RBS to sell Irish real estate loans for £1.1bn to boost capital position following stress tests

The Royal Bank of Scotland Group plc (RBS) has said it has agreed to sell a portfolio of Irish real estate loans to an entity controlled by US private equity group Cerberus, as part of its plan to offload risky assets and strengthen its capital position.

RBS will receive up to £1.1bn ($1.73bn, €1.39bn) from the sale, which is expected to be settled in the first quarter of 2015. The bank intends to use the sale proceeds for general corporate purposes.

The loans to be sold have carrying value of about £1bn. The gross assets are about £4.8bn and generated a loss of £0.8bn in 2013, primarily due to impairment provisions, RBS said.

RBS, which is 80% owned by the government, noted that the sale was part of "the continued reduction of assets in its RBS Capital Resolution division and is in line with the bank's plan to strengthen its capital position and reduce higher risk exposures".

As of the end of the third quarter, RBS had reduced assets in the Capital Resolution Ireland portfolio from £4.8bn to £2.9bn.

The sale comes as the bank along with a number of its peers was deemed inadequate in a crisis by the Bank of England's (BoE) stress tests.

RBS, Lloyds Banking Group and the Co-operative Bank were found to be the most vulnerable to a housing crash and spike in unemployment, according to the central bank. Only the Co-operative Bank has strictly failed the tests.

Despite the weak performance in the stress tests, Lloyds and RBS, which were bailed out by the taxpayer in 2008, had done enough in 2014 to improve their capital position, according to BoE.