Wells Fargo to buy Burdale from Bank of Ireland

BANK OF Ireland has agreed to sell its British-based asset lender Burdale to US bank Wells Fargo, generating about €690 million for the bank before the costs of the transaction are included.

The bank said the sale would not “adversely impact” its core tier one capital ratio, and the money would be used to reduce the lender’s Central bank borrowings.

The business was sold at a discount of 0.4 per cent to Burdale’s total loan commitments of about £1.3 billion (€1.6 billion) at the end of November, and a discount of about 0.8 per cent of total drawn balances of about £575 million.

Bank of Ireland purchased Burdale for €71 million in 2005.

The specialist lender financed the purchase of retailer Woolworths, car company Jaguar and English pottery Royal Worcester and Spode, and the management buyout of Glanbia’s Irish meats division. The company made a profit of £20.7 million in 2010.

Burdale had also established a business in asset-based lending in the US from a base in Stamford, Connecticut. This business is also being sold to Wells Fargo, which acquired a portfolio of US commercial property loans from Bank of Ireland earlier this year.

Bank of Ireland also gave an update on the progress of its deleveraging, saying it had divested itself of €8.6 billion in loans and other assets during 2011 at an average discount of 7.1 per cent.

“It shows that they are getting on top of it and ahead of the curve [on deleveraging] ,” said Colm Ryan, co-head of fixed income at Goodbody Stockbrokers. “What was interesting was the discount was small, which is very positive.”

The deleveraging is a condition of the EU-IMF bailout to reduce the bank’s reliance on the European and Irish Central Banks.

The divestments are “expected to have a marginal net positive impact” on the bank’s core tier one capital ratio, it said, and the lender expects it will be able to complete the remaining divestments under the base case discount assumptions used in the Central Bank stress tests last March.

Following the stress tests, the bank said it planned to reduce the size of its loan book from €114 billion at the end of 2010 to about €90 billion by the end of 2013.

Bank of Ireland said it planned to divest itself of €10 billion of loan portfolios and lending businesses. Deposits had increased since the end of October.Wells Fargo has purchased three loan portfolios from Irish banks. It agreed to buy $3.3 billion (€2.5 billion) of US commercial property loans from Irish Bank Resolution Corporation, formerly Anglo Irish Bank, and part of AIB’s $1 billion US commercial property loan portfolio.