Mortgage sales are back in the spotlight again with news that AIB has agreed a deal to sell over €1 billion of non-performing loans to a consortium led by Cerberus. Lloyds Banking Group this morning also confirmed that it had sold its Irish residential mortgage portfolio to Barclays.
Owen Callan, Financials Analyst at Investec, said the AIB sale involved mainly commercial properties and real estate developments. "They're not owner-occupier loans or even buy-to-let to a big extent. It's a mix of what's remaining on its bad loan book. AIB has been public in saying it won't sell owner occupier loans given the political climate and the issues that arise from that."
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Mr Callan said we could expect to see more of this type of loan sale in the future. "Permanent TSB is in the process of talking to investors and presenting their bad loan books to sell down. They've also reduced the size of what they originally wanted to sell. They've reduced the disposal from €3.7 billion to €2.2 billion by taking out the split mortgages."
Permanent TSB had asked the European Commission to re-designate these split mortgages as performing loans, but Owen Callan said it was unlikely to be successful. "It's an ongoing discussion but it doesn't appear likely that they'll be re-categorised. There is some hard regulatory language in place. They can't make an exception for one Irish bank. They'll have to be re-designated some way. Otherwise they'll remain on the books as a non-performing asset," he explained.
Owen Callan said AIB and the Government were likely preparing for a further sale of shares in the coming months or year. "It's difficult to say for certain. They need an investment case for the bank but also the markets. There's a good bit of volatility in markets at the moment. Perhaps they need a slightly more positive backdrop. It wouldn't be a great surprise to see them sell down further in the second half but it will take a long time to sell down that 70%."
He described Lloyds, which is offloading its Irish mortgage book, as an accidental landlord in the market here. "They took those loans from Halifax here. They had to take them at the bequest of the Government 10 years ago. They've been waiting for an opportunity to get rid of them. He said the loans being sold are not non-performing, but are low yielding. "Presumably, Barclays will package them up and sell them on to investors," he concluded.
MORNING BRIEFS - The Chairman of Independent News & Media will tell shareholders this morning that the board is horrified at the prospect that third parties may have had access to data relating to its employees or others. In a statement ahead of the company's AGM, Murdoch McLennan says INM will continue to co-operate fully with an investigation by the Director of Corporate Enforcement and the Data Protection Commissioner. INM is awaiting a court decision on its application to prevent the ODCE from appointing inspectors to the company.
***Paddy Power Betfair shareholders are also meeting at the company's AGM today. Shares in the company were higher yesterday despite British government plans to reduce maximum stakes on fixed odd betting terminals from £100 to £2. The company's share price got a boost earlier in the week following a US court ruling striking down a law that restricted sports betting.
*** The price of Brent crude breached the $80 a barrel mark on international markets yesterday for the first time in almost four years. Prices have climbed by over 50% in the past year as output cuts are limiting supply. New US sanctions on Iran and economic turmoil in Venezuela have also contributed to the rises.