Lloyds Bank aims to be UK giant owner with 50,000 homes

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Lloyds Banking Group aims to become one of the UK’s largest landlords by buying 50,000 homes in the next 10 years, according to internal documents.

Lloyds last month announced it was entering the private home rental market under the Citra Living brand in an effort to diversify the bank’s income away from traditional lending, which has shrunk due to low interest rates.

The bank has been very vocal about its long-term goals for the business, but an internal job advertisement seen by the Financial Times revealed that Citra has set a “strategic challenge” to reach 10,000 properties by the end of 2025, with more aiming to reach 50,000 by 2030.

It estimated that with 10,000 homes, Citra would have a balance sheet of around £4 billion and generate around £300 million in pre-tax earnings.

The 2025 target would make Citra larger than the current size of Grainger, the UK’s largest private residential owner, which owns around 9,100 properties and has a market capitalization of £2.1 billion.

Citra may consider “merger and acquisition opportunities and/or strategic alliances” to help it reach the goals, according to the announcement.

Bullish internal goals contrast with the group’s cautious public statements about Citra.

“We’re keeping this on a limited basis as we explore the region, while allowing ourselves to learn from it,” William Chalmers, Lloyds’ chief financial officer, told analysts last month.

The tax changes have reduced the number of smallholders who previously dominated the UK rental sector, but the housing shortage and the increase in the number of renting families has encouraged more large companies to enter the sector in recent years.

Insurance and money management groups such as Legal & General and M&G have become major investors, while retail chain John Lewis plans to convert some of its stores and other land into thousands of rental homes.

Lloyds, the nation’s largest mortgage lender, hopes its current knowledge of the real estate market will give it an edge. It is also considering selling other products from its other businesses, such as home insurance and deposit loans. Chalmers told analysts that “long-term asset generation is clearly interesting” for its insurance business.

One of the risks is competition with its potential customers. The company’s first property was a recently completed development in Peterborough, but the bank said it hoped to build most of its portfolio by developing new sites from scratch to avoid Hoover.[ing] Even properties that owners might want to buy.” Earlier this month, it agreed to a partnership with FTSE 100 housebuilder Barratt.

Lloyds said: “As highlighted at launch, Citra Living will initially start small, focusing on the purchase and rental of high-quality newly built properties. This will be achieved by working alongside leading homebuilders to meet the growing demand for rental properties, and the aim is to progressively provide additional stock to the UK rental market over the coming years.”

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