Lloyds Banking Group Plc - Acquisition of Tesco Bank's Mortgage Portfolio
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.