Finance Ireland profits fell in 2020 as Covid triggered €13.7m loans charge

Finance Ireland, the largest non-bank lender in the State, saw its profits slide by almost a third last year as it set aside €13.7 million of provisions to absorb potential loan losses stemming from the Covid-19 crisis.

Pretax profits dropped to €9.64 million from €14.1 million for the previous year. Still, chief executive Billy Kane told The Irish Times he now expects the company will free up some of the provision when finalising this year’s accounts, as the pandemic had not triggered a spike in arrears or defaults.

The provision was taken mainly on Finance Ireland’s commercial real estate and motor finance books. The group’s fast-growing mortgage business is funded off-balance sheet, as it uses the international bond market to refinance bundles of loans that it writes, in a process known as securitisation.

Total new lending declined by 18 per cent last year to €654.7 million, driven by commercial real-estate lending dropping by more than half to €100 million. The motor finance division, First Auto Finance, saw new lending fall to €196 million from €241 million for the previous year, as the business navigated a national lockdown in early 2020.

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Agri-finance lending

The small-business leasing division put in a “satisfactory year against the backdrop of Brexit and Covid-19”, the company said, with new lending dipping to €33 million from €44 million. Agri-finance lending declined to €44 million from €58 million.

However, Finance Ireland’s fledgling retail mortgage division saw new loans rise to €283 million from €219 million of loans written in its first full year in business, in 2019. The figure for last year equated to about 3.3 per cent of €8.4 billion of lending in the Irish home loans market in 2020.

Mr Kane said the group currently had a 6 per cent share of the Irish mortgage market, with strong underlying activity being helped by the decisions of Ulster Bank and KBC Bank Ireland earlier this year to exit the Republic.

Commercial mortgages

Finance Ireland’s total level of loans, including those extended by the company but moved off balance sheet under securitisation deals, edged 3 per cent higher to €1.1 billion during 2020. Mr Kane said 2021 was shaping up to be a “very strong year”, albeit with the exception of activity in commercial mortgages.

The company was forced to abandon plans for a €100 million-plus initial public offering (IPO) in May 2020 as the rapid spread of Covid-19 globally threw equity markets into turmoil.

It subsequently went on to raise €25 million in junior debt from major shareholders, the State's Ireland Strategic Investment Fund and US investment giant Pimco, who each hold 31 per cent stakes in the company.

Mr Kane said in April that the company would look at floating on the stock market in the second half of next year at the earliest, but that it could run into 2023.

“We now like to think that the Covid-19 effect is in our rear-view mirror,” Mr Kane said on Friday. An IPO “is certainly something we will keep on our radar”.