Business Irish

Sunday 19 January 2020

AIB turns to KPMG for toxic loan sale


Stock photo: Getty Images
Stock photo: Getty Images

Gretchen Friemann

AIB has drafted in KPMG to help assess the sales potential of up to €3bn of impaired loans as the nationalised bank prepares the groundwork for another major portfolio deal.

As it nears a €2.6bn to €3.3bn IPO later this month, AIB's burden of bad debts remains one of the biggest threats to its valuation.

According to sources, KPMG is concentrating upon Project Redwood, an initiative in the bank's workout unit that may culminate in a blockbuster loanbook sale or produce a string of smaller portfolio deals.

The bank declined to comment on the accountancy firm's involvement but the prospectus to its IPO, published on Monday evening, contained numerous warnings about the pace of the reduction of its impaired loans, which now stand at €8.6bn.

The official sales document to the float stated that "AIB has begun to experience an expected slowdown in restructuring momentum and it is now primarily dealing with those cases which are of lower monetary value, more complex, more specific to an individual's circumstances and more protracted in nature."

The prospectus highlighted that "a larger proportion of the remaining loans being resolved are subject to enforcement and the legal process associated with these takes more time than a consensual process."

As AIB grapples with the rump of a what was once a mountain of €29bn of toxic loans, there are signs the lender is adopting a harder line on co-operating borrowers who are in arrears.

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It's understood Project Redwood will not include troubled mortgages tied to primary homes.

However dozens of large-scale borrowers with loans principally exposed to assets in the UK and the North have been earmarked for inclusion in the sale. That appears to mark a hardening in the bank's stance towards commercial borrowers - previously it avoided offloading co-operating borrowers' loans.

AIB has shunted the management of most of its non-performing loans into its workout division, the Financial Services Group (FSG), which after scale-backs still employs 1500 staff.

Sources predicted the bank may outsource some of that work to private service providers like Capita. The firm already provides contractual services to FSG but work volumes are understood to have increased, prompting expectations AIB will follow Ulster Bank and ACC Bank and gradually outsource FSG's operations.

While the complexity of AIB's remaining NPLs has generated a multi-strand strategy, sources said potential loan buyers have received "soft soundings" about deals. However it may take a year before a sale is launched.

Irish Independent

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