The portfolio of commercial property loans, totalling £2 billion, was sold to GE Real Estate at a ‘small discount’, while it also sold its entire housing association loan book, with £2.2 billion in assets, to Dexia. Both of these sales followed a review of the books’ growth potential and capital utilisation. Commentators have viewed it as a strategic manoeuvre by the group before the introduction of Basel II in the New Year.
Following the sale, B&B will retain around £800 million of commercial property assets. Both sales were for cash proceeds, now being directed at increasing the group’s liquidity and to provide funding for other residential opportunities. However, the combined sales are expected to produce a loss of around £15-£40 million.
Steven Crawshaw, group chief executive of B&B, said: “These disposals are a natural step in the development of B&B’s strategy. The £4.2 billion proceeds will enable us to improve returns by redirecting capital and funding resources to take advantage of the significant opportunities that exist in the mortgage market today.”
Mark Chilton, chief executive of Homeowners Mortgages, said: “Both of these deals were originally approved or put in motion well before the credit crunch. The dominant reason behind this is Basel II, because commercial mortgages are far less capital efficient and it makes more commercial sense to free up capital. It’s a good strategic move.”
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