A Decade On, HBOS’ Joint Venture Arm Is Making Money For Lloyds Again
Almost exactly 10 years ago, Lloyds TSB completed a deal to buy troubled Scottish bank HBOS at the government’s behest. The deal would prove disastrous for the acquirer.
In the period that followed, Lloyds racked up billions of pounds of losses and had to be partially nationalised, with the UK government taking a 43% stake which it only exited in 2017.
A huge chunk of those losses, around £30B, were the result of the huge push into property HBOS made between 2000 and 2007. And while most of those losses came from lending, the pinnacle of HBOS’ hubris was Uberior, the bank’s joint venture division.
HBOS loved commercial property so much that it made equity investments alongside the companies that it lent to, meaning that in many cases its borrowers were putting only 2% to 3% of equity into deals, while what was once a traditional lending bank was making equity investments totalling hundreds of millions of pounds, backing the privatisation of housebuilders like Countryside and Crest Nicholson.
Uberior means plentiful or rich in Latin, and HBOS was so pleased with the name that it even called the HQ of its commercial division New Uberior House.
In the first set of financial results after Lloyds took over HBOS in 2009, it wrote down the value of Uberior’s portfolio by £250M. The year after, that write-down rose to £589M.
But recent accounts for Uberior Investments filed at Companies House show that over the past few years, Uberior has quietly been making money for Lloyds, as the company has gone about liquidating the portfolio in a more benign property market.
The last set of accounts filed show that Uberior Investments paid its parent company a £250M dividend in 2017.
Just under £100M of that dividend came from Uberior Equity, a subsidiary that managed stakes in housebuilders like Countryside, McCarty & Stone, Crest Nicholson and Keepmoat. Lloyds has on the whole sold out of or floated these businesses.
A further £144M of the dividend came from a company called Prestonfield Investments, which owns stakes in a series of joint ventures. One of those is a stake in a joint venture HBOS entered into with Moorfield when it took Marc Gilbard’s opportunity fund private in 2001. Uberior Moorfield paid a dividend of £18M.
In full year results for 2018 announced on 20 February, Lloyds revealed profit after tax of £4.4B, a 24% rise on the previous year, which was slightly below analyst expectations of £4.6B.