Lloyds sells 1.8bn pounds loan property

Last year, Lloyds posted a first-half loss on Thursday, sold more than 4 billion pounds worth of real estate from its specialist unit that manages over 1,800 cases representing 23.7 billion pounds of troubled loans.

"Despite the market for capital values improving 17.3 percent from its trough in 2009, we have seen this improving trend in the market begin to weaken for all but prime or central London based real estate," the bank said on Thursday.

In June, Investment Property Databank said property values had gained 17.3 percent since late 2009, after having tumbled by about 45 percent during the global financial crisis.

At 1202 GMT, Lloyds' shares were down 5.3 percent at 36.9 pence.

Austerity- and capital adequacy-minded banks, such as Royal Bank of Scotland, have cut their exposure to real estate since the credit crisis.

Harm Meijer, a property analyst at JPMorgan, said the fact banks held so much secondary property could reduce values in the wider market. "Secondary property needs money spent on it and careful management to hold its value. You have to wonder whether the assets are actually in the best hands," Meijer told Reuters.

Earlier today, Lloyds slumped to a 3.25 billion pound ($5.3 bln) first half loss, hit by the cost of compensating customers mis-sold insurance and as bad loans in Ireland and Australia piled up.

Lloyds is 41 percent owned by the British government after a credit crisis bailout.

Copyright Reuters, 2011