Wednesday 23 August 2017

Danske Bank eyes €2bn sale of retail loan book

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Gretchen Friemann

Danske Bank is mulling a sale of more than €2bn of performing Irish home loans and buy-to-let mortgages as the Danish lender continues to manage down its retail business here to focus solely on corporate and institutional clients.

The bank is understood to be considering a portfolio sale or potentially rolling the loans into a securitisation deal.

It is understood Morgan Stanley is advising Danske, with a deal likely to be concluded by the end of the year.

The bank declined to comment, however sources said a number of prospective suitors have already cast an eye over the portfolio including private equity firms and Irish banks struggling to grow their loan books because of housing shortages.

Bank of Ireland is widely viewed as a logical suitor after earlier snapping up €274m of performing commercial loans from Danske in 2015.

The deal was part of a wider €540m disposal that resulted in Goldman Sachs hoovering up €266m of toxic debt bundled into the sale.

It is understood Danske has long targeted an exit and had hoped to agree a sale by the autumn.

The Danish bank, which entered the local market with the acquisition of National Irish Bank, pulled down the shutters on its personal and business lending operations in October 2013 after nursing substantial losses.

Loans linked to its former retail bank were moved into a work-out unit while the day-to-day management of its personal mortgages book, which stood at DKK17.4bn (€2.3bn) in 2015, was outsourced to Pepper Asset Services.

Sources said the home loans portfolio include some buy-to-let loans as well as primary residential mortgages.

It's also thought to include a significant volume of tracker mortgages, which could weigh on the final sale price given the loans' low profitability.

While Danske is considering offloading the portfolio in one tranche, sources said a securitisation may also be on the cards.

However packaging the loans into bonds would be expensive and management intensive.

Earlier this year Mars Capital, a big buyer of Irish mortgages securitised €332m worth of sub-prime loans.

The firm, which is linked to Oaktree Capital bundled together the mortgages into a special purpose vehicle called, Grand Canal Securities 1.

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