Business Irish

Saturday 21 October 2017

Bid deadline looms for Danske Bank's €2bn loan book sale

Danske Bank HQ in Copenhagen, Denmark
Danske Bank HQ in Copenhagen, Denmark

Gretchen Friemann

US funds management giant Pimco and Bank of Ireland are among four remaining suitors vying for Danske Bank's €2bn retail book as the race for the high-quality, performing loans nears a close.

The Irish Independent understands final bids are due at midday on September 25.

A successful contender will be selected shortly afterwards, with the Danish bank and its advisors - Bank of America Merrill Lynch - aiming to close the transaction by December.

According to sources close to the deal, the portfolio includes about 30,000 performing loans - 10,000 of which are mortgages tied to the borrower's principal private residence. Roughly 5,000 of the loans are buy-to-let mortgages.

The mammoth portfolio sale, the largest so far this year, represents the remnants of Danske's Irish retail banking business and is expected to attract a full valuation given the book's low level of arrears.

Less than 5pc of borrowers have fallen behind with repayments according to sources, a factor that has helped sustain the interest of the State's two pillar lenders, Bank of Ireland and AIB.

As this newspaper revealed last month, the California-based money-manager, Pimco, is also in contention for the Danske book with some in the market characterising the firm as the strongest bidder for the asset, alongside Bank of Ireland.

For Irish lenders the portfolio offers a vital opportunity for growth.

A dearth of supply in the housing market, the tougher regulatory environment and the toll of legacy era debts have weighed on balance sheets. In the first six months of the year gross new lending at Bank of Ireland fell to €6.6bn from €6.9bn in the previous period.

AIB, which is thought to be among the final four bidders, is encountering the same difficulty. Its latest results showed negative year-on-year loan growth of 4.7pc in the first half.

While the Danske portfolio contains a high volume of tracker mortgages, many issued in the peak boom years of 2006-07, the overall credit quality of the borrowers presents a key attraction. Danske, Denmark's largest lender, forged into the local market in 2004 with the acquisition of National Australia Bank's Irish subsidiaries, Belfast-based Northern Bank and Dublin-based National Irish Bank.

After suffering heavy losses in the crash, the Nordic lender opted to largely exit Ireland, scaling back its presence to a narrow focus on corporate and institutional clients.

Danske outsourced the management of the retail book to the Sydney-based financial services firm, Pepper.

Irish Independent

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