BoI earmarks €375m landlord loans

Bank of Ireland has moved to reduce the amount of crisis-era landlord mortgage loans on its books — but has opted to securitise or refinance the loans rather than going for an outright sale for the time being.

The lender is possibly considering one further similar transaction this year.

The market transaction of the loans by way of securitisation involves 790 landlords over 1,730 accounts in the Republic, with a total face value of €375m.

By reducing the proportion of non-performing loans it carries on its books, the bank aims to move closer to the 5% target sought by European regulators by the end of the year.

At €375m, the transaction is relatively small, but nonetheless reduces the bank’s exposure to non-performing loans to 5.8%, down from 6.3% at the end of 2018. That suggests it could announce a similar market transaction or even contemplate an outright sale in the future.

Other banks, including Permanent TSB and Ulster, have been prominent in driving outright sales of non-performing mortgage loans to vulture funds.

However, Bank of Ireland will continue to be the point of contact for customers, potentially making this market transaction much less controversial for debt advocates.

However, one of the features of the transaction is that “a majority” of the earmarked mortgages have been restructured, though the bank doesn’t say what the new terms entail.

The loans are nonetheless accounted for as non-performing on the bank’s books, under European banking rules.

Some sort of transaction involving securitisation or a sale was signalled by chief executive Francesca McDonagh when the bank published its 2018 earnings last month.

Bank of Ireland has long argued that despite having the lowest value of non-performing loans of the Irish banks, that Irish mortgage banks are nevertheless obliged to tie up significant amounts of capital to cover their non-performing mortgage loans.

Lloyds Bank and Morgan Stanley will promote the securitisation sale, it said.