ptsb selling 3,400 interest-only buy to let loans

[Brendan Burgess]

Average balance: €375k
Average remaining term: 10 years
None subject to payment breaks

Total nominal value:€1.4 billion
Sale price:€1.2 billion

“This transaction will increase the bank’s transitional total capital ratio by 2.1 per cent, strengthen the balance sheet and provide us with resources to compete in our core markets of personal mortgages, personal lending and SME lending,” said Mr Crowley.

They must have had to set a lot of capital aside for these loans as there are no plans in place for them to repay the capital.

But it's hard to see how it otherwise makes commercial sense.

Let's assume that they are mainly trackers and that the average rate charged is 1%

So, for the next ten years, they will be getting a 1% return.
They will get in €1.2 billion. But it's not as if they can lend that out at the moment as the demand is not there.

ptsb might have a problem in ten years when some of these would simply refuse to repay the capital. And some might well still be in negative equity.

But a non-bank lender might well be able to happily refinance these at market rates.

Brendan

 

[NoRegretsCoyote]

And some might well still be in negative equity.

Very many I would say if it's been interest only.

Apartments both inside and outside Dublin are only at July 2009 levels, and are still between a third and a quarter below the peaks of 2007.

CSO numbers only go back to 2005 but I would say the average apartment bought between 2003 and 2009 is still woth less than what was paid for it.

AFAIK 2004-2008 is when the bulk of IO BTL mortgages originated.

 

[Brendan Burgess]

Here is the press release issued at the time

PERMANENT TSB GROUP HOLDINGS PLC

SALE OF BUY TO LET LOAN PORTFOLIO

Permanent TSB plc (“PTSB”, the “Bank”), a wholly owned subsidiary of Permanent TSB Group Holdings plc has agreed the sale of a portfolio of performing Buy-To-Let (“BTL”) originated loan accounts (the “Portfolio”) to Citibank NA London. Citibank NA London is a UK branch of Citibank NA (“Citi”), an entity incorporated in the U.S and regulated by the Office of the Comptroller of the Currency. Citi intend to syndicate the Portfolio via securitisation following completion of the acquisition. The securitisation of the Portfolio will have no impact on customers. The terms and conditions of individual loan accounts are unaffected by this transaction, and will continue to apply.
Citi has a significant presence in Ireland spanning 55 years. It is a major employer in the Irish Financial Services industry with a total of c. 2,500 staff.
The Portfolio will continue to be serviced by PTSB for a period of up to six months. At the end of this period, legal title and loan account servicing will transfer to Pepper Finance Corporation (Ireland) DAC trading as Pepper Asset Servicing (“Pepper”).
Details of the Portfolio and Transaction:
The transaction involves the sale of a pool of c. 3,700 BTL loan accounts. The loan accounts are linked to c. 3,400 borrowing relationships (a borrowing relationship can be a single borrower or two or more joint borrowers). All loans originated as loans secured on BTL properties; predominately consisting of Interest Only repayment terms, have an average balance of c. €375k, are classified as performing from a regulatory perspective and have an average remaining term of 10 years. No loan accounts having received a payment moratorium due to Covid 19 are included in the transaction.
The Portfolio has a gross balance sheet value of c. €1.4 billion, a net book value of c. €1.2 billion and an overall risk weight intensity of c. 80%. In the year to December 2019, the Portfolio generated gross interest income of c. €15 million and an operating profit1 of c. €2m. At completion, PTSB will receive a consideration of c. €1.2 billion. The proceeds will be used for general corporate purposes.
This transaction will increase the Bank’s transitional Common Equity Tier 1 (CET1) Ratio by c. 190 basis points (Fully loaded: c. 150 basis points) and the transitional Total Capital Ratio by c. 210 basis points (Fully loaded: c. 170 basis points). The transaction will see an increase in the Bank’s NPL Ratio from c. 7% to c. 7.7%.
Comment By Permanent TSB Chief Executive Eamonn Crowley:
[1 Operating profit assumed as gross interest income less cost of funds and operating costs.]“This transaction will increase the Bank’s transitional Total Capital Ratio by 2.1%, strengthen the balance sheet and provide us with resources to compete in our core markets of personal mortgages, personal lending and SME lending. All applicable terms and conditions continue to apply, meaning that customers will be afforded the same consumer protections upon completion of the transfer. Like Permanent TSB, Pepper is regulated by the Central Bank of Ireland and is required to comply with consumer protection legislation when dealing with customers.”

Post Transaction Loan Servicing:
The terms and conditions of individual loan accounts are unaffected by this transaction, and will continue to apply post the transfer to Pepper. The Bank is today writing to all customers, whose loans are included in the transaction, to inform them of this development.
Permanent TSB was advised on the transaction by KPMG, Mason Hayes & Curran and Clifford Chance.


Ends

 

[joe sod]

I think PTSB interested in buying Ulster bank , maybe they are offloading these loans in order to get the money to buy Ulster bank southern division

 

[Brendan Burgess]

Possibly, they might buy Ulster Bank's home loan book. I doubt that they would buy the Buy to Lets and the Corporate lending which makes up half their book.

ptsb has about €12 billion in home loans, whereas Ulster has about €15 billion.

It would make sense to have this in the one place.

Brendan