Lloyds Banking Group Plc, the U.K.’s second-biggest state-backed lender, agreed to sell private equity-related investments for 1.03 billion pounds ($1.6 billion) as it shrinks following its 2008 bailout.
The sale of the portfolio, which had losses of 40 million pounds in 2011, to a fund financed by British private-equity investor Coller Capital Ltd., will result in a pretax gain for Lloyds after it reverses a provision, the London-based bank said in a statement today. The group will continue to manage the fund in exchange for a fee, probably less than 10 million pounds a year, it said.
Lloyds Chief Executive Officer Antonio Horta-Osorio is selling assets after the bank received a 20.3 billion-pound rescue following the 2008 credit crisis. Revenue and profit margins are being squeezed as the U.K. economy contracts and the Bank of England holds its key interest rate at a record low.
Lloyds valued the private-equity portfolio at 1.05 billion pounds and the sale also includes the transfer of undrawn commitments of 220 million pounds, the bank said. The buyer, Coller International Partners VI, is a fund started by London-based Coller Capital to buy private-equity portfolios from investors who want to free capital. Banks have been selling such holdings because the assets need more capital under new regulations.
Coller’s competitors include New York-based Lexington Partners Inc. and Paris-based Axa Private Equity, which in June raised $7.1 billion, the largest of such funds. Secondary private-equity transactions rose to a record of about $25 billion in 2011 and are projected to stay at that level this year as banks and insurers unload assets, according to a January report by Cogent Partners, a New York-based advisory firm.
Lloyds started a so-called non-core division after its bailout to house assets that it plans to sell or wind down. The bank shrank the division by 44.9 billion pounds to 117.5 billion pounds in the year through June. The lender plans to reduce non-core assets to less than 70 billion pounds by the end of 2014.