Bank of Ireland sells €250m NPL to Cerberus

Bank of Ireland has sold a block of €250 million non-performing loans (NPL) to US fund Cerberus Capital Managemen at 40% discount to face value.

The bank will collect a net interest of about €3 million annually from the loans, which it will no longer receive after it sells on the portfolio. The deal will, however, help the lender to bring down its ratio of non-performing loans, a key banking metric for regulators and investors.

Bank of Ireland’s said its NPE (non-performing exposures) ratio will dip below 5 per cent following the deal, while its CET1 ratio, a measurement of the strength of its core capital, will also increase.

By selling the dud buy-to-let loans, the bank will be required by regulators to hold less capital in reserve as a precautionary measure should those loans deteriorate further. This frees up that capital to be deployed elsewhere in the business or sold as loans into the economy.

In a statement, the bank said “There will be no change to the protections currently afforded to customers under the relevant Central Bank of Ireland statutory codes of conduct, including the consumer protection code.”