NAB to sell £700m maiden UK NPL

FINANCE: National Australia Bank has put its first UK non-performing loan portfolio up for sale following a review of its UK book.

The bank, which owns Yorkshire and Clydesdale banks, has appointed Morgan Stanley to offload a circa £700m NPL in a process known as Project Chestnut.

The loan book is split into two tranches: a £200m residential pool and a circa £500m pool of commercial loans.

It is understood that the commercial book comprises the banks’ larger exposures, so is less granular with fewer borrower connections than many of the NPL books that have already been traded.

Morgan Stanley is said to be widely marketing the portfolio, which is likely to appeal to both residential specialists and traditional private-equity investors.

It will consider bids on the individual tranches or the whole. First-round offers are expected at the end of June.

The sale marks the acceleration of NAB’s wind-down of its UK activity as it looks to exit the market.

In 2012, the bank transferred £5.6bn of regional UK property loans from Yorkshire and Clydesdale to the main bank, with plans to undertake an orderly wind-down over six years. It had expected the loans to shrink to less than £2bn by 2018.

According to NAB’s first-quarter trading update, released in February, the bank’s CRE run-off portfolio continues to decline, with the balance falling from £4bn to £3.6bn over the quarter.

Net of provisions, the outstanding balance is now £3.1bn.

Morgan Stanley declined to comment.