conditions.
RBS, which owns Ulster Bank here, has lost billion of pounds in Ireland after the country's property crash, but in October decided to keep the business after a five-month review.
RBS chief executive Ross McEwan put the Irish loans that RBS does not want into a "bad bank" of assets it wants to sell or run down and said the remaining smaller Irish business could deliver attractive returns in the future.
McEwan last week said he did not expect to get back the £15 billion in capital the bank had sunk into the Ulster Bank business since the financial crash, however.
The value of the loans bought by Cerberus had been previously written down by RBS. The portfolio had a carrying value of about £1 billion and risk-weighted assets of £1.2 billion at the end of September, RBS said.
The portfolio, known as Project Aran, made a loss of £800m in 2013, mainly due to provisions for bad loans.
Project Aran was comprised of about 1,300 borrower groups, over 6,200 loans with around 5,400 properties. Over 75% by loan balance is secured by Irish assets and about 20% in Northern Ireland, with more than 90% of the loan portfolio in default.
Meanwhile, RBS today scraped through a health check of British banks, with the Bank of England saying it narrowly held enough capital to withstand a severe UK recession.
Cerberus made a second big bet on a recovery in UK and Irish property when it also bought a £1.2 billion portfolio of mostly non-performing commercial property loans from National Australia Bank.
The New York-based firm's purchase of UK loans from NAB is part of the Australian bank's plan to exit its UK operations, where it has taken big losses at its Clydesdale and Yorkshire Bank businesses.
It will cut NAB's UK commercial real estate portfolio to £836m from £5.6 billion two years ago, the bank said.
In April, Cerberus secured NAMA’s loan book of Northern Irish property loans, dubbed Project Eagle, paying around £1.2 billion for the £4.5 billion nominally valued loan portfolio.