Permanent TSB has agreed to sell a portfolio of mainly non-performing loans worth about €390m to Morgan Stanley Principal Funding.

The bank said the deal involves the sale of a pool of loan accounts linked to 1,222 borrowing relationships - a borrowing relationship can be a single borrower or two or more joint borrowers.

In total the portfolio has a gross balance sheet value of about €390m. Loans to the value of €223m (57%) were originated as Home Loan products and loans to the value of €167m (43%) were originated as Buy-to-Let products.

The lender said that 98% of loans are categorised as non-performing, while the remaining 2% comprise loan products which originated before 2009 and which are no longer available to new customers.

Permament TSB said it is writing to all customers, whose loans are included in the transaction, to inform them of the sale.

The bank said that Morgan Stanley intends to securitise the portfolio following completion of the deal next year.

It stressed that neither the sale nor the securitisation of the loan portfolio will have any impact on the terms and conditions of individual loan accounts.

Existing terms and conditions are unaffected by the deal and will continue to apply to the loans, it added.

"As has been the case with previous loan sale and securitisation transactions undertaken by the bank, all customers whose loans are included in this transaction will continue to have the same regulatory protections under the Consumer Protection Code and the Code of Conduct on Mortgage Arrears after the sale," it added.

The loans being sold will continue to be serviced by Permanent TSB for a period of up to six months. Legal title and loan account servicing will then transfer to Pepper Finance Corporation (Ireland) DAC, which trades as Pepper Asset Servicing and which is regulated by the Central Bank.

The bank said the transaction will increase its transitional Common Equity Tier 1 (CET1) ratio by about 60 basis points once fully completed.

It also reduces Permanent TSB's non-performing loan ratio to around 5.5% from 6.9%.

Commenting on today's sale, Davy Stockbrokers said the sale of non-performing mortgages is another positive, proactive step by Permanent TSB.

Davy said the sale increases capital, lowers non-performing loans nd will alleviate the impact of calendar provisioning in the coming years.

"Lowering NPLs will also better position PTSB in future regulatory stress tests and lower the overall risk density of the mortgage portfolio without a material profitability impact," Davy added.