PTSB sells loans in arrears to Mars Capital 

Approximately 70% of the accounts in the portfolio are on a tracker or fixed rate product, with the remainder being on a variable rate product. Pic: Andres Poveda

Permanent TSB has agreed the sale of a non-performing loan portfolio to Mars Capital, a credit services firm that manages mortgages sold by banks to vulture funds.

Permanent TSB, which trades as PTSB, completed the deal as part of a consortium arrangement with Mars Capital and certain funds managed by US based vulture fund Apollo Global Management.

PTSB chief executive Eamonn Crowley said the lender is required by regulation to hold additional money for non-performing loans, such as mortgages, “meaning that the amount that can be lent to first time buyers and other personal and business customers would have been impacted if this transaction had not occurred."

The transaction involves the sale of loans with a gross balance sheet value of €348m and an overall risk weight intensity of 68%.

The portfolio comprises of 1,244 loan accounts secured on 1,489 properties and 83% of the accounts are classified as non-performing due to their arrears status.

The average balance for accounts in arrears is €71,000 and the average time in arrears is 22 months.

Approximately 70% of the accounts in the portfolio are on a tracker or fixed rate product, with the remainder being on a variable rate product.

Of the accounts, 925 are home most of which are in arrears of around €40,000 on average.

The loans included in the sale will continue to be serviced by PTSB for a period of up to six months during which customers will continue to have the right to avail of the lender’s mortgage product and interest rates.

At the end of this period, legal title and loan account servicing will transfer to Mars Capital.

“We will write to each of our new customers individually in due course with more information on what this transaction means for their loan,” said Mars Capital Finance Ireland chief executive Colin Maher.

Mortgage arrears slowed ahead of the first interest rate cut announced by the European Central Bank (ECB) last month, but figures suggested cost pressures continue to burden some households.

By the end of March, Central Bank figures showed there were 703,308 private residential mortgage accounts in the Republic and 47,620 of these homes were in arrears.

However, early-stage arrears crept upwards by 1%, following 3% increases in each of the previous two quarters.

Brokers Ireland chief executive Diarmuid Kelly indicated the cause of slowdown is likely due to households prioritising their mortgage payments over other expenses and some are “often eating into savings to do so”.

PTSB, along with the other two lenders operating in the retail banking market in the Republic posted bumper annual profits for 2023 amid a high interest rate environment. Banks will post earnings on their financial performance so far this year in a fortnight.