Permanent TSB puts UK mortgage business up for sale

Permanent TSB has put its non-core Capital Home Loans (CHL) mortgage business in the UK up for sale, The Irish Times has learned.

It is understood that four or five parties are in “active” discussions to acquire the business and a data room has been opened for them to examine the loan book in detail. A sale could be concluded shortly.

Based in Hampshire, CHL has not accepted new mortgage applications for a number of years and is currently in run-down mode. It comprises mostly of buy-to-let mortgages in the UK.

It had gross loans worth the equivalent of €7 billion at the end of June 2014 and its mortgages were 95 per cent performing at that time. Some 3 per cent were 90 days or more in arrears with their payments at the mid year point.

Strong interest

With strong interest in the book and given its high level of performing loans, PTSB would expect to get a good price for CHL, possibly as high as 90 cent in the euro, according to industry sources.

PTSB tried to sell CHL in 2013 but withdrew it from the market when it didn’t achieve the target sale price.

In its interim report last year, PTSB said the CHL arrears levels were “lower than the industry benchmark in the UK and we are also seeing increased levels of redemptions within this loan book as the UK economy recovers”.

The bank is in the middle of a capital raising exercise to plug a hole identified by the European Central Bank last October. The shortfall amounted to €855 million but, at the time, PTSB said the gap was only €125 million due to various measures that had already been implemented.

PTSB has hired Deutsche Bank to seek private capital to plug the remaining shortfall and bank executives have held several roadshows in recent months to generate interest in the bank, which is 99.2 per cent State owned.

Reports suggest that up to €400 million could be raised from private investors in return for a stake of between 30 and 40 per cent.

The bank hopes to conclude a deal by the end of March, which will then be presented to the Minister for Finance Michael Noonan for approval. The bank has until July to plug the capital shortfall.

While the sale of CHL is not central to its capital raising plan, off-loading this non-core asset could make the bank more attractive to external parties. It might also prove helpful in securing approval from the European Commission for its restructuring plan under State aid rules.