PTSB chief: Selling loans to vultures ‘only way’ to repay bailout funds

PTSB chief: Selling loans to vultures ‘only way’ to repay bailout funds
Jeremy Masding

Pádraig Hoare and Eamon Quinn

The chief executive of Permanent TSB has said the selling off of thousands of non-performing loans is necessary because they had “diminished the share price” and affected the overall value of the bank.

Jeremy Masding said it would not be possible to meet ECB requirements to reduce its non-performing loans to a low single-digit percentage unless it sold some on.

Permanent TSB was accused of “throwing its customers to the wolves” by Sinn Féin TD Pearse Doherty with its decision to sell around 14,000 homes in the overall €3.7bn Project Glas portfolio of 18,000 properties.

Mr Masding said: “The guiding principle for us is we are trying to clean up the bank, to get it to a place where it can continue to compete. We can only do that with a much, much lower non-performing loan ratio. We will consider all options.

“As the chief executive of the bank, my job is to implement the right option for all Irish taxpayers and for shareholders to satisfy regulatory requirements.

“When I came to Ireland, the bank had been bailed out to the tune of €4bn. What drives us every morning is to pay that back.

“Our share price is €1.86, our market capitalisation under €850m. We still owe the State just shy of €1.5bn. 

That gap is being registered by the market as a function of us not being able to manage down the non-performing loan ratio. 

The share price is very much diminished and the only way to get that money back is to manage down that ratio,” he said.

TDs and senators at the Oireachtas Finance Committee accused Mr Masding and his team of failing to explore all viable options before selling on the loans, thousands of which the bank admitted are so-called split mortgages that were negotiated with customers looking to remain in the family home.

The bank’s leadership said 4,300 split mortgages — where repayments are made on the first part of the mortgage and the second part is paid later — would be sold, despite repayments being made by customers according to the restructured terms.

Permanent TSB said it had not received regulatory approval to class the split mortgages as performing loans — in stark contrast to AIB officials, who told the committee that it was “crystal clear” that similar mortgages could legally move off the non-performing loans bundle and be classed as performing.

AIB officials were lambasted by committee members for failing to acknowledge the existence of Project Redwood, a distressed loan book said to be worth as much as €3.7bn.

Despite widespread reports that AIB was close to selling the loans, the bank’s head of financial solutions, Jim O’Keeffe refused repeatedly to admit Project Redwood existed. 

No family homes are believed to be included in Project Redwood, while AIB is said to have insisted any buyer would own an entity that is regulated in the Republic.

Fianna Fáil TD Michael McGrath said it was disturbing that a State-owned bank would not tell Oireachtas members about such an important sale.

“You are coming before the national parliament and giving no information. There may be no family homes, but there may be farmers, SMEs, retailers, buy-to-lets — we have reasonable and legitimate questions. The lack of openness is stark and remarkable,” he said.

Meanwhile, Derville Rowland, director general of financial conduct at the Central Bank, said it had called in the Dutch Central Bank to examine the “behaviour and culture” of five banks and would implement a new regime for individual senior bank chiefs if their conduct was found wanting.

Citing the tracker mortgage scandal, she told an industry conference: “In the years since the financial crisis, there have been significant misconduct issues both at home and abroad”.

More on this topic

Permanent TSB sells further tranche of nearly 2,000 mortgages to vulture fundPermanent TSB sells further tranche of nearly 2,000 mortgages to vulture fund

Sale of over 10,000 Permanent TSB loans to go aheadSale of over 10,000 Permanent TSB loans to go ahead

PTSB loan sale ‘a horrible day for mortgage holders’: HallPTSB loan sale ‘a horrible day for mortgage holders’: Hall

‘Messy’ outcome to Permanent TSB loans plan‘Messy’ outcome to Permanent TSB loans plan

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