Bloomberg News

Lloyds Sells U.S. Mortgage-Backed Bonds for $5 Billion in Cash

May 31, 2013

Lloyds Auctions $8.7 Billion of Mortgage Bonds to Dealers

A sign sits above the entrance to a Lloyds TSB bank branch, part of the Lloyds Banking Group Plc, in Loose, U.K. About 170 million pounds has been sold to Goldman Sachs for about 200 million pounds in cash, Lloyds said. Photographer: Chris Ratcliffe/Bloomberg

Lloyds Banking Group Plc (LLOY), Britain’s largest mortgage lender, sold U.S. mortgage-backed securities for 3.3 billion pounds ($5 billion) in cash as it tries to plug a capital shortfall identified by regulators.

The sale will result in a pretax gain of 540 million pounds and boost the group’s core Tier 1 capital, a measure of financial strength, by about 1.4 billion pounds, London-based Lloyds said in a statement today. Bank of America (BAC:US) Corp., Morgan Stanley (MS:US), Credit Suisse (CSGN) Group AG and Goldman Sachs (GS:US) Group Inc. were the winning bidders.

Royal Bank of Scotland Group Plc and Lloyds, the U.K.’s largest state-owned lenders, are seeking to bolster their balance sheets while avoiding equity sales. Lloyds auctioned the bonds amid a U.S. housing recovery that fueled a 10.5 percent jump in home prices in March from a year earlier, the fastest pace in seven years, according to CoreLogic Inc.

Lloyds advanced 0.4 percent to 62.05 pence by 8.16 a.m. in London. The stock has gained about 30 percent this year and is trading above the 61 pence price at which the government says it will break even on its 39 percent stake.

The bank said that about 170 million pounds has been sold to Goldman Sachs for 200 million pounds in cash, generating a pretax gain of about 30 million pounds. The transaction is expected to be completed in the first week of June.

Financial Strength

The auction is the biggest widely marketed sale of securitized debt since at least March 2010, according to New York-based data-provider Empirasign. Eight of the 10 largest auctions were sales by the Federal Reserve of debt acquired from Bear Stearns Cos. and American International Group Inc. amid the credit crisis.

The disposal, coupled with the sale of a second stake in wealth manager St. James’s Place Plc (STJ) last week, will boost Lloyds’s core Tier 1 capital ratio to about 8.7 percent from 8.1 percent at the end of the first quarter. The lender has said it is seeking to increase that level to more than 9 percent by the end of the year.

Lloyds said on May 29 that it will sell its international private-banking business to Swiss wealth manager Union Bancaire Privee for as much as 100 million pounds. The bank will receive about 65 million pounds when the deal is completed and 35 million pounds over a two-year period, it said.

Michael DuVally, a spokesman for Goldman Sachs, Mark Lake of Morgan Stanley, Drew Benson of Credit Suisse and Zia Ahmed of Bank of America, all based in New York, declined to comment.

To contact the reporters on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net

To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net; Edward Evans at eevans3@bloomberg.net


Steve Ballmer, Power Forward
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • BAC
    (Bank of America Corp)
    • $16.6 USD
    • 0.34
    • 2.05%
  • MS
    (Morgan Stanley)
    • $34.06 USD
    • 0.74
    • 2.17%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus