Wednesday 18 July 2018

Finance Ireland close to decision on move to offer Irish mortgages

Billy Kane, managing director of Finance Ireland; Frank Donnellan, managing director of First
Auto Finance, the car finance subsidiary of Finance Ireland; and Jim Hickey, chief operating
officer, Finance Ireland, in Dublin yesterday. Photo: Colm Mahady / Fennells
Billy Kane, managing director of Finance Ireland; Frank Donnellan, managing director of First Auto Finance, the car finance subsidiary of Finance Ireland; and Jim Hickey, chief operating officer, Finance Ireland, in Dublin yesterday. Photo: Colm Mahady / Fennells
Donal O'Donovan

Donal O'Donovan

Finance Ireland is eyeing a potential move into the mortgage market, with a final decision to be made by the end of April.

The finance house, led by former Permanent TSB chief executive Billy Kane, is the country's biggest non-bank provider of car finance (€243m).

It also lends to the commercial real estate and small business sectors.

Finance Ireland is now looking at options to team up with an external money provider to launch a mortgage product in Ireland with a decision due in weeks, Billy Kane said.

If a residential home loan is launched, the plan is to roll it out through the broker channel under the Finance Ireland brand, Mr Kane said.

He said the market share would ultimately be small but would provide an alternative to the banks.

Adding a mortgage business will bolster his ambition to develop Finance Ireland into a challenger bank and potentially list the group on the stock exchange.

Finance Ireland's biggest shareholders are US investment giant Pimco and the State's Irish Strategic Invesment Fund (Isif).

The firm offers secured lending to small landlords, farmers, small businesses and buyers of new and, increasingly, second-hand cars.

The business is in the process of completing a €30m equity placing, with shareholder approval due to be signed off on March 28.

The company declined to comment on the details of the fund-raising, but it is understood that Pimco and Isif have agreed to commit a further €15m each to the business.

The two anchor shareholders have gradually diluted out other historic shareholders in recent years, but staff and managament hold a 10pc stake.

The deal is understood to value Finance Ireland's equity at €105m.

While Isif is an important shareholder, it won't fund the move into mortgages.

Instead the plan is for mortgage origination to be financed off-balance sheet by a third party - and likely be structured to roll into residential mortgage backed securitisations (RMBS) funded in turn on the bond market.

If it does enter the mortgage market, Finance Ireland said it will target home owners, rather than the buy-to-let sector.

As a small player it will struggle to compete on price, but Billy Kane said borrowers in the first time-buyer market currently have few alternatives and could benefit from greater choice.

Meanwhile, Finance Ireland is also looking at securitising its commercial real estate loan book, worth around €175m and growing, in order to maximise its access to capital.

The firm's existing consumer business, car finance, is already funded off balance sheet by Close Brothers.

Financial results published yesterday show that Finance Ireland generated a profit before tax of €8.3m in 2017 - up nearly two-and-a-half times on the previous year. Lending was a record €435m, including a steep rise in commercial property loans to €123m.

Finance Ireland said its lending portfolio, which includes on and off-balance sheet assets, increased to €668m last year.

Net revenue increased €54pc to €26.3m. The firm's business mix means that a greater share of its revenues are made up of commission than is the case for the main banks, with interest income therefore relatively less important.

Irish Independent

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