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Ministers eye £3bn B&B mortgage sell-off

Business & Economy 01 May 2017
Ministers eye £3bn B&B mortgage sell-off

Ministers to sell £3bn of Bradford & Bingley mortgage loans

UK Asset Resolution has hired Morgan Stanley to sell a £3bn chunk of Bradford & Bingley mortgages, Sky News learns.

Image: The auction is unlikely to be held until after June's General Election

By Mark Kleinman, City Editor

The Government is to take another step towards recouping the vast sums of money injected into the banking system in 2008 by selling £3bn of Bradford & Bingley (B&B) mortgage loans.

Sky News has learnt that UK Asset Resolution, the Treasury-supervised unit which manages the remnants of the former high street lender, has appointed the Wall Street investment bank Morgan Stanley to handle an auction later this year.

The portfolio for which it will seek buyers is understood to comprise lower-quality buy-to-let and higher loan-to-value mortgages ‎than an £11.8bn package offloaded last month.

City sources said the latest auction was unlikely to kick off until after June's General Election.

It is likely to involve the mortgages being sold at a substantial discount to their book value.

A successful sale of the £3bn mortgage book would nevertheless generate sufficient proceeds to repay a big chunk of the outstanding loan made by the Treasury to the Financial Services Compensation Scheme (FSCS) in 2008.

It would represent a further phase of the Government's efforts to recover as much of the capital ploughed into the banking industry during the financial crisis as possible.

The £20bn used to rescue Lloyds Banking Group has now been returned to taxpayers, with the remaining 1% stake in the UK's biggest high street lender expected to be sold in the next fortnight.

Morgan Stanley has led the gradual reduction of the state's Lloyds shareholding through a drip-feed mechanism called a trading plan.

Tens of billions of pounds more has been generated from the disposal of the customer base of Northern Rock to Virgin Money, and loans made by the same bank, whose requirement for emergency Bank of England funding in 2007 marked the start of Britain's financial meltdown.

However, the Government is unlikely to recover more than a fraction of the £45.5bn used to prop up Royal Bank of Scotland.

Philip Hammond, the Chancellor, recently acknowledged that the Government would be forced to crystallise a huge loss when its 72% RBS shareholding is eventually sold.

UKAR's balance sheet, which stood at £116bn in 2010, has been whittled down to £22bn following the £11.8bn sale to Blackstone and Prudential.

The latest auction will draw interest from ‎a similar pool of buyers of financial assets which have participated in previous UKAR sale processes.

Spokesmen for UKAR and Morgan Stanley declined to comment.

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