The Bank of Ireland is reducing its bad loan portfolio by 1.4 billion euros

The Bank of Ireland has reached an agreement to sell 1.4 billion euros of non-performing mortgages in two separate transactions.

istressed asset specialist AB CarVal is buying a portfolio of the bank’s distressed Irish owner-occupier loans with a face value of €800m.

The bank is also removing 600 million euros worth of UK mortgages from its balance sheet via a securitization where market investors assume their performance risk.

The two deals will reduce Bank of Ireland’s non-performing risk ratio to 3.7% from 5.4% while adding a small amount to its Tier 1 capital. The group is forgoing approximately €30 million in annual revenue from the loan sales, which are expected to close before the end of the year.

The bank will continue to service Irish loans pending the transfer of ownership to CarVal, after which Mars Capital Finance will take over loan servicing.

However, UK mortgages and customer relationships will continue to be managed by the Bank of Ireland, even though the assets are no longer on the balance sheet.

The bank said it would contact affected Irish customers before transferring credit administration. The transaction will not change consumer protection or legal rights related to the loans.

Bank of Ireland releases its third-quarter trading update on Wednesday, the first for interim CEO Gavin Kelly since the state sold its remaining stake in September. The Bank of Ireland is reducing its bad loan portfolio by 1.4 billion euros

Fry Electronics Team

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