PTSB said on Friday it has agreed to a portfolio of mainly deep-in-arrears mortgages with a gross value of €348 million to a group comprising US private equity giant Apollo and loan servicing firm Mars Capital.
The bank, formerly known as Permanent TSB, said that the deal will reduce its non-performing loans (NPL) ratio to 1.7 per cent, below the European average of 1.9 per cent.
The banks ratio had stood at 3.3 per cent in March, and peaked at 28 per cent before the bank sold a number of problem loan portfolios to get its NPLs ratio down to acceptable levels for regulators.
The portfolio comprises 1,244 loans against 1,489 properties, the bank said in a statement. Some 83 per cent of the accounts are classified as non-performing due to their arrears status.
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The average arrears balance for accounts in arrears is €71,000 and the average time in arrears is 22 months.
The remainder of the portfolio is classified as non-performing under regulatory guidelines and definitions.
Typically, these are interest only or part capital and interest loans where the borrower and the bank have been unable to agree a credible capital repayment plan, the bank said.
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“PTSB is undertaking this transaction to ensure that we remain a strong and resilient competitor in the Irish retail banking market, offering much needed choice to customers,” said chief executive Eamonn Crowley.
“Like other retail banks, PTSB is required by regulation to hold additional capital for non-performing Loans, meaning that the amount that can be lent to first time buyers and other personal and business customers would have been impacted if this transaction had not occurred.”
“As a result of today’s announcement, we will be able to free up capital that will be used to support up to €2 billion of lending into the Irish economy.”
The sale comes as PTSB is seeking to convince regulators to allow it to reduce the implied riskiness of its loan book, which has left it at a competitive disadvantage to its larger rivals.
Every €100 of mortgages the bank issues has a so-called risk weighting of more than 40 per cent, against which it must hold capital.
The high risk-weighted assets (RWA) density is a result of the bank’s experience of the arrears crisis following the financial crash.
By contrast, the risk weighting on new Bank of Ireland and AIB mortgages is in the 20s, which means they can write new business more competitively.
The unlevel playing field contributed to PTSB’s market share for new mortgages sliding to 13.4 per cent in the first three months of this year, down from 23 per cent for the first half of 2024. Still, the bank has moved recently to lower certain mortgage rates to improve its competitive positioning.
The planned loan sale will increase the bank’s so-called common equity Tier 1 capital ratio – a measure of financial strength – by 0.35 percentage points of risk weighted assets. The ratio stood at 14.3 per cent in March.
PTSB said that it will write to affected customers in the coming days to assure them that their terms and conditions will not be affected by the transaction and that they will continue to have the same regulatory protections under the Consumer Protection Code and Code of Conduct on Mortgage Arrears.
Mars Capital Finance Ireland’s chief executive, Colin Maher, said his firm will also write to the transferring customers “in due course with more information on what this transaction means for their loan”.
“We always encourage any customers facing difficulties to contact our Dublin-based expert team, so our highly trained advisers can discuss a range of tailored solutions and advise on what may be most suitable to support them,” he said.
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