Lloyds Banking Group has sold its Irish residential mortgage portfolio to Barclays for around £4bn ($5.4bn) in cash, as part of a plan to focus on its core British market.
The deal was the last action Lloyds needed to take to complete its exit from the Irish market, following its closure of its retail banking operation there in 2010. Lloyds is left only with around £4bn worth of additional Irish mortgages that it will allow to expire over time.
Lloyds will now be able to focus on tackling an increasing threat to its dominant position in the British markets from new entrants eager to cut prices to win business. Of the assets sold yesterday, £300mn worth are impaired — meaning borrowers are struggling to pay them.
They generated a pretax loss of around £40mn last year, Lloyds said in a statement. A year to the day after its return to private ownership following the British government’s last sale of its stake in Lloyds, Britain’s biggest lender faces a battle to maintain its grip on the mortgage market.
Lloyds shares have fallen 7.6% in its first year free from government ownership after a bailout. That makes them the worst-performing stock among Britain’s four biggest banks with rivals RBS and HSBC climbing an average of 10% in the same period.
Investors fear that Lloyds as the biggest mortgage lender, with a market share of 20%, has most to fear from a low interest rate environment that makes finding profitable lending opportunities for banks difficult. “We are concerned about the competition from the mortgage market from new entrants. We think Lloyds has the most to lose; it has the biggest share of the market.” —Agencies