Business Irish

Tuesday 25 June 2019

BoI to appoint rent receivers to target landlords diverting cash

Laura Noonan

BANK of Ireland is appointing rent receivers in a bid to clamp down on buy-to-let investors who "divert" their property income away from the bank, chief executive Richie Boucher said yesterday.

The comments at BoI's annual shareholder meeting came as the bank released a surprise-free interim management statement describing trading conditions as "challenging" but in line with the previous expectations.

Buy-to-let mortgages have been the worst performers for most banks. Mr Boucher said BOI's €7bn buy-to-let book included €4bn owed by "amateur" landlords, where performance was similar to owner-occupier mortgages.

"About €3bn (of the rest) is people with multiple properties, the arrears profile of that is problematic," Mr Boucher said, citing tendencies to engage in "a diversion of rental income that should be coming to the bank".

"At that stage we are taking action... such as the appointment of rent receivers," he added.

Central Bank Governor Patrick Honohan recently urged institutions to deal more proactively with troubled buy-to-let mortgages.

Banks say the unintended consequences of a recent High Court judgment often prevent them from actually repossessing investment properties. This makes the appointment of receivers to collect rent the best available option. BoI's €28bn of residential mortgages includes more than €17bn of so-called trackers.

Mr Boucher said yesterday that his bank is "not engaged" in the Government's proposals to shift tens of billions of trackers away from Permanent TSB and AIB.

"We're obviously keeping a very close eye on potential developments," he added, while also stressing the tracker book would become less challenging once the cost of the bank's deposits and other funding falls.

Mortgage arrears are seen as the main danger area for the banks in 2012. BoI now has 500 people "actively involved in the management of arrears cases", Mr Boucher said.

The bank's priority is "to maximise recovery" while "working with empathy with the customers".

While not referring specifically to mortgage debt, Mr Boucher defended the bank's decision to take litigation as a "last resort" in the interests of "the recovery of monies that belong to shareholders".

The bank's potential participation in an elaborate scheme to avoid the State making a €3.1bn cash payment to the former Anglo Irish Bank was briefly discussed yesterday but will be discussed fully at a separate extraordinary general meeting. BoI may agree to effectively loan IBRC €3.1bn for 364 days, money that could then be re-borrowed by BoI from the European Central Bank.

The arrangement could earn BoI a profit of about €40m.

Mr Boucher yesterday stressed that the bank had "not signed any agreement" and would put the "potential transaction" to a shareholders' vote.

No date was given, but it's likely to take place in May. Yesterday's interim management statement, which was described by NCB Stockbrokers as containing "no nasty surprises", also revealed that BoI has agreed to sell another €900m of loans, bringing it up to 95pc of its asset sale targets.

The latest disposals are an international corporate and residential mortgage portfolio. The average loss on the €9.5bn of disposals to date is 7pc.

Irish Independent

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