AIB sells mortgage and other bad loans for €400m

AIB has agreed a sale of 2,150 customers’ loans mostly made up of owner occupiwer mortgages in arrears to a consortium of US investors including Mars Capital and Ellington Management Group.

he majority taxpayer owned bank will receive €400m in cash for the bad loans – all of which were in default before Covid with average time in arrears of nine years.

AIB said 88pc of the loans involved are primary dwelling home (PDH) loans, meaning they are secured on family homes not investment properties. In all 2,300 properties are secured on the debts.

The price is a discount to the amounts owed but in line with the valuation on the bank’s own balance sheet ahead of the sale, so it will not book an additional loss. The portfolio was loss making to the tune of €56m in 2020 and AIB said the sale is expected to be capital accretive – meaning that the sale in theory boosts its capacity for new lending.

The bank said all customers in the loan portfolio sale will continue to have the same regulatory protections under the Consumer Protection Code (CPC) and the Code of Conduct on Mortgage Arrears (CCMA) after the sale, customer contracts will not change.

The latest sale of non performing loans take the share of bad debts on the bank’s balance sheet to 6pc, still well north of a medium-term target to reduce that to 3pc of lending.

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