Saturday 21 October 2017

Irish banks' woes continue as they're warned of legal difficulty in trying to warehouse trackers

Tracker mortgages are not profitable
Tracker mortgages are not profitable
Thomas Molloy

Thomas Molloy

IRISH banks may find it legally impossible to warehouse tracker mortgages, one of the country's leading stockbrokers warned yesterday.

Troika officials said earlier this week that they are looking at ways of reducing the pressure on Irish lenders from unprofitable tracker mortgagers.

Merrion Stockbrokers economist Alan McQuaid said any solution involving government or official intervention is likely to be considered as "state aid" under European Commission competition rules.

Mr McQuaid said it may be possible to structure a purchase of the portfolios at "long-term economic values" similar to the NAMA acquisitions.

However, such a off-balance sheet transfer is likely to create material capital losses.

Operationally it may also be difficult for the institutions to disaggregate these loans (unlike NAMA, which acquired large developer exposures).

Banks should instead find ways of internally ring-fencing these portfolios in non-core units, while obtaining cheap credit to fund the assets. While this would be good for banks, it is unlikely to get the nod from watchdogs, he predicted.

"While such a structure would clearly be beneficial from the banks' perspective, we are not as confident that the ESM and/or ECB will be as willing, or legally capable, in assisting with such proposal in the near-term."

A real solution to the banks' tracker woes is unlikely until there is a significant recovery in property values coupled with a pick-up in housing transactions, he added.

Irish Independent

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