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PTSB sells €1.4bn of buy-to-let mortgages to Citigroup

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Permanent TSB (PTSB) said on Monday it has sold a pool of interest-only buy-to-let mortgages with a gross value of €1.4 billion to US banking giant Citigroup, with the loans set to be refinanced on the international bond market.

The deal involves 3,400 borrowers and the loans have an average balance of €375,000 and are classified as performing loans with an average remaining term of 10 years. None of the loans were subject to payment breaks during the Covid-19 pandemic, it said.

PTSB, led by chief executive Eamonn Crowley, will receive the €1.2 billion net value of the portfolio from Citigroup’s Citibank NA London for the loans, before the US bank sells bonds against them to investors in a transaction known as securitisation.

The deal marks the first loan sale by an Irish retail lender since the onset of the coronavirus crisis in March.

PTSB signalled in February that it was assessing risks associated with thousands of buy-to-let mortgages, amounting to €2.5 billion, that were handed out before the crash and on interest-only terms until the loans mature. The bank said at the time that it was engaging with customers to work out “credible” principal repayment plans in order to estimate the long-term health of this portfolio.

The bank cannot change the conditions of the loans as long as borrowers are meeting their contracted terms. The terms of individual loans involved in the sale are unaffected by the transaction. Loan servicing firm Pepper will manage the loans.

The disposal will also boost PTSB’s capital reserves but will result its ratio of non-performing loans rising to 7.7 per cent from 7 per cent.

“This transaction will increase the bank’s transitional total capital ratio by 2.1 per cent, strengthen the balance sheet and provide us with resources to compete in our core markets of personal mortgages, personal lending and SME lending,” said Mr Crowley.

“All applicable terms and conditions continue to apply, meaning that customers will be afforded the same consumer protections upon completion of the transfer. Like Permanent TSB, Pepper is regulated by the Central Bank of Ireland and is required to comply with consumer protection legislation when dealing with customers.”

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