Two giants of American finance are teaming up to buy a £5bn portfolio of loans taken on by British taxpayers during the financial crisis.

Sky News has learnt that the Wall Street financial services group Citibank and Pimco, the giant bond trading house, are working together to acquire the tranche of residential mortgages and unsecured personal loans from UK Asset Resolution - an agency overseen by the Treasury.

City sources said the deal is scheduled to be announced on Tuesday.

One insider said Pimco was providing financing for the deal, with the assets being owned by Citi.

It will mark another significant milestone on the journey towards winding up UKAR, which was set up in the aftermath of the 2008 crash to manage loans taken on by customers of Bradford & Bingley and Northern Rock.


The deal will be the latest disposal of UKAR assets involving Pimco, and comes a year after it joined forces with Barclays to buy a separate £5.3bn portfolio from the agency.

Philip Hammond, the Chancellor, has set a target of reducing UKAR's balance sheet to zero by this time next year.

Bankers said that the deal to be announced this week would shrink UKAR's balance sheet to just £8bn, more than 90% lower than its mammoth size when B&B and Northern Rock had to be rescued by taxpayers after they were unable to keep trading.

UKAR has announced a string of transactions involving private sector buyers in the last few years, the largest of which saw Cerberus, the hedge fund, acquiring a £13bn portfolio of securitised mortgages in November 2015.

Last year, the Treasury agency offloaded an £860m portfolio of equity release mortgages to Rothesay Life, the pensions risk transfer specialist.

The proceeds from last April's sale to Pimco and Barclays were used to repay the outstanding £4.7bn of a Treasury loan to the Financial Services Compensation Scheme (FSCS), the interest on which is paid by major banks and building societies.

The disposals have not been without controversy amid accusations that some consumers holding the loans sold by UKAR have been unfairly treated by the new owners.

"Building on UKAR's strong track record of successful asset sales, the government now expects to divest the remaining assets from B&B and NRAM plc by March 2020, subject to achieving value for money and market conditions remaining supportive," last year's Budget documents said.

"As has been the case for all previous UKAR sales, buyers will be required to agree to UKAR's customer treatment protections which include the Financial Conduct Authority's (FCA) Treating Customers Fairly principles."

The reduction of UKAR's balance sheet to below £10bn represents another milestone in removing the legacies of one of the ‎worst financial crises in British history.

Last autumn's tenth anniversary of the collapse of Lehman Brothers underlined the continuing repercussions of the 2008 crash, with interest rates in most western economies still at historic lows.

The Treasury sold a further chunk of shares in Royal Bank of Scotland last year, and aims to sell the rest of the Government's stake within four years.

Meanwhile, the £20bn used to rescue Lloyds Banking Group has now been returned to taxpayers, generating a modest profit.

Tens of billions of pounds more has been yielded from the disposal of the customer base of Northern Rock to Virgin Money, and loans made by both it and B&B.‎

Credit Suisse is advising UKAR on the deal.

UKAR, Citi and Pimco declined to comment on Monday.