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Ireland's PTSB to cut bad debt levels with securitisation deal

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By Graham Fahy

DUBLIN (Reuters) – Irish financial services firm Permanent TSB (PTSB) said on Thursday it had agreed to sell a 1.3 billion euro ($1.5 billion)portfolio of problem mortgage loans in a securitisation deal, reducing its bad debt level to below 10 percent.

Bailed out like other major Irish banks in the financial crisis, PTSB has been trying to reduce its exposure to non-performing loans (NPLs) and focus on providing services for consumers and small and medium-sized enterprises (SMEs).

CEO Jeremy Masding said the securitisation deal “reduces the NPL ratio to less than 10 percent thereby enabling PTSB to continue to compete in the Irish retail and SME banking market.”

The bad loan ratio was about 26 percent on Jan. 1 this year.

Irish banks are under pressure from the European Central Bank to reduce bad loans which ballooned after Ireland’s property crash. PTSB is 75 percent state-owned.

Most of the 6,272 mortgages in the sale were restructured but are classified as non-performing loans (NPLs), the bank said. They include 4,046 “split” mortgages, where repayments on a portion of the loans are frozen until a future date.

The bank would continue as the contact point for customers affected by the transaction for six months, at which point loan outsourcing company Pepper Finance Corporation will take over legal title to the loans.

“We tried to get the balance right between what we might call the optimal customer outcomes, and doing the right thing for the long-term future of the bank,” Masding told a conference call, although he said he expected “political blowback.”

Irish banks have been criticised for selling off loans which they made during the housing boom before the 2008 financial crisis to international distressed asset funds, which consumer groups say take a more aggressive approach to borrowers.

The PTSB transaction involves the transfer of the problem mortgages to a securitisation vehicle, called Glenbeigh Securities 2018 – 1 DAC, which will issue the bonds.

PTSB’s Common Equity Tier 1 (CET 1) ratio will increase by around 30 basis points as a result of the deal.

The gross balance sheet value of the loans is around 0.91 billion euros.

($1 = 0.8793 euros)

(Reporting by Graham Fahy; Editing by Edmund Blair)

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