UK Edition
Chancellor to raise £11.8bn for UK taxpayer by selling Bradford & Bingley loans
The Government has raised almost £12bn offloading the remnants of Bradford & Bingley, the mortgage lender that collapsed at the height of the financial crisis, in one of Europe’s biggest ever state asset sales.
American private equity giant Blackstone and FTSE 100 insurer Prudential are buying two portfolios of buy-to-let mortgages from UK Asset Resolution (UKAR) for £11.8bn, in a deal that Philip Hammond, the Chancellor, said “marks another major milestone” for taxpayers.
It is one of the largest ever sales undertaken by a European government and is likely to be the last big disposal of mortgages that fell into UK taxpayers’ hands during the banking meltdown almost a decade ago.
Prudential and Blackstone saw off a host of bidders for the loans including the influential US hedge fund Elliott and Cerberus, the American buy-out firm that snapped up £13bn of Northern Rock mortgages in 2015 and then sold on a £6.1bn chunk. The Treasury said it had been “a highly competitive sale process”.
The deal means that UKAR’s balance sheet has now shrunk to £22bn from £116bn seven years ago, when it was set-up to run-off the bad loans made by B&B and Northern Rock, which both failed and were nationalised when the credit crunch hit.
Some £10.9bn of the funds raised from the sale will be used to help pay off the £15.65bn debt B&B owes to the Financial Services Compensation Scheme (FSCS). UKAR will start selling more mortgages later this year to meet a March 2018 deadline to repay the rest of the FSCS loan.
The price fetched for the mortgages was “at the upper end of expectations, delivers value for the taxpayer and compares favourably with the ‘fair value’ of the B&B loan book”, UKAR said.
It added: “A key consideration for this sale was the continued fair treatment of borrowers and there will be no changes to the terms and conditions of the buy to let loans involved in this transaction.”
The B&B sale comes as the Government makes mixed progress offloading other investments it was forced to make during the crisis. While it has successfully slashed it stake in Lloyds Banking Group from 43pc to less than 3pc, and is expected to exit the lender entirely in early May, it still owns 72pc of Royal Bank of Scotland.
Lloyds and RBS have seen their fortunes diverge since their bailouts, with the former now generating its biggest profits since the crisis and the latter still suffering heavy losses.
Mr Hammond said: "We are determined to return the financial assets we own to the private sector and today’s sale is further proof of the confidence investors have in the UK economy."