Fergal O’Leary, the bond market veteran who cofounded a company that made millions finding buyers for Irish debt following the 2008 financial crisis as big-name investors fled the scene, reckons his latest venture can bridge gaps in another market: mortgages.
Núa Money, the nonbank lender he set up in 2021 with some former Citigroup bond market colleagues and Kazakh fintech whizzes, and backed by the Allen beef barons of Wexford, began issuing loans last summer through brokers.
“When we started off, we knew we weren’t going to have the best rates in the market,” says O’Leary, Núa’s chief commercial officer, from the no-frills boardroom in the company’s offices in Dublin’s south docklands.
“So, we knew that we had to come up with products that had some tweaks compared to the wider market, to make them more appealing – without being reckless in any way. Otherwise, we faced not getting any business.”
Núa initially set itself apart by ignoring the current market norm of looking at a borrower’s demonstrated repayment ability (DRA) over the previous six months – in favour of a more income-based focus.
“The DRA approach doesn’t make a lot of sense if you’re a first-time buyer and you’ve been living at home with your parents for the past six months and have been running a very frugal lifestyle as you save up,” says O’Leary.
The lender has also set itself apart by offering loans to holders of immigrant visas. “At the moment, you typically need to be a year, or sometimes two years, in the country before banks will lend to you. With us, you can apply for a mortgage after you’ve been in the country for three months, and can draw down a mortgage after you’ve been here six months and have passed probation,” he says. “We’ve seen a lot of interest in this from people in the HSE [Health Service Executive] and tech sector.”
Núa also looks at variable income slightly differently to most in the market (applying greater focus on more recent bonus payments, albeit subject to certain stress testing), and is more flexible, O’Leary says, on allowing borrowers to release equity from their home.
“The banks generally need to know what equity release would be used for. We don’t – as long, of course, as you meet general loan requirements,” says the 55-year-old, referring to regulatory limits on loans relative to income (LTI) and the value (LTV) of a property.
Last month, Núa opened up a new front, aimed at what it calls “mortgage prisoners” indebted to investment funds – colloquially known as vulture funds – that snapped up billions of euro of non-performing loans in the wake of the financial crash.
The new so-called Núa Freedom product is aimed at borrowers that had previously been in trouble but have maintained a restructuring arrangement for at least five years
As of last June, more than 80 per cent of mortgages in the hands of firms not actively lending were rates of at least 6 per cent – with many paying between 8.5 and 10 per cent, following rate hikes in recent years, according to a recent report from the Oireachtas Library and Research Service.
At the same time, the average new loan was being priced at a little over 4 per cent, Central Bank of Ireland figures show. Market rates have come down since then as the European Central Bank (ECB) reduced official rates.
The new so-called Núa Freedom product is aimed at borrowers that had previously been in trouble but have maintained a restructuring arrangement for at least five years. The lender is offering an initial fixed rate of 5.25 per cent for three to five years, before moving to a standard variable rate, to such borrowers, subject to a maximum LTV of 75 per cent and the borrower being able to cover the entire value of the loan, including portions that had previously been warehoused under a split-mortgage arrangement.
“The balance of Irish mortgages covered by the three most popular restructuring arrangements alone – split mortgages, arrears capitalisation and term extensions – amounts to €3.4 billion,” says O’Leary. “We’re starting to see some very good traction with the product now.”
O’Leary declines to identify the “large international financial institution” Núa has signed up to fund its first batch of mortgages. He is also coy when asked about the value of loans it has either approved or seen drawn down.
However, he drops more than a hint on the minimum amount Núa aims to have out on loan at some stage in the second half of the year, when the company plans to refinance a bunch of mortgages on the international bond market, through a process called loan securitisation.
“The standard securitisation deal in the market is about €300 million, or €250 million to €300 million. We’re aiming to carry out such a transaction at some stage before the year-end, either in the third or fourth quarter,” he says.
Nonbank lenders have begun to re-emerge from the sidelines over the past year, having been squeezed over the previous 18 months as the price of wholesale and bond market funding spiralled as central banks hike interest rates. The ECB has cut rates a number of times since last June.
Still, the three mainstream Irish banks – AIB, Bank of Ireland and PTSB – and Avant Money, now a branch of its Spanish banking parent Bankinter, accounted for 99.5 per cent of the €12.6 billion of mortgages issued in 2024 – helped by their cheap deposit funding.
ICS Mortgages, owned by Dilosk, rebooted its owner-occupier mortgage offering last year, easing what were then the most stringent lending criteria in the market and gradually lowering its interest rates, as international funding conditions eased. MoCo, a nonbank lender, but owned by Austrian bank Bawag, launched early last year.
While nonbanks had largely competed on price before the spike in interest rates, this time around they’re vying for customers on product and service.
“There’s a real opportunity for more players to come in and take market share from the banks. But it depends on what your niche is. We’ve been really conscious about developing products that people want,” says O’Leary.
Numerous brokers report that Núa’s integrated technology gives it an edge. Núa has processed new mortgage applications to fully underwritten loan offers in as few as six minutes, with some cases moving from application to drawdown in less than three weeks.
Not all nonbank players are as optimistic. It emerged last month that Finance Ireland, which, in 2018, became the first nonbank lender to start issuing home loans following the property crash, was exiting the mortgage market. It had been effectively out of the residential mortgage market for some time as its lending rates were high.
The company’s chief executive Billy Kane repeatedly spoke in recent years about how mainstream banks have been “actually cross-subsidising” their mortgage books with cheap deposit funding. Close to 90 per cent of customers’ money in Irish banks is in on-demand or current accounts, which are earning little or nothing. Still, Finance Ireland remains active in the car finance, small business, agri-lending and commercial property markets.
O’Leary moved to London in 1999 to join Lehman Brothers, mainly selling mortgage-backed securities and credit-protection derivatives, before returning to Dublin to work in part of Citigroup’s global markets business
O’Leary’s involvement in the financial industry spans more than three decades.
Having studied economics at University College Dublin, he oined Dutch banking group ABN Amro’s Riada Stockbrokers unit in Dublin on the equity research side in 1992 while undertaking a master’s in investment and treasury at Dublin City University.
However, the government bonds desk – usually referred to by insiders as the rates desk – was where the main action was, around the time of the sterling crisis as the UK pulled out of the exchange rate mechanism of the European monetary system, a precursor to the euro zone.
“The rates desk was going gangbusters – and I made my mind up pretty quickly that I wanted to join it,” he recalls. His time on the bonds team would see him get into selling corporate bonds and structured products such as asset-backed securities sales – including bonds backed by mortgages – as these markets opened up in Europe in the 1990s.
O’Leary moved to London in 1999 to join Lehman Brothers, mainly selling mortgage-backed securities and credit-protection derivatives, before returning to Dublin to work in part of Citigroup’s global markets business. “I was only with Lehmans for a modest period of 18 months, but it was a great place to work at the time,” he says of the US investment bank that would become synonymous with the global financial crash in 2008.
It was over lunch in the Harbourmaster Bar and Restaurant in the heart of the IFSC in 2009 with fellow ABN Amro alumnus Jim Ryan – who was then head of balance sheet management at Depfa Bank, the German-owned lender that would also collapse during the financial crisis – that O’Leary’s next move was hatched.
The pair would set up Glas Securities in 2009 – with another former Depfa banker, Michael Cummins, also joining as a founder – to trade Irish government and bank bonds as borrowing costs started to spiral.
“Nobody wanted to touch Ireland at the time. There were a lot of what you’d call real-money accounts, like insurance companies and asset managers, that were being asked disproportionately about their exposure to Irish bonds, even when Ireland was a tiny part of their portfolios. So, they wanted to get out. On the other side, there were hedge funds and distressed debt funds that were seeing Irish bonds trading at discount and saw them as an attractive bet,” he said. “We matched both sides.”
At the height of the debt crisis, after the State entered an international bailout to avert a default on its bonds as the cost of bailing out the banking system became too much to bear, Glas Securities was responsible for 30 per cent of the Irish Stock Exchange-reported trading of Irish government bonds.
In 2011, a year that saw Irish government bond market rates – or yields – breach 14 per cent and US bonds guru Michael Hasenstab, of Franklin Templeton, begin to accumulate what would become a €8 billion outsize bet on the nation’s debt, Glas recorded close to €10 million in commissions.
The trio decided to close the business in early 2014, as trading of Irish bonds fell dramatically after the government completed its bailout programme and volatility across euro-zone debt markets eased considerably after then ECB president Mario Draghi’s famous pledge to do “whatever it takes” to save the euro. Glas Securities had €4.2 million of net assets, mainly cash, at the time of the windup.
“We decided that it’d be best to get out in a good way, rather than a bad way,” O’Leary says.
He subsequently took on a number of non-executive director positions, including: a vehicle of US asset management giant Blackstone invested in pools of corporate loans, called Blackstone/GSO Corporate Funding; a company that offers management services to EU funds; a couple of property vehicles; and an Irish fund management entity of CapVest, the private-equity firm run by Cavan-born Seamus FitzPatrick.
In 2021, O’Leary joined forces with a number of former executives from private equity-owned Maltese bank MeDirect – including former Citigroup bond markets colleagues Briton Mark Watson and Spanish native Ximo Vincent, and Kazakhstan-born financial technology executive Alanbek Yussupov – to set up Núa.
All of our lending comfortably falls well within [Central Bank lending rules], with no exceptions. The portfolio of loans that we are generating provides significant headroom to these limits
— Fergal O’Leary
The other founding shareholders include Kazakh banking technology veterans Mukhit Inebekov and Yerzhan Daribayev.
Watson (Núa’s chief executive) and Vincent (its chief financial officer) were known to have been looking at the Irish mortgages market even while they were with MeDirect. They left that business in 2019.
The initial idea they looked at with O’Leary was to set up a new bank in the Republic but they decided against it because of the capital investment needed and other onerous requirements. “It was too much of a leap of faith at the time,” he says. They decided to go down the route of applying to the Central Bank to become a retail credit firm.
O’Leary was introduced to Wexford businessmen Bert and Lance Allen, former owners of beef processor Slaney Foods, by a friend as Núa was seeking to raise money to develop its technology platform. They would end up taking a 40 per cent stake for €4 million.
Núa, which has 15 employees, currently sells its mortgages through 125 brokers. However, it plans to also open a direct digital channel to consumers by the end of this year, according to O’Leary. It won’t involve a big jump in staffing. “We’ll let the technology do the heavy lifting,” he says.
He insists the company’s move into more bespoke products than offered by the banks, including its courting of borrowers that had problems in the past, will not lead to potentially higher arrears than the market.
“All of our lending comfortably falls well within [the Central Bank lending rules], with no exceptions,” he says. “The portfolio of loans that we are generating provides significant headroom to these limits and while we are providing much greater flexibility, efficiency and fast responses to customers, this is accompanied by an appropriate and solid underwriting policy, which is audited on a loan-by-loan basis by our international funding partner.”
Do the Núa partners still harbour an ambition of becoming a bank one day, or has that ship sailed?
“No, it definitely hasn’t sailed. I think there’s a great opportunity to build an efficient banking system in Ireland – across mortgages, SME lending, deposits,” he says. “Whether it’s for us or not, I don’t know. It certainly isn’t for the next 18 months. We can’t be distracted from the core business we are building.”
CV
Name: Fergal O’Leary
Job: Chief commercial officer at Núa Mortgages
Lives: Malahide, Dublin
Family: Married to Linda McNulty; they have three children, Emily, Isabelle and Matthew
Hobbies: Cycling, running, walking, watching rugby and travel
Something you might expect: “I love all things financial.”
Something that might surprise: “Well, it would certainly really surprise any of my friends, or anyone that knows me, that I’d agree to do an interview like this, as I’m really private.”
