National Australia Bank is to sell £1.2 billion ($AU2.28 billion) of higher risk loans from its UK Commercial Real Estate portfolio to an affiliate of the private investment firm Cerberus Global Investors.
As a result of the sale, a small gain is expected to be recognised in the March 2015 half-year accounts and an estimated £127 million of capital will be released for the NAB Group when the transaction is settled.
Following the sale, the balance of the portfolio will be reduced to £836 million, compared to the original balance of £5.6 billion in October 2012.
CEO Andrew Thorburn said the great majority of the remaining non-performing loans are being sold.
“The sale of these higher risk loans in the NAB UK CRE portfolio is another important milestone in our strategy of reducing our low returning legacy assets and sharpening our focus on our core Australian and New Zealand franchises,” Mr Thorburn said.
The remaining NAB UK CRE loans are largely strong performing loans.
The NAB’s cash profit dropped 9.8% to $5.18 billion after it took a $1.504 billion hit on its troubled UK business in the latest full year result.
The NAB has also hired Deloitte to help sell its insurance business. The bank is also considering options for its troubled UK business, including a public float.