RBS off-loads £1.6bn of discounted Irish loans

At completion, Ulster Bank Ireland and Ulster Bank will receive about £360 million in cash at current exchange rates, a gain of about £245 million compared with the book value, 73 per cent state-owned RBS said in a statement.

The loans had a loss of about £28 million in 2014.

RBS said the sale, expected to complete by the end of this year, with the gain to be recognised in the fourth quarter.

The proceeds will be used for “general corporate purposes”, the Edinburgh-based bank said.

It added that the transaction “is in line with the bank’s plan to strengthen its capital position and reduce higher-risk exposures”.

RBS injected £15.3 billion into Ulster Bank between 2008 and 2013 and moved billions of Euros of risky real estate assets from the unit’s balance sheet into a company bad bank.

Demand for land in Ireland is rising again in tandem with home prices, as the economy recovers from one of the worst recessions in Western Europe.

The loan portfolio, known as Project Clear, includes about 20 percent of all the space zoned for residential use in Dublin, Cairn said in a separate statement.

The deal will be completed this year and the loans will be split between the buyers, with Cairn contributing €78 million of the cost, the Dublin-based homebuilder said.

Cairn’s 75 percent share of the portfolio gives the company the opportunity to build more than 14,000 homes over the coming years, Chief executive officer Michael Stanley said.

Richard Roach, head of financial sponsors at RBS, said: “RBS has been a consistent lender to private equity-backed UK mid-market corporates for more than 20 years and these new co-lending agreements will make a real and unique difference in this important market.

“It makes borrowing on this scale simpler for our customers and our ability to structure competitive lending packages in this way enables us to support our private equity clients and in turn continue to help UK companies expand, create more jobs and invest more in the British economy.”