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Lloyds Cuts Exposure to Shipping Sector by $500 Million

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November 13, 2013

reuters logoBy Jonathan Saul and Matt Scuffham

LONDON, Nov 13 (Reuters) – Lloyds Banking Group has sold a $500 million-plus portfolio of shipping loans to cut its exposure to the industry, sources familiar with the matter said on Wednesday.

The deal for between $500 million and $550 million of loans was done in the past two weeks, with Bank of America seen as the most likely buyer, the sources said. Lloyds and Bank of America both declined to comment.

Lloyds, 33 percent owned by the UK government, is selling off non-core assets to strengthen its balance sheet and focus on lending to British households and businesses.

“They are finally getting some movement from the market on their shipping portfolio,” one source said. “It looks like they are aiming to shift the bigger stuff and I would not be surprised to see more.”

Lloyds has not given regular updates on the level of its shipping market exposure, but it stood at 8 billion pounds ($12.7 billion) at the end of June 2012, not much reduced from before the crisis.

In May sources told Reuters that Lloyds was aiming to sell an estimated $500 million tranche of its shipping book. The sources said that Lloyds took a near 50 percent loss last year on a separate $750 million tranche of shipping loans it sold to U.S. private equity firm Oaktree Capital.

“The bank is in good shape and it has cleared the decks,” another source said. “It has already allocated provision and losses for the shipping portfolio. They are willing to take the loss and are winding it down as quickly as possible.”

The first source estimated that the latest sale was priced at a discount of about 45 percent.

Britain aims to offload its stakes in Lloyds and state-backed rival Royal Bank of Scotland as soon as possible, having provided a combined 66 billion pounds to keep the banks afloat during the 2008 financial crisis.

RBS and Lloyds are among several European banks trying to reduce their exposure to shipping loans as they cut their balance sheets to become less risky and tougher regulations require them to hold more capital, making loans less profitable.

Earlier this week sources said RBS was in talks to sell a shipping loans worth close to $800 million, with Bank of America seen as a leading contender to buy the loans.

(c) 2013 Thomson Reuters, All Rights Reserved


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