November 30, 2017 / 2:10 PM / in a year

CORRECTED-Britain's 'bad bank' to complete Bradford & Bingley loan sales next year

(corrects Hares’ surname in paragraph 9, and changes loan amount to 6 bln from 4 bln in paragraph 11)

By Emma Rumney

LONDON, Nov 30 (Reuters) - Britain’s “bad bank”, set up to wind down the assets of two failed lenders, expects to complete a sale of mortgages by the second quarter of 2018, its CEO Ian Hares said on Thursday, in a deal set to return almost 5 billion pounds to the taxpayer.

The UK Asset Resolution Authority (UKAR) was set up in 2010 to take on assets, including residential and buy-to-let mortgages, from Bradford & Bingley and Northern Rock, which were nationalised in the run up to the financial crisis.

The British government poured billions of pounds into the country’s banks during the crisis and is still trying to recoup the money.

The 20 billion pounds ($26.92 billion) used to rescue Lloyds Banking Group in the crisis was returned to taxpayers with a small profit earlier this year. In November, the government said it planned to reprivatise Royal Bank of Scotland by selling 15 billion pounds of shares.

The UKAR said the proceeds from the sale of the next chunk of Bradford & Bingley’s mortgage portfolio would be used to repay the remaining 4.7 billion pounds of a 15.8 billion pound loan to Britain’s Financial Services Compensation Scheme (FSCS).

The FSCS had borrowed the money from the British government when it injected billions into Britain’s banks during the financial crisis.

The sale of the assets was initiated earlier this year, but its formal launch was announced on Thursday with UKAR’s interim results. It was initially expected to raise enough money to repay the whole of the loan to the FSCS by March 2018.

“It’s slipped back about 6-8 weeks,” Hares told Reuters by telephone. “We expect that to complete in the first half of next year, most probably in ... the second quarter. Somewhere between April and June.”

The price of the sale will be subject to market conditions, but Hares said UKAR wanted to get at least enough to cover the loan repayment with anything extra to be used to repay other outstanding debts.

In the six months to Sept. 30, UKAR reduced its balance sheet by 13.2 billion pounds to just over 21 billion pounds, and repaid 13.1 billion pounds of loans to the government. This means 76 percent of the loans have now been repaid.

UKAR expects to have cut its balance sheet to around 12 billion pounds by the middle of next year and have remaining government loans of around 6 billion, Hares said.

UKAR’s underlying profit before tax fell by 41 percent, to 238 million pounds, reflecting its reduced mortgage balances, it said.

The news of the latest UKAR asset sale was first reported by Sky News on Wednesday. It follows an 11.8 billion pound sale from the portfolio in March. ($1 = 0.7429 pounds) (Reporting by Emma Rumney. Editing by Jane Merriman)

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