Up to 15% of borrowers on payment breaks may need further relief, says PTSB

Permanent TSB (PTSB) estimates between 11.5 per cent and 15.4 per cent of its mortgage, personal and small business borrowers who availed of payment breaks of as long as six months since the onset of the Covid-19 crisis will need further relief as the period of breathing space comes to an end.

Bank executives told Davy analysts late last week that less than half of the initial 13,000 three-month breaks granted to PTSB borrowers needed to be extended by a further three months, under industry-wide measures introduced in March to avert a fresh arrears crisis as households and businesses grappled with the economic shock. Mortgages accounted for 10,600 of the payment holidays.

The executives estimate 1,500-2,000 loan accounts may need additional forbearance coming out of the extended breaks, below what they originally anticipated, Davy analyst Diarmaid Sheridan said in a report on Monday. The document highlighted comments from top bankers from PTSB, Bank of Ireland, AIB and Ulster Bank during a virtual "site visit" of Irish lenders last week.

PTSB estimates that loans with a value of between €200 million and €300 million will need further relief, in addition to the payment breaks. That equates to less than 2 per cent of gross loans, and may reflect the fact that many individuals who have been hardest hit by the crisis – lower-paid workers in retail and hospitality – are not homeowners.

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“We will be offering a range of solutions to those customers that need it most, working with them on a case-by-case basis to put in place a solution that reflects their individual circumstances,” a spokeswoman for the bank said.

Unable to return

Regulators have been pushing banks to come up with individual solutions for borrowers who are unable to return to regular loan payments as they come off extended payment breaks.

Guidance from banking executives as they reported first-half figures in August suggests the five main retail lenders will end up taking as much as €3.6 billion of impairment charges for 2020 as a whole – driven by expected problems across business loans.

The fear is that further waves of Covid-19 and restrictions will lead to a bigger problem than currently estimated. On Monday the Government decided against advice from public health officials to introduce Level 5 restrictions across the State, which would have been close to the lockdown measures seen earlier in the year. Taoiseach Micheál Martin’s Cabinet opted, instead, to move the Republic to Level 3 from midnight on Tuesday.

Top executives at AIB, the State’s main mortgage lender, said the trend of individuals exiting extended home-loan payment breaks in recent weeks has been encouraging, Davy said.