Financial Services

Ulster Bank buries bad news on bad loans on budget day

Cantillon: While everyone was preoccupied it revealed it would sell €800m of mortgages

Ulster Bank revealed at 4pm on Tuesday, as journalists, politicians and the wider public were preoccupied by Budget 2020, that it had agreed to sell the mortgages. Photograph: Nick Bradshaw

Thu Oct 10 2019 - 05:50

The Jo Moore award for burying bad news on a busy day this year goes to... Ulster Bank.

Moore was a Labour Party spin doctor in the UK who infamously sent an email within her department on the day of the 9/11 terrorist attacks in 2001, saying it was “a very good day to get out anything we want to bury”.

Ulster Bank revealed at 4pm on Tuesday, as journalists, politicians and the wider public were preoccupied by Budget 2020, that it had agreed to sell €800 million of mortgages.

Even the wording of the press release was ambiguous: "Pepper Finance Corporation (Ireland) DAC will become the legal owner and Servicer of the mortgages. The purchase is being financed by funds managed by CarVal Investors LLC."

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Any casual reader would assume that Pepper, a loan service provider, had actually bought the loans. It took a bit of digging to ascertain that it was CarVal, a US distressed debt investor, which would be known as a vulture fund in certain parts, was actually buying the portfolio.

“This is a difficult decision, taken following a period of concentrated engagement with customers,” the release said. “Our preference is to work with customers to find a solution that keeps them in their home while paying a mortgage that is affordable for them in the long term. This is not possible for every customer.”

The portfolio does appear to be full of very difficult cases. The average owner-occupier loan was €36,000 in arrears after 28 missed payments – and five forbearance attempts by the bank.

Banks are under pressure from regulators to do whatever they can to shift non-performing loans (NPLs) off their books to protect themselves, their investors, depositors – and, ultimately, taxpayers – in the event of another crisis. Loan sales are a necessary tool as part of that process.

But announcing a sale on one of the busiest news days of the year plays into the hands of those who accuse them of throwing borrowers to the wolves.

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