Permanent TSB drops €4bn loan sale bombshell
STATE-BACKED bank Permanent TSB has sparked a political outcry with its decision to sell a €4bn portfolio of loans that includes thousands of mortgages to embattled home owners.
The move, first revealed by Irish Independent online yesterday, came as a bombshell to the market, which had expected the lender to offload a smaller number of impaired buy-to-let loans. Instead, the bank has opted to flog close to €3bn of soured home loans alongside a separate €1bn portfolio of toxic buy-to-let mortgages.
The controversial decision marks the first time a nationalised bank has attempted to sell a large volume of home loans, and potentially leaves vulnerable borrowers at the mercy of global private equity funds and distressed debt investors.
It also paves the way for part-nationalised AIB to pursue a similar path. It is understood the Government was aware of this politically sensitive loan sale ahead of its formal launch by the bank on Tuesday.
In a statement, PTSB announced it had decided to press the trigger on a long-flagged auction of non-performing loans. It did not divulge the scale of the deal but stated it was codenamed Project Glas. However, the divestment is far larger than expected and has been sub-divided into two portfolios, Project Tibet, which involves mortgages tied to primary home dwellings, and Project Nepal, the smaller portfolio of buy-to-let mortgages.
Sources told the Irish Independent that Finance Minister Paschal Donohoe (inset) warned Cabinet colleagues on Tuesday that a major story relating to a bank selling off loans was likely to break in the coming days.
While he did not identify the bank, ministers were led to believe the move was likely to be politically problematic.
A spokesperson for the minister confirmed the Department was made aware that some banks, including PTSB, “are considering the sale of certain portfolios of loans in the coming months in an effort to reduce their level of non-performing loans”.
“This is a task required by the banks’ regulator at EU level; the SSM,” said a spokesperson for Mr Donohoe. “These are decisions for the management and boards of the banks and do not require the minister’s consent.” The decision triggered a furious backlash from lobby groups yesterday. Prominent debtors’ advocate David Hall, founder of the Irish Mortgage Holders Organisation, which established iCare Housing – an approved not-forprofit housing organisation – described the bank’s treatment of borrowers as “abysmal”. He said the sale would result in 20,000 loans changing hands and said many vulnerable families were swept up in the move. However, it is understood a number of the borrowers fell into arrears on their mortgages many years ago and have persistently refused to engage with the bank. Other homeowners may have had part of their mortgages written off by the bank, enabling them to potentially strike a better deal with a new lender.
A string of private equity firms, investment banks and domestic lenders are sifting through the assets, with Bank of Ireland understood to number among the long list of potential suitors.
PTSB has come under persistent criticism for its high stack of non-performing loans, which represent 28pc of its total loan book – the highest among Irish lenders. A successful deal would reduce that figure to close to 10 to 12pc.
A spokesperson for PTSB declined to comment on the sales process. However, Michael McGrath, Fianna Fáil spokesperson on finance, called on PTSB to clarify, as a matter of urgency, the nature of the loans being sold as part of Project Glas.
Earlier this week, Goodbody said that for PTSB to significantly reduce its soured exposures, it would need to sell loans with a face value of €3.7bn.
The stockbroker predicted the bank would take a €350m hit on such a sale.