Sunday 22 April 2018

Mortgage writedowns 'deterring foreign investors'

John Corrigan, CEO of the National Treasury Managment Agency
John Corrigan, CEO of the National Treasury Managment Agency

Donal O'Donovan and Sarah McCabe

FOREIGN investors are happy to lend to Ireland but still question the state of the banks, the head of the National Treasury Management Agency has said.

The issue of whether or not Irish banks are financially strong enough to absorb mortgage writedowns is "the remaining piece in the puzzle", NTMA chief John Corrigan said yesterday.

The mortgage arrears situation is a "concern" for the investors who buy government debt, he added.

Mr Corrigan was speaking after the successful issue of €5bn of 10-year government bonds on Wednesday which attracted offers from 400 different investors.

If banks are a concern for investors, they are a concern for the NTMA, he told a conference organised by the Irish Association of Pension Funds (IAPF).

However, he said the banks, are trading well within the banking stress test limits set out in the Prudential Capital Assessment Review stress tests.

Banks should not need extra cash from shareholders, including taxpayers, to cope with their mortgage arrears problems even with the new Central Bank regime aimed at forcing the lenders to tackle their mortgage arrears problems, he added.

Shares in the banks declined yesterday, the first full day of trading after investors had time to absorb Wednesday's announcement about new Central Bank rules aimed at resolving the problem of mortgage arrears. The declines, including a 1.8pc fall for Bank of Ireland, were relatively small.

Davy and Goodbody Stockbrokers both issued notes to clients after the Central Bank set out its new targets for the banks.

Davy's Emer Lang said the banks' financial position will not worsen as a result of the new Central bank plan.

She still thinks banks' mortgage losses will be worse than even the "adverse scenario" foreseen during stress tests in 2011, but that the banks will have enough capital to cope.

Goodbody said mortgage arrears are now "trending toward stabilisation", with losses continuing in 2014 and 2015 but at a slower pace.

The gap between Bank of Ireland and AIB's €6.4bn of mortgage provisions at the end of June, and the €250m they have written of will close quickly under central bank targets, according to Austin Hughes at Goodbody.

Deposits

Meanwhile the amount of money on deposit at banks here remained stable in February at €154.8bn, up 0.3pc over the previous month, according to new figures from the Central Bank.

It's the first information on deposits since Finance Minister Michael Noonan announced that the Government's bank guarantee will be phased out from the end of this month.

"While still very early in the process, there have been no negative trends or unusual deposit volume movements as a result of the announcement to end the scheme," the Central Bank said. Banks' reliance on the European Central Bank for loans continued to fall last month, the data shows. The use of the soft loans dropped by €8.2bn €61.9bn, the lowest level since September 2008.

Irish Independent

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