Overseas private-equity and hedge funds are currently circling as much as €11 billion of Irish loans, mainly mortgages, that have been put in the market by three of the most active lenders during the property bubble.
Permanent TSB said on Tuesday that it had pressed the start button on the sale of a portfolio of loans known as Project Glas as it seeks to lower its level of non-performing loans (NPLs). It is understood that the portfolio, being marketed by EY, contains up to €2 billion of private and buy-to-let mortgages, based on their original value.
PTSB has the highest ratio of NPLs among Ireland's bailed-out banks, at 28 per cent of its €21 billion portfolio at the end of June, even as the group and wider industry have cut arrears at pace from their 2013 peak. The European Central Bank, in charge of supervising euro-zone lenders for more than three years, is piling pressure on lenders with high levels of NPLs to come up with credible strategies to reduce them over time.
Elsewhere, Lloyds Banking Group has begun the process of selling its remaining €5 billion Irish mortgage book in a move that would end its drawn-out retreat from the Republic, which began in 2010. Lloyds, which has retained Deloitte to manage the deal, inherited €32 billion of Irish loans when it agreed to take over Scottish group HBOS in 2008 in a rescue deal engineered by the UK government.
While the portfolio is mainly performing, it is understood to be dominated by long-term interest-only mortgages issued to professionals during the property boom.
And AIB drew initial bids of up to €2 billion late last month for a €3.75 billion par-value loans, mainly comprised of commercial real estate and buy-to-let mortgages. Sources said on Tuesday that the bank had opened a more detailed data room this week for bidders, reported to include Wall Street giant Goldman Sachs, private-equity firms Lone Star and Cerberus and investment firm Pimco. The sale is expected to be completed in June.
The amount of loans currently on the market suggests 2018 will be the busiest year for Irish portfolio sales since at least 2016, when €12.5 billion of loans were sold, according to PricewaterhouseCoopers data. The peak year was 2014, when the National Asset Management Agency disposals and the liquidation of Irish Bank Resolution Corporation drove €30.5 billion of loan sales across Irish institutions.
“The Irish and European banking regulators are very clear that all banks in the euro zone need to reduce significantly the percentage of non-performing loans on their balance sheets,” PTSB said on Tuesday.
“The bank will use various approaches including voluntary surrenders [of properties], mortgage to rent, loan sales and, where appropriate, legal action to progress this agenda,” it added.
The bank said that about 1,200 buy-to-let properties have been surrendered by troubled borrowers under an initiative started last year where borrowers would have any shortfall on mortgage following the sale of the asset written off.
Minister for Finance Paschal Donohoe told the Cabinet on Tuesday that one of the banks was preparing to sell a portfolio, according to sources. This is understood to relate to the PTSB transaction. A spokeswoman for the Minister declined to comment.