Austria’s Bawag bank confirms plan to offer Irish mortgages through MoCo

The chief executive of Austrian bank Bawag confirmed on Thursday the group’s plan to offer Irish home loans through a mortgages start-up it acquired in recent months, saying the group likes the potential profit returns it could generate in the market.

Bawag, based in Vienna, took over the company behind MoCo, an Irish business that has been looking to enter the mortgages market, in March for a nominal amount of €35.

The deal came as Dutch merchant bank NIBC, which was a key backer of the company behind MoCo, decided earlier this year against providing more equity finance to the start-up.

“MoCo is a small platform that we’ve purchased that allows us to have [mortgage] origination capabilities,” Bawag chief executive, Anas Abuzaakouk, said on a call with analysts on Thursday as the bank reported interim results.

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Mr Abuzaakouk added that Bawag likes the executive team at MoCo, which includes former AIB executive Aidan Sherry and John Walsh, a one-time senior information technology director at loan servicing company Link Group, as well as the “macro fundamentals of Ireland”. He added: “We like the risk-adjusted returns profile.”

The chief executive officer said, however, that developing an Irish mortgage business will “take time”. He said: “It’s something organic and the platform is effectively a greenfield [project].”

MoCo, the trading name of a company registered in Dublin in 2020 as Cedar Lending Services, had long planned on securing a retail credit firm authorisation from the Central Bank to sell mortgages through brokers.

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A spokesman for Bawag said, however, the new owner intends to rely on its Austrian banking licence and the European Union financial services passporting regime to issue Irish mortgages. He declined to comment on a time frame for launch.

“We are in the initial set-up phase and will provide further market updates as we get closer to our launch,” he said.

Non-bank lenders that entered the Irish owner-occupier mortgage market in the past five years, including ICS Mortgages – owned by Dilosk – and Finance Ireland, were at the coalface as borrowing rates in financial markets and from wholesale funders jumped in 2022 as central banks started to hike rates aggressively to rein in inflation.

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By contrast, traditional banks’ loan books here are funded mainly by cheap deposits, which has allowed them to avoid passing on most of the European Central Bank’s (ECB) rate increases since last summer. The ECB has raised its main lending rate from zero to 4 per cent since last July.

NIBC had built up a 12 per cent stake in MoCo, and was also planning to fund the company’s mortgage offering, before it decided to back away from the Irish market. The Dutch company expressed frustration last autumn at what it saw as a “persistence of irrational pricing” by mainstream Irish banks, as they lagged behind European peers in hiking mortgage rates, MoCo said in an email to investors at the time.

The company received more than €3.65 million in investment in recent years from NIBC and a host of high-net-worth individuals, including former AIB chairman Lochlann Quinn, former DAA and Aryzta chief Kevin Toland, Smurfit Kappa chief executive, Tony Smurfit, and former Green Reit chief executive Pat Gunne.

Dermot Divilly, a former chairman of An Post, and former Davy deputy chairman Kyran McLaughlin were also among the backers. They all lost the money they invested as part of Bawag’s takeover of MoCo.