NatWest is planning to undertake a significant risk transfer of a 1 billion leveraged loan portfolio.

According to sources, the UK bank NatWest (NWG.US) is undergoing a significant risk transfer (SRT) related to a leveraged loan portfolio. Sources say the size of the portfolio is close to 1 billion ($1.3 billion). They added that the size of the SRT is around 90 million. SRT is an increasingly popular tool for banks to manage risks. Banks can ensure that loans do not default by selling these notes to pension funds, sovereign wealth funds, and hedge funds. This allows them to reduce the use of their own capital to meet regulatory requirements, while investors can achieve a return rate often exceeding 10%. Sources said that terms, including the size, are still to be discussed with investors. Additionally, the bank is marketing additional senior bonds denominated in British pounds on Wednesday, which is a form of debt used by lenders to enhance capital buffers. The increasing popularity of SRT means that such transactions are expected to reach historic highs this year. Chorus Capital Management, which invests in SRT, expects global issuance to increase to $35 billion, compared to an estimated $29 billion last year, with most of the transactions occurring in Europe. Last year, NatWest Bank expanded its team of bankers in the SRT department and marketed a risk transfer related to a 1.4 billion loan portfolio. Other recent deals by UK banks include a transaction with Standard Chartered Bank related to a $1.5 billion loan portfolio. The UK government is set to sell its stake in NatWest Bank, which was acquired during the bailout plan in 2008 amid the financial crisis. This month, the UK government further sold its stake in NatWest Bank, currently holding less than 7%. CEO of the bank, Paul Thwaite, stated that the second quarter would be a reasonable timeframe for a complete exit.