BoI’s results reveal scale of mortgage arrears problem

Bank announces plans to resume dividend payments next year

Andrew Keating, chief finance officer, and Richie Boucher,  chief executive, announcing the Bank of Ireland  results. Photograph: Cyril Byrne / The Irish Times

Andrew Keating, chief finance officer, and Richie Boucher, chief executive, announcing the Bank of Ireland results. Photograph: Cyril Byrne / The Irish Times


Bank of Ireland produced stellar trading results on Monday, with profits up 30 per cent and the company announcing plans to resume dividend payments next year, some nine years after its last payout to shareholders.

Most of the key metrics showed strong growth – new lending, customer deposits, its net interest margin, and capital levels.

There was another area of growth at the bank last year, albeit one that slipped under the radar. It was called “forbearance measures” in the bank’s 224-page preliminary statement. These are offered to customers in arrears or about to go into arrears with their mortgage payments.

It involves a borrower in financial distress being granted a temporary or permanently agreed change to the contractual terms of their home loan.

The bank’s results showed the number of Irish accounts with “active forbearance measures” at the end of December was 23,833, which was 2,757 or 13 per cent higher than a year earlier. This flies in the face of the industry narrative that the arrears problem is in decline.

Interestingly, the increase was driven by performing loans, with a 25 per cent increase to 17,279. Performing loans are essentially those that are up to and including 90 days past due with their payments.

In terms of non-performing loans, the figure fell by 9 per cent to 6,554. Non-performing loans are defined by the bank as defaulted loans together with probationary residential mortgages (loans that were no longer classified as defaulted at the reporting date as the mortgages were awaiting the successful completion of a 12-month probation period). The bank’s figures also suggest a high level of negative equity in its Irish mortgage book. In terms of owner-occupied properties, some 17 per cent of the total had a loan-to-value of 100 per cent or more.

Negative equity isn’t an issue if a borrower can meet the terms of their mortgage but the bank’s data shows 46 per cent of home owners with non-performing loans have LTVs of 100 per cent or more. Most of these people are up the proverbial creek without a paddle.

Negative equity

It could be due to rising house prices (CSO figures show they increased by 6.6 per cent nationally last year) or it could be borrowers getting back on track to the extent that they are no longer a non-performing loan. But it could also be due to people handing back their keys or having their property repossessed and no longer being classified at all. The results show the bank had a little more than €3 billion of non-performing Irish mortgages on its books at the end of last year. That’s 12.2 per cent of its total home loans. This reduced by €900 million in the 12 months but it’s still a large number. Defaulted loans came to €2.3 billion or 9.3 per cent of the total Irish mortgages.

Some details about repossessions were also given. The bank said 186 properties were disposed of last year along with 531 buy-to-lets sold by receivers. This included 137 owner-occupied homes, which generated sales for the bank of €20 million, or an average of almost €146,000.

Again, these figures are down on the previous year but that’s of little comfort to those who lost their homes. The bank has another 167 properties waiting to be sold, including 120 owner-occupied homes. We know, too, that the bank doesn’t do write-downs so home owners will most likely be chased for the debt even if they lose their homes.

The bank argues its mortgage arrears numbers are below the industry average and some nine out of 10 restructuring arrangements are sticking, which again would be higher than the industry norm. This is true but it doesn’t take away from the fact that thousands of its customers are in trouble of one sort or another with their mortgages.

It’s incredible this issue hasn’t received more attention in the election campaign, especially given the palpable public anger towards Fine Gael and Labour.

The multibillion scale of the mortgage arrears problem and its social impact trumps the huff and puff about water charges, property tax and the like.

Twitter: @CiaranHancock1