AIB plans sale of €750m of commercial property loans

AIB is preparing to sell a portfolio of commercial property loans that had an original value of €750 million, according to a Bloomberg report.

The lender is likely to formally market the loan book in the first half of next year, it said, noting that such portfolios, comprising loans issued before the domestic property crash more than a decade ago, are typically sold at a discount to their par value.

“AIB has reduced NPE (non-performing exposure) levels from €31 billion in 2013 to €3.5 billion or 5.9 per cent of gross loans at September 2021. For customers in difficulty our focus has been to put in place sustainable solutions to help them and our preference is to provide these through customer engagement on a case-by-case basis,” a spokesman for the bank said, declining to comment on the report.

“Notwithstanding the considerable progress made to date, the bank’s NPE ratio remains elevated and we are committed to reaching an NPE level of circa 3 per cent, which is more in line with European levels.”

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AIB has been the most active of the three remaining banks in the Irish market in 2021 in off-loading non-performing loans as the sector prepares for a belated spike in defaults next year as a result of the Covid-19 crisis. Loan sales also avoid the negative impact of banks having to set aside more provisions against problem debt in the coming years under so-called calendar provisioning rules and guidelines being pushed by European regulators.

Project Bay

In October, AIB agreed to sell €400 million of problem mortgages, known as Project Bay, to a consortium involving US-based Ellington Financial and Mars Capital Finance Ireland. Morgan Stanley has provided finance for the deal, leading to speculation that the portfolio, comprising loans deep in arrears as well as restructured debt, will be refinanced on international bond markets in the near term.

In February, the State’s largest mortgage lender agreed to sell a portfolio of mainly troubled home loans to US investment group Apollo for a discounted price of €400 million, with Mars Capital Finance Ireland contracted to service the loans.

A month earlier, the bank sold a portfolio of 620 owner-occupier mortgages, originally worth €150 million, to an "ethical" investment consortium, comprising Everyday Finance, Home for Life, Arizun Asset Management (Ireland) and LCM Partners, that is focused on mortgage-to-rent for borrowers.