Permanent TSB Group Holdings Plc (IPM), the bailed-out Irish lender, hired Morgan Stanley (MS) to sell its commercial real estate and subprime residential mortgage loan books, which have a combined face value of about 2.6 billion euros ($3.5 billion).
“Morgan Stanley has been appointed to sell the two portfolios,” said Ray Gordon, a bank spokesman, who declined to comment further on the process. The loans are mainly non-performing and are valued at a discount on Dublin-based PTSB’s balance sheet after bad-debt provisions.
PTSB’s chief executive officer, Jeremy Masding, is slimming down Ireland’s once largest mortgage lender to show European antitrust authorities it is viable after a 4 billion-euro state rescue since 2011. Firms such as Blackstone Group LP (BX) and Kennedy Wilson Holdings Inc. (KW) are among an influx of overseas buyers of Irish real estate as the market recovers from a crash in 2008.
Irish commercial real estate values rebounded almost 10 percent in the year through March, according to Investment Property Databank Ltd. They remain 64 percent below their 2007 peak.
Masding said in March the bank planned to sell its Irish commercial real estate and subprime home loans business this year, before marketing its U.K. residential mortgage unit. The bank had previously planned to first sell the U.K. operation, Capital Home Loans, with 6.7 billion euros of loans.
“While a significant amount of the commercial real estate portfolio is impaired, it has been well provisioned,” the European Commission said of PTSB in a report on Ireland yesterday. “This should help limit the capital impact” of the sale, it said.
PTSB had set aside 911 million euros of provisions to absorb bad debts in the 2.1 billion-euro commercial loan book on Dec. 31, according to its annual report.
The liquidation of defunct nationalized lender Anglo Irish Bank Corp. since February 2013, with the sale of 90 percent of a 22 billion-euro loan book, shows that there is “strong demand” for Irish commercial real estate assets, the EU said.
PTSB’s Irish subprime unit, Springboard Mortgages, marketed as a “near-prime” lender when set up in 2006, had 466 million euros of loans at the end of 2012, according to its most recent accounts filed with the country’s companies office. It had set aside 147 million euros of loan-loss provisions at the time. Springboard stopped writing business in 2009.
PTSB’s 2013 net loss narrowed to 261 million euros from 996 million euros as a one-time gain from winding up a defined-benefit employee pension plan offset an increase in bad-loan impairment charges. The group doesn’t expect to return to profit until 2017.
Ireland’s two largest lenders, Bank of Ireland Plc and Allied Irish Banks Plc (ALBK), each swung back into profit in the first quarter for the first time since the financial crisis erupted in 2008 as their loan losses fell.
To contact the editors responsible for this story: Edward Evans at email@example.com Steve Bailey, Jon Menon