Ulster Bank has agreed to sell most of its remaining loans, comprising performing and non-performing personal and commercial debt with a gross value of €694 million, to US distressed debt group AB CarVal Investors, as it continues its winddown.
AB CarVal has signed up to buy the loans through a vehicle called Elmscott Property Finance and has enlisted loan servicing firm Pepper Finance to manage the loans as legal title holder, a spokesman for Ulster Bank confirmed to The Irish Times.
The gross value refers to the carrying value of the portfolio on Ulster Bank’s balance sheet as of the end of last year, which is lower than the original value of the loans.
The deal follows on from AB CarVal taking over a portfolio of €800 million of problem mortgages from Ulster Bank in 2020 – before Ulster Bank’s parent, NatWest Group, decided to quit the Irish market. KBC Bank Ireland also sold a €1.1 billion non-performing loans portfolio to AB CarVal early last year as part of its planned exit from the Republic.
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Ulster Bank expects most of the loans in the latest transaction to transfer to Pepper by the end of this year, according to the spokesman. The bank has written to some affected customers to give them at least two months’ notice of sale prior to completion and transfer of their facility, as required by the Central Bank.
“Other customers whose facility may be included in the transaction at a later date, will be written to later this year,” he said. It is believed that this may include remaining customer overdrafts and credit card debt.
However, Ulster Bank has still to find a future home for its so-called offset mortgages, where money in customers’ savings accounts is used to lower the balance – and interest due – on home loan accounts. The spokesman declined to comment on the size of the offset mortgages portfolio.
Ulster Bank has also either sold – or agreed to sell – almost €16 billion of mortgages and commercial loans to Permanent TSB and AIB as part of the winddown.
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Meanwhile, NatWest disclosed in its interim results last month that Ulster Bank’s deposits had fallen to £400 million (€466 million) by the end of June, following a period of frantic activity by customers to find other providers to take care of their banking needs. The figure was down from about €2 billion in March and €21 billion at the end of 2021.
Ulster Bank also paid an €800 million dividend to NatWest in June, beginning the process of repatriating excess capital on its balance sheet as it hastens its exit from the Republic.
The bank laid the groundwork earlier this year for capital repatriation when it passed shareholder resolutions, following procedures allowed under Irish company law, that created “profits available for distribution”. These amounted to a net €2.63 billion at the time, after the deduction of retained losses on the balance sheet.
Ulster Bank had previously paid €3.5 billion of dividends to its parent between 2016 and 2019, representing just a fifth of the £15 billion (€17.5 billion) bailout the unit received during the financial crisis.
Ulster Bank’s rescue bill equated to a third of the total UK government’s £45 billion 2008 bailout of NatWest, when the group was known as Royal Bank of Scotland (RBS).
Jane Howard, Ulster Bank chief executive, told the Oireachtas finance committee in February that it would be next year at the earliest before the company hands its banking licence back to the Central Bank.
