Barclays in talks to sell £2bn package of risky loans

Barclays is preparing to sell £2bn of risky second-charge mortgages and loans made through its Firstplus brand, more than 10 years after the bank had originally planned to offload the subsidiary.

The lender has been in talks with a number of challenger banks in the past few weeks about selling the portfolio, according to people familiar with the situation. Barclays acquired Firstplus with its £5.4bn takeover of Woolwich in 2000.

The £2bn Firstplus business, which was fronted by television presenter Carol Vorderman in adverts, was moved to Barclays' non-core division in May and has not issued any new loans for six years.

Brokers said that the brand had been the subject of controversy as it offered borrowers with impaired credit histories the chance to consolidate debt through second mortgages lent against homes.

Ray Boulger, a mortgage expert at John Charcol, said that Firstplus was known for offering second-charge mortgages at a loan to value of up to 125 per cent, with terms stretching up to 25 years.

Some borrowers were left paying annual interest rates as high as 12 per cent after house prices plummeted following the credit crunch, even though the base rate was cut to a historic low.

Barclays has failed to sell the book on at least two occasions. It looked to offload it in 2002, two years after the Woolwich deal. It failed to sell the business again in 2007 shortly before the financial crisis.

The latest attempt comes as improving economic conditions in the UK buoy asset prices, providing banks with an opportunity to offload riskier books after years of sitting on loan losses.

Appetite among buyers has increased significantly in the past few months, with a number of private equity firms expressing interest, as well as new banks looking to boost their asset base.

Mr Boulger said that parts of the Firstplus portfolio exposed to London and the southeast will have seen a reduction in loan-to-values as property prices have risen.

But he warned: "The problem for customers of lenders who are no longer lending is that they don't need to be reasonable on rates. Once [the lender] exits the market, it has less of a reason to be seen as fair on existing customers."

In its latest set of quarterly results, Barclays said that risk-weighted assets in its non-core unit shrank £10bn during the first three months of the year, to £65bn.

Regulatory changes, which will hand responsibility for second-charge mortgages to the Financial Conduct Authority from April next year, could spur a number of institutions to offload books rather than be forced to comply with new rules.

General Electric, the US multinational conglomerate, put its £7.7bn UK Home Lending platform of residential mortgages up for sale two weeks ago as part of broader plans to retreat from global financial markets.

UK Asset Resolution, the company tasked with disposing of the government's holdings in defunct lenders Northern Rock and Bradford & Bingley, recently started a £13bn asset sale by issuing information memorandums to interested buyers, according to people familiar with the situation.

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