First Citizen Finance unlikely to enter mortgage market

Non-bank lender considered home lending after news Ulster and KBC would exit Ireland

First Citizen Finance, the Irish non-bank consumer finance firm that has been weighing up entering the mortgage market, is now unlikely to get into offering home loans, according to sources.

Chief executive Chris Hanlon said last December that the group, which focuses on car finance, agriculture and SME equipment lending, and commercial property, was in talks with overseas financial backers on potentially venturing into mortgage lending.

He said at the time that First Citizen would "be able to give a pretty good steer" by the end of March as to whether the company would venture into residential mortgages. The company's interest in the space had been piqued by the announcements last year that Ulster Bank and KBC Bank Ireland were leaving the market.

However, sources told The Irish Times this week that First Citizen, which had talked about potentially writing about €1 billion of mortgages over three years, was now unlikely to move into home loans. A spokesman for the company declined to comment.


The development comes as ICS Mortgages, owned by non-bank lender Dilosk, increased interest rates across its three- and five-year fixed-rate products by 0.2-0.45 percentage points, marking the first upward movement in Irish rates for some years.

Lending margins

ICS is seeking to shore up its lending margins in the wake of an increase in borrowing costs on the international bond markets, which it ultimately relies on for funding, in anticipation of the European Central Bank pulling back monetary stimulus and an expected start of a cycle of interest rate hikes later this year.

While Irish banks’ mortgage books are currently primarily funded by customer deposits, which are generating no interest for savers, non-bank lenders usually ultimately fund their loan books on the international capital markets.

Meanwhile, The Irish Times reported on Thursday that a major UK investor in Dilosk, London-based investment firm Chenavari, is looking, according to sources, at exiting the largest Irish non-bank mortgage lender. Neither company has commented on the matter.

Chenavari had built up a stake of as much as 30 per cent in Dilosk by the end of 2018, before selling down more than half of its holding last year. It came at a time when Dilosk's founders, Fergal McGrath and his brother, Oran, increased their stake in the lender to just over 50 per cent.

Representatives for another UK firm, Attestor Capital, which invested in Dilosk around the same time and currently holds a 18.8 per cent stake, did not respond to requests for comment on its holding.

Bond market pricing

"We had picked up rumblings in recent weeks around potential suitors and it will be interesting to see what interested parties emerge in terms of potential buyers," said John Cronin, an analyst with Goodbody Stockbrokers.

Dilosk reiterated in recent days that the company itself is not involved in any discussions that could lead to a sale of the business.

Meanwhile, Finance Ireland, another non-bank lender that has expanded into mortgages in recent years, said it was closely monitoring bond market pricing developments following a recent spike in near- to medium-term interest rates.

“The longer-term impact of rising wholesale interest rates will undoubtedly put pressure on all lenders to review their interest rates. That pressure is not being seen on the longer-term products,” it said.

“Finance Ireland has some very competitive and flexible long-term fixed rates available (for 10, 15, 20 and 25 years) and we are expecting an increase in the number of borrowers availing of these rates in the coming months due to the certainty they bring borrowers.”

The other non-bank mortgage provider in the State, Avant Money, which entered the Irish market in late 2020 with the first sub-2 per cent mortgage rate on new loans since the financial crash, declined to comment on its future pricing strategy.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times