(Bloomberg) -- Banco Santander SA is reaching out to investors about a potential significant risk transfer linked to a portfolio of about £1 billion ($1.3 billion) of loans out of its UK unit, according to people familiar with the matter.

The size of the SRT is around £90 million, and the underlying portfolio is made up of unsecured personal loans, said the people, who asked not to be identified because the matter is private. The marketing of the deal is at an early stage, and terms are subject to discussion with investors, they added.

A representative for Santander declined to comment.

SRTs enable banks to hold onto loan assets and offload the risk by paying investment firms to share any potential future losses. Usually, a bank would obtain default protection for as much as 15% of portfolios, and in return investors can receive yields that frequently top 10%.

Spain’s largest lender is looking to speed up transactions that transfer risk to investors such as private credit firms, according to a presentation by the bank’s global head of capital and profitability management, Sergio Gámez, earlier this month. Such transfers could take the form of asset sales, guarantees or securitizations, according to the presentation to analysts, which was seen by Bloomberg News. 

The SRT will provide credit protection on a mezzanine portion of the loan portfolio, said the people. The junior tranche — which ranks first to absorb losses — is expected to be retained by Santander, as well as the most senior tranche, they said.

Santander used SRTs and other strategies including sales and hedges to dispose of the equivalent of €30 billion in risk-weighted assets in the first half, Chief Financial Officer Jose Garcia Cantera said on an earnings call in July. The cost was about half of what it earned from reinvesting the released capital, aiding an annualized profit boost of some €500 million, he said at that time.

--With assistance from Neil Callanan, Carmen Arroyo and Jorge Zuloaga.

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