Finance Ireland considering entering mortgage market as profits soar

Company’s pre-tax profit up by 226 per cent last year to €8.3m

Finance Ireland founder Mr Billy Kane said the company will decide by the end of April whether to proceed with an entry to the mortgage market.

Finance Ireland founder Mr Billy Kane said the company will decide by the end of April whether to proceed with an entry to the mortgage market.

 

Finance Ireland, the country’s largest non-bank lender in the retail market, is considering entering the mortgage market as it assesses ways to further diversify its business after its pre-tax profit soared 226 per cent last year to €8.3 million.

The development comes as the company, set up in 2002 by former Permanent TSB chief executive Billy Kane, finalises a €30 million share placement that values the business at €105 million before the fresh money.

The Ireland Strategic Investment Fund and US investment giant Pimco, who previously invested a combined €55 million in Finance Ireland between 2015 and 2016, are lined up to acquire all the equity being issued in the current fundraising, according to a source.

Finance Ireland, which competes in leasing to small and medium-sized enterprises (SME), motor finance and agri-finance, saw it new lending rise by 43 per cent to €435 million last year, driven by a surge in lending in its fledgling commercial real-estate business, according to the company’s latest set of annual figures.

The company’s total loan portfolio rose by 58 per cent last year to €668 million. The company has more than 100 shareholders, including staff.

Mr O’Kane told reporters at a briefing on Friday that the company will decide by the end of April whether to proceed with an entry to the mortgage market. Any such business would be through the broker channel, would focus on owner-occupiers and rely on funding from a third party. The executive would not identify what potential financers the company is in talks with.

The company entered real-estate lending in 2016 and currently has a portfolio of about €175 million, focusing on loans of between €1 million and €10 million to investors and professional landlords.

Commercial property

The company plans to refinance its commercial property loan book this year by the issuance of bonds in capital market in a deal known as securitisation. It may be the first commercial real-estate securitisation in Ireland in a decade.

The motor finance division, an intermediary for UK merchant bank Close Brothers in the Republic, delivered a 70 per cent increase in profit last year, even as new loans to the market increased by only 5 per cent.

Frank Donnellan, managing director of the motor business, branded First Auto Finance, said that while the new car market has been softer in Ireland in the first few months of 2018, its business funding imported car sales carried out through dealerships is performing strongly.

Mr Donnellan said that 15 per cent of the motor book is made up of personal contract purchase (PCP), a form of hire purchase plan which has surged in popularity as a form of financing a car purchase in recent years but has come under the spotlight of competition authorities on both sides of the Irish Sea in recent times.

Mr Donnellan said that while PCP has its uses as a potentially low-cost source of car financing, he added: “If you are doing high mileage, stay away from it.”