3 September 2019
LLOYDS BANKING GROUP TO ACQUIRE TESCO BANK'S UK RESIDENTIAL MORTGAGE PORTFOLIO
Lloyds Banking Group plc (the 'Group') announces today that Halifax has entered into an agreement with Tesco Personal Finance plc ('Tesco Bank') to acquire Tesco Bank's prime £3.7 billion UK residential mortgage portfolio.1
As part of the transaction, we welcome over 23,000 mortgage customers who will be transitioning from Tesco Bank. Halifax has a proven track record in serving and supporting mortgage borrowers across the UK.
The transaction is consistent with Group strategy and value accretive to shareholders.
As previously indicated, the Group's strong free capital build gives us flexibility to consider inorganic growth opportunities in selected target areas where we see value for shareholders. The transaction is in line with this approach and demonstrates the Group's strong commitment to the strategically core prime mortgage market.
The acquired portfolio will generate good returns to the Group in excess of current organic market opportunities, while delivering open mortgage book growth within the Group's low risk strategy and providing additional flexibility in participation choices in the mortgage market. Following this transaction, we now expect the Group's open mortgage book assets at the year end to be ahead of the year end 2018 balance.
The purchase price of c. £3.8 billion represents a 2.5 per cent premium on gross book value. 2 It will be funded using existing internal resources with minimal impact on capital (mid to high single digits basis points at year end 2019). Under the ownership of Tesco Bank the portfolio generated customer income of c. £81 million and a pre-tax profit of c. £9 million in the year to 28 February 2019.
The beneficial ownership of the portfolio is expected to transfer at the end of September 2019, with transfer of legal title anticipated by the end of March 2020. We will work closely together with Tesco Bank to ensure a smooth transition to the Group for all customers.
1 Halifax is a division of Bank of Scotland plc which is a wholly owned subsidiary of Lloyds Banking Group plc
2 There will be an adjustment at legal close for in-flight customer loans and further advances made to existing customers during the period until legal title transfer which is likely to be less than £30 million
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For further information:
Douglas Radcliffe +44 (0)20 7356 1571
Group Investor Relations Director
Matt Smith +44 (0)20 7356 3522
Head of Corporate Media
FORWARD LOOKING STATEMENTS
This document contains certain forward looking statements with respect to the business, strategy, plans and/or results of the Group and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, including statements about the Group's or its directors' and/or management's beliefs and expectations, are forward looking statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend upon circumstances that will or may occur in the future. 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Please refer to the latest Annual Report on Form 20-F filed with the US Securities and Exchange Commission for a discussion of certain factors and risks together with examples of forward looking statements. Except as required by any applicable law or regulation, the forward looking statements contained in this document are made as of today's date, and the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained in this document to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The information, statements and opinions contained in this document do not constitute a public offer under any applicable law or an offer to sell any securities or financial instruments or any advice or recommendation with respect to such securities or financial instruments.