Bank of Ireland considers NPL sales

By Eamon Quinn

Bank of Ireland hasn’t ruled out selling non-performing loans (NPLs) as it rethinks the best ways to preserve capital and boost profitability, chief executive Francesca McDonagh has said.

The bank carries a lighter burden of crisis-era soured loans than its rivals and has so far avoided the political furore faced by other banks after they sold off troubled loans to vulture funds this year.

But CEO Francesca McDonagh said she will not rule out any option, as the bank makes a final push to reduce its share of non-performing loans to 5%, the indicative target regulators want Irish banks to achieve.

Bank of Ireland could likely meet that goal before the end of 2019 if it were to sell off non-performing loans.

“We are keeping all our options under review…and I wouldn’t rule out any approach”, in reducing non-performing exposures, she told reporters. 

We are trying to get to 5% as soon as possible. We are being incentivised by our regulator as well. We will look at all options on the table.

 

"Our position has changed because the regulatory environment in which we operate has also changed”, she said.

At €5.9bn, the bank currently has 7.5% of all its loan exposures categorised as non-performing. 

Reducing that share to 5% means Bank of Ireland will continue to work through at least €2bn of non-performing loans.

Speaking at the publication of the half-year earnings, Ms McDonagh said the bank posted “good growth” in Irish mortgage lending; broadened its programme of “transformation” which includes investing in IT systems and improving “the culture” of the bank; as well as improving returns from the UK business; and reining in costs. 

For the six months to the end of June, it posted an underlying pre-tax profit of €500m, slightly higher from a year earlier.

The bank’s sizeable exposure to UK lending has been under scrutiny since the Brexit vote two years ago and is one of the factors weighing on its shares.

But analysts said the shares which fell 2% yesterday came after they climbed significantly in the past week and the latest earnings marked some early progress for the bank’s long-term plans.

Ms McDonagh said it had assessed all outcomes to Brexit, and was looking at its UK operations, boosting profitability, and reviewing its UK cards business.

Most economists expect the UK and Irish economies to keep growing, no matter the Brexit outcome, she said.

The bank said it was focusing later this year on selling mortgages through brokers, suggesting it didn’t plan to cut home loan rates anytime soon.


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