Royal Bank of Scotland’s ‘bad bank’ has disposed of £4 billion ($6 billion; €5.4 billion) of bad loans, about half of them non-performing commercial real estate loans, including Cereberus Capital Management’s £1.1 billion Project Aran portfolio sold by RBS subsidiary Ulster Bank, and expects to do the same in the second half of this year.
Last year was a banner year for private equity firms acquiring non-performing real estate loans. The three largest buyers, Cerberus, Lone Star and Blackstone accounted for 70 percent of all closed European transactions involving private equity in 2014 valued at €42.4 billion, according to data from property services firm Cushman & Wakefield.
RBS Capital Resolution (RCR) said it had reduced its assets by 25 percent to £11.1 billion in the first quarter of the year and it would dispose of around half of the remaining total by the end of 2015 – a year earlier than planned.
Of the £11.1 billion of loans left about £4.6 billion were made on commercial real estate. Most of those loans were made in the UK, £2.3 billion, and through Ulster Bank in Ireland, £1.1 billion.
The total value of gross loans in commercial real estate was £8.4 billion with a total provision of £5.1 billion.
RCR said the recent disposal activity was across all four of its loan divisions – Corporate, Real Estate Finance, Ulster Bank and Markets. Its disposal schedule had benefited from a combination of market liquidity and demand for real estate and this resulted in impairment releases of £109 million.
Other operating income of £117 million was primarily driven by disposal gains and fair value adjustments. RCR made an operating profit for the quarter of £181 million.