AIB is preparing to put a portfolio of mainly problem personal loans, which had a combined original value of less than €100 million, up for sale, according to sources.
The plans are advancing against the backdrop of recent changes in the office of chief financial officer. Group financial controller Kevin Gahan took on the chief financial officer role on an interim basis last month after Donal Galvin stepped down following seven years in the role to pursue, as he said in the initial announcement in May, “other career opportunities”. He is on gardening leave at present.
The unsecured portfolio, also believed to include business loans, is expected to be sold by the end of the year, at a deep discount to the original value of the loans, the sources said.
From kitchen counter to supermarket shelves, the rise of Ballymaloe Foods
The planned disposal follows AIB’s sale earlier this year of a portfolio of non-performing loans valued at €300 million to US distressed debt giant Cerberus and loan servicing company Everyday Finance, a unit of UK-based Link Financial. That portfolio, dubbed Project Fir, included mortgages, unsecured and small business loans that had soured during the Covid-19 pandemic and never recovered.
READ MORE
European regulators introduced binding rules in 2019, a decade after the financial crash, requiring banks to set aside loan-loss provisions equal to 100 per cent of an unsecured loan within three years of a borrower default. They allow banks to build up full provisioning on a secured loan like a mortgage over seven years.
The regulations incentivise banks to address such borrowings or get them off their books.
“In line with regulatory requirements, European banks are obliged to classify certain loans as non-performing exposures [NPEs] for a variety of reasons. For customers in difficulty, AIB continues to provide support through a comprehensive range of forbearance solutions,” said an AIB spokesman. “Our focus continues to be to put in place sustainable case-by-case solutions to help them to get back on track, and this accounts for the vast majority of our NPE resolution. Where the bank has not been able to resolve the NPE position through customer engagement, the use of loan sales is an option which the bank will consider, to ensure there is no build-up of unresolved NPEs.”
He declined to comment on the portfolio sale in the works. AIB, led by chief executive Colin Hunt, said in July that its non-performing loan volumes increased by €200 million over the course of the first half of the year to €1.8 billion, equating to 2.4 per cent of all its loans.
The spokesman said that the process to appoint a successor to Galvin “is under way and the outcome will be announced in due course”. It is understood that the bank has been assessing both internal and external candidates.
