The Irish NPL market is a mature and well established market. Over the past 10 years, an array of international Private Equity buyers have invested heavily in large-scale Irish loan portfolios comprising of all loan types and all major asset classes – the 2013 Special Liquidation of IBRC and the resulting loan sales delivered by KPMG kick-started the growth of the deleveraging cycle.
These investors have been attracted to Ireland in part due to its stable legislative environment and its mature regulatory regime, but also due to the sustained performance of Ireland’s economy over this period following the global financial crisis. The sheer depth of Irish banks’ NPL stocks also ensured that there was enough product available to maintain the interest of the international buyer audience. All of the major lenders and institutions including NAMA, AIB, Bank of Ireland, Danske, PTSB, Rabobank and Ulster Bank have adopted NPE portfolio sales as part of their overall deleveraging strategy in order to target NPL ratios in line with European averages.
Ireland has now reached the mature phase of its post-recession NPL life cycle. The banks have either worked out or disposed of almost all of their legacy NPL stocks in most asset classes, including CRE, corporate, SME, residential BTL, retail, hospitality, and unsecured/consumer debt. However, it is only very recently that Banks have sought to address the major remaining over-hang from the global financial crisis – non-performing owner-occupied residential mortgages.
In addition to the pressure on banks to resolve the negative balance sheet impact of this asset class, it is inevitable that additional pressure will start to mount as the expected wave(s) of COVID-19 impacted loans turn from performing to non-performing over the coming 6-12 months. Ireland’s high proportion of multinational pharma and ICT firms together with State backed pandemic wage supports and sector-led payment relief measures have thus far prevented a significant increase in NPL volumes. However, this is expected to change as support measures reduce, particularly in sectors more susceptible to the impacts of the pandemic (e.g. tourism, hospitality, retail (non-grocery), and leisure).
Unlike other active NPL markets such as Greece and Italy, the vast majority of deleveraging transactions in the Irish market are whole loan sale transactions. Whilst a number of securitisations have been undertaken in the Irish market, most of securitised portfolios comprise of restructured, reperforming or “split” loans, rather than solely NPL exposures.
2019 was a very active year in the Irish NPL market with transaction levels exceeding €10 billion. Rabobank disposed of its subsidiary ACC Bank’s residual loan book of c.€4.2 billion in a market exit trade. Approximately €2.7 billion of this comprised of loans secured against a mix of asset classes which was sold to a consortium of CarVal and Goldman Sachs, whilst the remaining €1.5 billion of unsecured loans was sold to Cabot. AIB sold two large mixed NPL portfolios to Cerberus in 2019 with an aggregated GBV of just over €4 billion, and appears set to continue its deleveraging strategy with two prospective residential portfolio transactions due to complete in 2021, totalling approximately €1.4 billion.
Following a pause in the market during Q1-Q3 2020 due to the impact of the coronavirus pandemic, Permanent TSB announced the sale of a portfolio of performing Buy-To-Let (“BTL”) loans with aggregated balances of €1.4 billion to Citibank in October 2020.