Barclays Is Said to Plan Sale of Irish Mortgages to M&G, Pimco

(Bloomberg) -- Barclays Plc plans to sell notes to M&G Prudential and Pacific Investment Management Co. in a securitization of 4.3 billion pounds ($5.8 billion) of Irish residential mortgages, according to people with knowledge of the matter.

Barclays will probably hold about 5 percent of the notes, the minimum required to meet so-called skin-in-the-game rules, said the people, who asked not to be identified because the matter is confidential. Barclays acquired the loans from Lloyds Banking Group Plc in a deal announced earlier Friday. The bank’s capital won’t be affected, a Barclays’ spokesman said, without providing more detail.

The transaction comes just a month after Barclays played a key role in a similar loan sale, leading a group of investors that bought 5.3 billion pounds of mortgages from the U.K. government. Pimco provided funding for that deal, with Barclays and five other banks committing to buying bonds to help finance the acquisition.

A spokeswoman for M&G Prudential, which was recently formed out of Prudential Plc’s British asset-management unit and its insurance business in the U.K. and Europe, confirmed the firm’s purchase of notes in the securitization. A spokeswoman for Pimco, an investment management unit of German insurer Allianz SE, declined to comment.

Slow Retreat

Lloyds’s disposal of the mortgages all but completes its decade-long exit from the country. The deal is another milestone in Chief Executive Officer Antonio Horta-Osorio’s drive to transform Britain’s biggest mortgage lender into a U.K.-focused bank. The company will take a pretax loss of about 110 million pounds on the deal in the second quarter, though the disposal should boost its capital buffer, it said in a statement.

Lloyds has steadily reduced its presence in Ireland after inheriting 32 billion euros ($38 billion) of assets in the country when it acquired HBOS Plc at the height of the financial crisis in 2008. Many of those loans turned out to be bad and caused Lloyds more then 10 billion euros of losses, according to a U.K. government report in 2015.

“This looks to be a very good transaction for Lloyds,” Edward Firth, an analyst at KBW, said in a note to clients. Barclays may opt to “warehouse” the loans in its investment bank before reselling them, he said, but cautioned “the market for non-performing Irish loans is very much a buyer’s one as the domestic banks struggle to achieve European non-performing loan targets.”

©2018 Bloomberg L.P.

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