Citi to Buy Mortgages From U.K. Bad Bank for $6.4 Billion

(Bloomberg) -- Citigroup Inc. is paying 4.9 billion pounds ($6.4 billion) for residential mortgages and unsecured loans from the British government’s bad bank, in a major step to offloading the assets it took on at the peak of the financial crisis.

UK Asset Resolution Ltd., the government agency overseeing nationalized lenders, expects to complete the sale of two portfolios within the next few weeks, it said in a statement on Tuesday. Pacific Investment Management Co. is financing the transaction.

The British government has previously sold multi-billion-pound portfolios to firms including Blackstone Group LP and Cerberus Capital Management LP. A group led by Barclays Plc agreed to acquire a 5.3 billion-pound mortgage portfolio from UKAR last year.

“This is a significant step in the reduction and simplification of our balance sheet,” said Ian Hares, Chief Executive Officer of UKAR. Citigroup in London declined to comment. UKAR has now cut its balance sheet by 93 percent since its formation, to 8 billion pounds, as a result of the sale.

UKAR was formed from collapsed lenders Bradford & Bingley Plc and Northern Rock Plc after they required a bailout during the first British bank run in more than a century. The government agency plans to divest all of its remaining assets by 2021, it said last summer.

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