National Australia Bank (NAB) has confirmed it will sell £625 million ($A1.12bn) of largely non-performing loans in its UK portfolio to an affiliate of Cerberus Global Investors.
The lender said the sale would reduce the gross loans balance of its UK commercial real estate portfolio by 20% to £2.38 billion at June 30, reducing gross impaired loans by 48%.
NAB said the deal would result in a small gain above net book value and would release an estimated £127 million of capital when settled.
Incoming NAB chief executive Andrew Thorburn said the sale was a "substantial de-risking" of the non-performing part of the UK portfolio.
"As we signalled at the interim results in May we continue to look at opportunities to optimise return on equity by accelerating the sale of non-core assets," Mr Thorburn said.
The deal is not subject to regulatory approval.
NAB reduced its charge for bad and doubtful debts by 52% in the first half of 2014, largely due to lower loan losses in both its Australian and UK businesses.