Wednesday 15 August 2018

Barclays mortgage deal not a sign it's entering Irish market

Bank buys 27,000 Irish loans
Bank buys 27,000 Irish loans

Donal O'Donovan and Ellie Donnelly

Barclays Bank's deal to buy £4bn (€4.5bn) of Irish mortgage is not a signal the bank intends to enter the retail market here, and the loan book will be immediately sold to a consortium of financial institutions, the Irish Independent understands.

Around 27,000 loans being sold are expected to continue to be serviced by Pepper following the deal.

Lloyds Banking Group yesterday announced the sale of Irish residential mortgages with a face value of £4.3bn to Barclays.

The home loans were originally issued before the crash by Bank of Scotland Ireland, now part of Lloyds, and the deal in effect completes that bank's exit from its disastrous Irish business.

Lloyds will have "minimal exposure" to Ireland after the sale. The bank will suffer a pre-tax loss of about £110m on the sale, but the disposal should boost its capital buffer, it said in a statement yesterday.

Barclays' role prompted speculation the British bank could be looking to enter the Irish retail market, but informed sources dismissed that idea.

Instead, Barclays' investment banking arm is working with a consortium of two financial backers who will buy the home loans as an investment and borrow against them as a performing asset in the securitisation bond markets. Barclays will act as originator and sponsor of the associated securitisations, and as securitisation arranger and as warehouse financing arranger and provider, it is understood.

Sales of mortgages are controversial, however unlike home loans being sold by Permanent TSB, the Lloyds borrowers are overwhelmingly up to date with payments, not in distressed.

However, a high share of low-interest tracker loans in the book is a drag on profits.

The deal is the largest sale of residential mortgages ever in the State with Lloyds bundling 27,090 loans into the portfolio.

Owner-occupier loans dominate the portfolio, along with 4,023 buy-to-let loans. The book is tied to 22,742 properties spread across the country.

Relatively few of the Lloyds mortgages are in arrears.

The sales documents show accounts on which "payments are over 90 days past due" account for just 2.64pc of the book.

Irish Independent

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