Tuesday 25 July 2017

BoI unlikely to figure in trackers' 'clear-out'

Laura Noonan

Laura Noonan

BANK of Ireland is an "interested observer" of the authorities' efforts to deal with unprofitable tracker mortgages banks but is very unlikely to be involved in any industry-wide solution, the Irish Independent understands.

The news comes after BoI chief Richie Boucher sparked speculation that his bank would try to take part in the mooted arrangement made to deal with tracker mortgages at state-owned AIB and Permanent TSB.

In response to questions from analysts about the industry-wide efforts, Mr Boucher said: "It's not a discussion -- conversation -- that we've had to date, but obviously, we will watch any developments like that closely."

Some observers interpreted this as a sign that BoI would push for inclusion if the Government launched a scheme to remove unprofitable trackers from the books of Permanent TSB and AIB.

The case is particularly pressing for Permanent TSB, which would be far more viable as an institution without the trackers.

"You'd have to think they'd have a strong case," said one analyst. "It's hard to see how the Government could avoid letting them in from a competition point of view."

The Irish Independent understands, however, that the authorities from the EC, ECB and IMF who are drawing up possible solutions for the future of AIB and Permanent TSB's tracker book have not considered including BoI.

While the bank's inclusion hasn't been categorically ruled out, the way the scheme is constructed could make it unattractive for the bank. "They'd have to be willing to play along," one source said.

"They can't just tip their unwanted assets into some structure."

"Playing along" is likely to involve taking an upfront loss on the tracker portfolio, which makes up more than 60pc of BoI's €27.8bn residential mortgage book. "It's hard to see why they would want to do that," said one source.

Another potential option would see BoI take a stake in a new, special purpose vehicle that would also assume tracker mortgages from AIB and Permanent TSB.

Such a move could have an adverse impact for BoI, since the bank would also be exposed to losses on the other banks' loans.

The situation is less complex for AIB and Permanent TSB since they are both 99.8pc owned by the State, therefore the State is overwhelmingly on the hook for any potential losses regardless of which entity they're expensed to.

Irish Independent

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