Business Irish

Monday 23 October 2017

State to get €130m from IL&P in guarantee deal

Group raises €2bn through the sale of a five-year bond

Joe Brennan

Irish Life & Permanent expects to hand over up to €130m to the State this year as a result of higher costs associated with the new banking guarantee scheme.

The group paid €29m in fees to the Government last year under the original guarantee scheme. The group sees its average cost rising from about 0.15pc of covered liabilities to as high as 1pc of the value of bonds issued under the extended guarantee.

The group yesterday raised €2bn through the sale of a five-year bond -- marking its second issue under the new scheme. It tapped the US market with a $1.75bn (€1.27bn) bond in January. The latest deal was priced at 1.6pc over the benchmark mid-swap market rate -- equating to a yield of about 4.1pc.

Ireland's Bloxham acted as a co-lead on the deal. It was led by Deutsche Bank, JP Morgan, BNP Paribas and Bank of America Merrill Lynch.

IL&P's new group treasurer Michael Torpey said: "The success of this transaction is very encouraging and suggests a good response to the group's results announced today and to strong investor support for Ireland Inc -- where the progress being made on NAMA, on debt funding generally by the NTMA and on addressing our fiscal problems by the Government is being well received by investors."

The group increased its reliance on European Central Bank funding by €3bn to €9.75bn in December as it took an opportunity to avail of Frankfurt's last auction of 12-month funds.


The ECB began offering 12-month and six-month funds in June last year -- compared to its normal maximum three-month money -- to help shore up the banking system and get credit flowing through the eurozone again. Its last six-month auction will take place this month. IL&P's ECB borrowings stand at €8.75bn.

The group is the most heavily reliant among domestic lenders on the volatile wholesale markets for funding. Its loan-to-deposit ratio dipped to 246pc from 271pc at the end of 2008.

"Our target for 2010 is to reduce it further to 230pc through a combination of deposit book growth and reduced loan balances resulting from the expected lower level of new business volumes in 2010," it said.

The total number of new loans issued plunged to €1.2bn from €7.1bn a year earlier, while the overall loan book dropped 3.7pc to €38.6bn.

Meanwhile, IL&P chief executive Kevin Murphy confirmed an Irish Independent report in January that the bank has inked a large securitisation deal on part of its life assurance book, which will release €200m of capital.

However, the deal still has to be sanctioned by the Financial Regulator.

Irish Independent

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