AIB has sold a €400m portfolio non-performing loans to Everyday Finance and affiliates of US investment groups Cerberus Capital Management and LCM Partners Ltd as it continues efforts to reduce its stock of non-performing exposures.
The majority state-owned bank currently counts 4.4% of its total loan book as non-performing and remains "firmly on track" to reduce the proportion of bad loans to 3% by the end of 2023.
With the completion of the sale, AIB will have reduced its stock of non-performing loans from €31bn to €2.6bn over the past nine years, primarily through customer engagement and case-by-case restructuring.
The sale includes multiple assets classes with an average time in default of approximately nine years, and the lender said "substantially resolves" its legacy, long-term default non-performing exposures.
"Normalising NPEs remains a priority delivering balance sheet resilience with improved risk profile, lower calendar provisioning and facilitates normalisation of our workout unit," the group said in a statement to the Dublin and London stock exchanges.
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As of last December, the portfolio had a gross value of €400m and a fully loaded risk-weighted assets position of €300m, and during 2021, it incurred a lost before tax and post-provisions of some €46m.
AIB said it would use the proceeds from the sale for general corporate purchases, including the continuation of support for customers restructuring.
It expects that the transaction will have a positive impact of 0.4% on CET1 capital covering profit and loss, calendar provisioning and risk-weighted assets reduction.
Colin Hunt, CEO of AIB, said: "Agreement of this transaction is an important milestone for AIB as it reduces the NPE ratio to well below 5%, resulting in a pro-forma NPE ratio of c. 4.4% at Q1 2022.
"It demonstrates further progress as we move towards closing out legacy items this year while maintaining momentum in the delivery of our strategy."
Everyday Finance will be responsible for all regulated activities in relation to the portfolio, and AIB will now contact affected customers to inform them that ownership of their loans is being transferred with all existing protections under the loan contracts guaranteed.
(Pic: Getty Images)
