Bank of Ireland shares slide after it offloads €350m of non-performing loans

Disposal comes as lender looks to lower level of problem loans ahead of Covid defaults

Bank of Ireland slid by 7 per cent to the bottom of the Stoxx 600 index on Friday after it said it had disposed of €350 million of non-performing loans. The bank is racing to lower its level of such problem loans ahead of an expected spike in Covid-related defaults.

Shares fell to €4.665 in the hours after the deal was announced amid a weaker environment for European banks.

US investment giant Pimco, which has previously acquired problem home loans from Permanent TSB, is believed to be the buyer, although the bank declined to comment.

Bank of Ireland said the transaction is expected to result in a pro-forma reduction in its non-performing exposure (NPE) ratio from 5.7 per cent to 5.3 per cent.

The portfolio includes both owner-occupied and buy-to-let investment properties.

The average timeframe for which the loans have been non-performing is six years. However, the majority of the loans involved have been restructured and are performing, the bank said.

Bank of Ireland, led by chief executive Francesca McDonagh, confirmed on Friday that it had entered into a securitisation of the portfolio.

A mortgage portfolio securitisation deal involves a lender pooling a portfolio of mortgages in a special purpose vehicle, and selling bonds to investors where interest, or coupon, payments are covered by income from the underlying mortgages.

In a statement the bank said the transaction would help it manage the regulatory capital requirements that are applied to non-performing mortgages and reductions.

It added that the restructuring arrangements would not affect protections currently afforded to customers, and that no transfer of servicing of loans or of legal titles is currently planned.

“Bank of Ireland will remain the contact point for customers in all queries regarding their loan, as is the case today,” it said, adding that customers did not need to take any action as a result of the new arrangement.

Charlie Taylor

Charlie Taylor

Charlie Taylor is a former Irish Times business journalist