A bank has shed £1.2 billion of UK commercial property loans in the last ten months leaving a legacy regional portfolio of £4.4 billion.
< 
div>A bank has shed £1.2 billion of UK commercial property loans in the last ten months leaving a legacy regional portfolio of £4.4 billion.
National Austalia Bank (NAB) expects to run-off until maturity over the next five years, reports CoStar Finance.
Net of provisions, NAB’s outstanding UK commercial real estate loan balance is now £3.9 billion.
Cameron Clyne, Group CEO at NAB, said in its third-quarter trading update this week that the run-off of the UK commercial real estate loan portfolio was ahead of plan, based on its April 2012 outlined strategy to exit UK property lending by its Clydesdale and Yorkshire bank subsidiaries.
Last October, NAB transferred £5.6 billion – down from £6 billion as at April 2012 – of predominantly regional UK property loans to National Australia Bank Limited, to be run-down until maturity. NAB expects the property loans book to shrink to under £2 billion by 2018.
Clyne said: “In the UK, we continue to deliver against the strategy we outlined in April 2012. Progress on simplification of our UK Banking business has been pleasing, with efficiency benefits ahead of plan.
“We have also achieved further run-off in the UK commercial real estate portfolio with the current balance of £4.4 billion down £1.2 billion since its transfer to National Australia Bank Limited in October 2012.”
Cash earnings in NAB’s UK commercial real estate division improved over the quarter with a lower charge for bad and doubtful debts (B&DDs) and higher income.
NAB’s decision to exit property lending almost 18 months ago was part of a wider strategic review to reduce it UK risk appetite, driven by rising bank funding costs and the then “double-dip” return to capital depreciation in UK property markets.
In its half year results to the end of March, published 9 May, NAB published a £185 million B&DD charge reflecting “the on-going stress in the commercial real estate market in the UK”, compared to an equivalent B&DD charge of £249 million for the six months to September 2012.
NAB stated in May that its B&DD charge over the period arises from continuing “economic pressure on distressed businesses and the continuing refresh of asset valuations as part of the close management of the portfolio in an environment that is not improving”.
NAB UK CRE specific provision to gross impaired assets was 31.9 per cent, as at 31 March 2013, while total provision to gross loans and acceptances was 11.48 per cent.
This compares with specific provision to gross impaired assets of 30.8 per cent and total provision to gross loans and acceptances at 9.9 per cent, at 30 September 2012, when the commercial real estate assets were still held in NAB’s UK Banking division.
NAB is to publish its annual results on 31st October.
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