Ulster Bank looks set to sell on as many as 7,000 non-performing mortgages as the bank moots a portfolio sale in 2018. The Royal Bank of Scotland-owned operation plunged into an operating loss last year, on the back of the ongoing tracker mortgage crisis.
On Friday, the bank confirmed that it had set aside €68 million in preparation of a potential sale of a portion of its non-performing loan book, which could see as many as 7,000 mortgages in arrears sold on to a foreign fund later this year.
“What we’re not doing is we’re not announcing a portfolio sale; we made a provision in our accounts which would facilitate a potential loan sale in 2018,” chief executive Gerry Mallon said.
Mr Mallon said that the bank’s non-performing mortgage loan book consisted of about 20,000 customers, and is worth about €4 billion. It accounts for some 16 per cent of the bank’s total loan book. Of the 20,000 customers in this cohort, about 5,000 would be classified as “non-engaging”, with 3,000 of these in arrears of 720 days or more. The potential move is being driven by regulatory requirements at European level to cut non-performing loans down to 5 per cent.
Cut some slack
Earlier this month Permanent TSB said it would sell on some € 4 billion of its non-performing loans to meet this requirement, involving a mixture of residential and buy-to-let mortgages, while on Thursday, KBC Bank Ireland suggested that Irish banks should be cut some slack by regulators.
“It does need to be resolved in some way,” Mr Mallon said, adding, “But I’m not arguing against the ECB in relation to that. We operate under regulations which are not optional and we need to comply with those.”
According to year-end accounts for 2017, the bank reported an operating loss of €151 million last year, from a €24 million profit for 2016.
Mr Mallon said the accounts showed “real progress” in terms of what the bank achieved last year, pointing to a growth in income in its core customer business; €2.6 billion in new customer lending; an improved net interest margin, up by 5 basis points to 1.67 per cent; dividend payments to its parent RBS; as well as making the bank “safer and more sustainable”.
However the tracker mortgage scandal continues to weigh on the bank’s performance and additional provisioning for tracker mortgages was the main factor behind Ulster Bank’s slump. The lender said it set aside an additional € 192 million to cover refunds, compensation and other costs related to the country’s tracker-mortgage scandal and other incidents of overcharging.
‘Final discussions’
The development comes as Ulster Bank, which has previously disclosed the 3,500 of its customers were either denied a low-cost loan linked to the European Central Bank main rate or put on the wrong rate entirely, continues discussion with the Central Bank on its final figure. The Irish Times reported in December that Ulster Bank may report an additional 2,000 to 3,000 cases. Commenting on this, Mr Mallon said the bank was in "final discussions" with the Central Bank, and expects to reach a "conclusion" in the next few weeks, about the final numbers impacted. The bank did say that, of the 3,500 cases disclosed thus far, 1,460 customers had been compensated.
The bank said that it made an additional € 87 million of provisions for tracker cost in the fourth quarter of last year. That brings the total amount of money ringfenced to deal with the controversy over the past two years to €298 million – the highest among the country’s five main lenders.
Inconsistencies
In addition, the bank set aside €101 million of provisions to deal with other customers that had been impacted by “inconsistencies in documentation relating to non-tracker mortgage holders and commercial loan customers”.
These include errors in terms of customer documentation, and both overcharging and undercharging.
“Whereas our errors have resulted in both positive and negative impacts for customers, our follow-up will be solely with disadvantaged customers to whom we apologise unreservedly,” Mr Mallon said.
The figure of €101 million is the “best estimate at this point in time”, Mr Mallon said, adding that “more work is still to be done to identify all of the customers”. This will probably take up to the early summer, Mr Mallon said, at which point the bank will start to engage with impacted customers, and commence a programme of redress and compensation.
Mr Mallon, who announced last month that he was leaving the bank, is committed to Ulster Bank until July, and he noted that the search for his successor was still a “work in progress”.
