LLOYDS BANKING GROUP has decided to wind down its Irish business lending operation, which was badly hit by the bursting of the Republic’s property bubble two years ago.
Following a four-month review, Lloyds said it would pass £21.5bn of commercial loans in the region to its Bank of Scotland subsidiary. Most of the 800 Lloyds staff working in Ireland will be transferred to a new service company. They will look after customer relations while gradually running the loan book down.
Lloyds quit the Irish high street in February, shutting its 44-branch Halifax business and shedding around 750 jobs. Although a spokesman emphasised the commercial banking arm would retain a presence until its assets dissolved naturally, a statement said Lloyds was effectively pulling out as “there was little opportunity for scalable growth in the future”.
The move marks the end of the group’s flirtation with the one-time “Celtic tiger” economy. HBOS aggressively pushed into the Irish market in 2005, extending credit that contributed to the country’s rapid house price boom. Lloyds took on the exposure when it bought HBOS in 2008.
Just under half – 43 per cent – of Lloyds’ Irish business loan book is judged to be at risk of turning toxic. Much of the credit is tied up in commercial real estate projects.
Ian Gordon, an analyst at European brokerage Exane BNP Paribas, said the 41 per cent state-owned bank had given the market clarity on its Irish division. He said: “All in all, a sensible decision for Lloyds, where under [head of group operations] Mark Fisher’s leadership, delivery against a cost synergy target of £2bn is already ahead of schedule.”
Shares in Lloyds closed 0.8 per cent lower at 70.1p.