Permanent TSB pulls out of talks to buy €100m in mortgages

Permanent TSB has pulled out of talks to buy up to €100 million of mortgages that originated from US group GE Capital's former Irish portfolio of subprime loans.

The portfolio, made up of performing home loans, accounted for a part of the €600 million mainly troubled portfolio that GE sold at a deep discount to Australian financial firm Pepper four years ago in a deal that was financed by Goldman Sachs, the Wall Street investment bank.

The acquisition would have been the first such purchase for PTSB since the onset of the financial crisis as lenders face pressure to rebuild their loan books after years of contraction.

Larger rival Bank of Ireland has bought hundreds of millions of euro of restructured loans in recent years from US private equity firm Loan Star, Danske Bank and the liquidators of Irish Bank Resolution Corporation.

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First-time buyers

PTSB’s decision to withdraw from the proposed acquisition comes as analysts predict that mortgage lenders will receive a boost in business next year from the Government’s imminent Help-to-Buy plan for first-time buyers of new homes and the Central Bank’s relaxation of borrowing limits for people taking out their first mortgage.

Shares in PTSB have surged by almost 30 per cent in the past two months to €2.82, although they remain well off the €4.50 level at which the Government sold shares in the bank in June last year.

The advance has been helped as PTSB completed the sale of €9 billion of British and Irish loans at the direction of the European Commission under a State-aid agreement tied to its taxpayer bailout in 2011.

Last week, PTSB appointed Declan Dolan, who had overseen the completion of the deleveraging programme as interim group treasurer, to the role on a permanent basis.

Another buyer

It is expected that Pepper and Goldman Sachs may seek to find another buyer for the loans after PTSB’s surprise move to exit the process in recent weeks.

The two firms had hired KPMG earlier this year on options to sell part of the former GE portfolio in Ireland.

Spokesmen for PTSB, Pepper and Goldman Sachs declined to comment.

Pepper Asset Management, which used the original purchase, involving 3,500 mortgage customers, to get a foothold in the Irish market in 2012, has spent the last few years restructuring problem loans and putting the overall book on a firmer footing.

The €600 million loan book was acquired for 40 cent on the euro at the time, according to contemporary reports.