Investors set to pile into PTSB auction
Permanent TSB is expected to attract strong interest from debt markets when it refinances another €500m tranche of performing loans next week as bond market investors swoop on deals offering a positive yield.
The residential mortgage-backed securitisation (RMBS), the first from PTSB since 2016, marks the latest in the Fastnet Securities programme, and will be drawn from a pool of more than €803.6m worth of performing home loans.
A strong reception will underscore debt markets' confidence in the rebounding economy and the increasing appetite among debt market investors for healthy Irish mortgages.
As this newspaper revealed last week, the Goldman Sachs and Pimco consortium has gained front-runner status in the race for Danske's €1.8bn portfolio.
The Wall Street bank and California-based funds giant are tipped to securitise the loans amid a rebound in investor appetite for the once-unloved mortgage-backed bond market.
While the volume of securitisations in this space remain well below the boom-time peak, RMBS deals are now classed as relatively low-risk as the debt is fully segregated from the bank.
In theory, lenders would be unaffected even if Permanent TSB was to go bankrupt, meaning it is a less risky investment than lending to a bank.
PTSB embarked on a roadshow of the deal this week with advisers Bank of America Merrill Lynch, Morgan Stanley and Citi meeting potential investors in London, Amsterdam, Paris, Munich and Frankfurt.
According to Bloomberg, the average size of the mortgages to be included in the securitisation is €131,779.
PTSB will randomly select from a pool of 6,098 home loans issued to owner-occupiers at an average interest rate of 3.28pc.
As the mortgages are performing - the pool has an arrears rate of less than 2pc - with the portfolio composed primarily of loans carrying a top-notch credit rating, sources predict the yield may be lower on this RMBS deal than last year's offer.
In September 2016, PTSB's last RMBS - dubbed Fastnet Securities 12 - raised €500m and attracted an effective interest rate of 0.4pc.
This latest deal comes as the bank faces acute pressure to reduce its relatively high stock of non-performing loans, which sit at 28pc of the total loan book.
The bank is expected to pull the trigger on the sale of some €1.25bn soured loans within the next few months and has hired accountancy firm Ernst & Young, to help plot a disposal strategy.
As of the end of June, PTSB's non-performing loan exposures totalled €5.9bn although the bank regards 53pc of these loans as treated, since they are in some form of forbearance management and are generating income.
While the lender is weighing a number of NPE resolution strategies, the upcoming portfolio sale is likely to contain mostly toxic buy-to-let loans, which account for 34pc of its untreated NPEs.