Business Irish

Saturday 3 December 2016

IL&P suspends sale of £6.8bn UK loan book despite up to 10 offers

Published 14/02/2012 | 05:00

IRISH Life & Permanent has suspended the sale of its £6.8bn (€8.1bn) UK loan book and axed plans to offload its €500m subprime mortgage book.

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Sources last night confirmed that IL&P had told advisers KPMG "in recent days" that the sales process around the £6.8bn UK loan book was to be put on hold.

As many as 10 bidders are understood to have tabled first-round offers for the UK Capital Home Loans book, dubbed CHL, in late December.

They have now been told that the sales process will not progress until the Government and the EC/ECB/IMF troika have agreed a 'strategic plan' for IL&P.

Final bids for the €500m subprime book were lodged in late December. A "handful" of bidders made offers, but the Irish Independent understands IL&P is no longer pursuing a sale of the unit.

A spokesman for IL&P last night declined to comment on developments around either transaction.

The two sales were part of an ambitious disposal plan designed to help IL&P raise €1.3bn in capital and get its crucial 'loan-to-deposit' ratio down to targets demanded by the Central Bank.

But the overall disposal plan was derailed in late November, when Great West LifeCo abandoned a bid to buy Irish Life Assurance for more than €1bn.

The life insurance business is now not expected to be sold in the short-term, and the Government and troika are looking to hammer out a new 'strategic plan' for IL&P over the coming months.

Reshape

Officials are grappling with how to reshape the plc's Permanent TSB banking unit so it can be sustainable and viable and contribute to the financial landscape.

Both the troika and Irish officials thought it unwise to sell off significant assets while that review was ongoing.

The sale of CHL has been suspended rather than abandoned, and may be restarted after the future of Permanent TSB becomes clear, the Irish Independent understands.

The working assumption is that IL&P will not sell Springboard and its loans will instead be integrated into the main Permanent TSB bank.

The future of Permanent TSB is likely to be outlined in the "financial sector enhancements" documents the troika is working on, which mainly deals with restructuring Anglo Irish Bank's bailout.

Options for Permanent TSB include merging it into AIB, or carving out its unprofitable tracker mortgages into a separate entity so Permanent TSB becomes a smaller but healthier bank.

A final position has not yet been agreed, but the chances of it being merged into AIB appear increasingly unlikely in light of AIB's reluctance to take on the smaller lender.

Officials also see competition advantages to retaining Permanent TSB as a standalone bank, and think there is a niche in the personal and mortgage lending market that the bank can trade profitably in.

On the capital front, the overwhelming likelihood is that the state, which already owns 99.8pc of IL&P, will put the outstanding €1.3bn into the bancassurer at the end of June.

Irish Independent

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