PTSB’s most troubled €1.5bn of mortgages ‘most at risk’ of sale

Permanent TSB’s €1.5 billion of troubled mortgage loans that haven’t been restructured at the end of 2016, either because borrowers cannot afford a workable solution or they haven’t engaged with the bank, are most at risk of being sold, according to analyst at Goodbody Stockbrokers.

The 75 per cent State-owned bank, which has the highest percentage of non-performing loans (NPL) among Irish lenders, has committed to outlining by the end of September how it plans to lower its level of soured mortgages. It may give some indication when it publishes first-half figures next week.

While analysts at Goodbody Stockbrokers believe the bank will continue to focus on working through troubled loans on a case-by-case basis, the bank, which is under particular pressure from the European Central Bank to draw a line under NPLs, faces the possibility of "accelerated sales of untreated portfolios", they said.

"We would expect regulators to continue to allow PTSB to workout its treated NPL book, with greater regulatory oversight on untreated/deep arrears portfolios," said Goodbody analysts Eamonn Hughes and Cian Harty in a report.

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Discounted prices

However, the threat of asset sales at discounted prices may dent the analysts current forecasts that Permanent TSB will have €250 million of excess capital at the end of 2019.

At the end of December, Permanent TSB’s NPLs stood at 27 per cent of its loan book, with the issue exacerbated by the fact that the it was required in recent years to sell its largely performing UK mortgage book under a State-aid restructuring plan.

Within the pool of troubled loans, about €3.1 billion were classified as having been treated, but still counted as NPLs because they had not been performing for long enough to be reclassified or because of the nature of the restructure prevented them from being recategorised.

A further €1.1 billion faced repossession or voluntary sales or were linked to customers who were in default on other loans. Meanwhile, €1.5 billion of loans were classed as untreated.

Permanent TSB has largely relied on reduced payments as a forbearance measure for loans under stress, with split mortgages, where repayments on a portion of a loan are put on ice, the second most popular treatment.

The Goodbody analysts also studied an unlikely situation where the bank was forced to sell its entire €5.7 billion NPL portfolio at a €400 million loss on top of €3.36 billion of bad loan provisions already taken against the loans. Even under this scenario, it would not dent the bank’s capital, they concluded, as the bank would also reduce assets against which it had to hold capital.