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Highlights
- Lloyds Bank aims to be the UK’s biggest private landlord by within a decade.
- It aims to build 10,000 properties by the end of 2025, and another 50,000 by 2030.
- This would create a portfolio worth £4 billion, generating pre-tax profits of around £300 million.
Lloyds Banking Group (LON:LLOY) has confirmed that it is aiming to buy 50,000 homes in the next decade to become one of the biggest landlords in the UK. Lloyds is planning for diversification by moving away from traditional lending as low interest rates have taken hold of the market for more than a decade, which has led to a fall in overall returns. This move has been announced after the bank has recently launched its Citra Living brand, which has helped it in entering the private home rental market. Under the Citra Living Brand, the banking giant will function as a private landlord and charge rent from its tenants.
By the end of 2025, the bank has set an aim to buy 10,000 homes, according to news reports. Providing approximately one in every four home loans, Lloyds is the biggest mortgage lender in the UK at present.
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Buying and renting newly built properties will be the primary focus of Citra Living brand, and it will start small at the outset, and test its plans in the rental market first. The first unit of homes that will be put up on rent by it include 45 new apartments at Fletton Quays in Peterborough. Merger and acquisition opportunities as well as strategic alliances may be taken into account by Citra to support it in reaching its set targets.
By the end of this year, the British retail and commercial bank aims to acquire approximately 400 properties and has set a target to double this number by next year. According to the managing director of Citra Living, Andy Hutchinson, the objective of the new brand is to work in collaboration with the leading house builders, with the aim of picking out feasible sites and buying properties on them for tenants to rent. This will help in both meeting the increasing demand for the rental properties, as well as making sure that the house building sector is receiving the continued support that it needs. The bank has recently entered into a strategic partnership with Barratt Developments, which is a property development firm, for pushing itself into the property market.
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Owing approximately 9,100 properties and having a market capitalisation of worth £2.1 billion, Grainger is at present the largest private residential landlord in the UK. According to the report in The Financial Times, Grainger will be left behind by Citra is if Lloyd is able to achieve its 2025 target, making Citra larger than the current size of Grainger. Taking into account the currently prevailing property prices and rental estimates, the banking giant will potentially generate a pre-tax profits of roughly £300 million, along with a portfolio worth approximately £4 billion.
The bank will be initially careful with the new division and will gradually enter the private rental market to explore the area further, that too on a limited basis. Many big fund management groups, such as Legal & General and M&G, have entered the private rental market in the past few years. Retailer John Lewis has recently announced its plans to transform the unused floor space in its department stores into rental homes.
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Summing up
Recently, in June, the Lloyds Banking Group declared that another 44 of its branches were being shut down mainly due to a surge in digital banks leading towards a shrinking customer base. The banking group is, therefore, trying to diversify its operations, with the aim of progressively providing incremental stock to the UK rental market over the coming years.
