Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Categorized | Insurance, Property

L&G enters property lending

Posted on April 30, 2012

Legal & General has made its first foray into property lending as the insurer bids to take advantage of the gap in the market created by the retreat of bank finance.

The company will announce on Tuesday that it has agreed to provide Unite, the UK’s largest developer and manager of student housing, with a £121m loan. The move is the start of what L&G hopes to build into a multibillion-pound lending business.

    It is the latest example of an insurer looking to get a foothold in the real estate financing market. The appetite among banks to hold debt secured against property has dwindled during the past two years, as overexposure to the sector and regulatory changes put pressure on new lending.

    The loan also marks a watershed for L&G, which first looked at the idea of commercial property lending almost a year ago but pulled back amid worsening market conditions. The insurer held negotiations with 150 prospective borrowers before agreeing with Unite. L&G is looking to make another property loan in the coming weeks.

    Ashley Goldblatt, head of commercial lending at L&G Investment Management, said the company had looked at applications that could not get lending from the banks. “We looked at a lot, but you have to wait for the right one to come along and then grab it. It is a bit like marriage.”

    He added that L&G would target medium to long-term lending agreements where it could negotiate fixed rather than floating-rate repayments to match its long-term liabilities. The property lending business will be entirely financed by policyholders’ funds.

    The loan to Unite, which is secured against a portfolio of student dormitories in London, Manchester and Bristol, represents a 60 per cent loan to value and is fixed at 5.05 per cent for 10 years. The cost of the loan is below the 5.7 per cent average Unite pays for its debt.

    Joe Lister, Unite’s chief financial officer, said securing the loan was a testament to the strength of the company and marked an important step for it.

    Insurers are tipped to become an important force in the property lending market this year and next as regulatory changes force banks to pull back.

    Reforms being ushered in under Basel III – the third accord in a sequential updating of global banking regulation – will increase the cost of capital banks must hold against commercial property loans.

    Both Aviva and Prudential, two of L&G’s UK rivals, already have property lending businesses.