The Bank of Ireland has agreed to sell its bad debt portfolios in Ireland and the UK in two separate transactions.
The Irish loan bundle consists mostly of mortgages and mortgage purchases, and a small portfolio of other non-mortgage bad debts.
The EUR 800 million worth of loans have been purchased by funds managed by investment management firm CarVal Investors.
After an interim period during which legal title is transferred, the loan will be managed by Mars Capital.
The transaction is expected to close later this year.
Under central bank rules, the borrower will continue to enjoy the same legal and regulatory protections after the sale is complete, the Bank of Ireland said.
The bank said it will contact and notify customers whose loans are included in the sale before the transfer.
Separately, the Bank of Ireland also agreed to a deal to confirm a tranche of bad debt in the UK.
It has a total value of €600 million, most of which is a loan for the purchase of investment property owned by the owner.
The sale will be through a securitization, and when the transaction closes on this date next week, it will not appear on the balance sheet, but the mortgage will continue to be processed by the bank.
The two sales will reduce the Bank of Ireland’s bad debt exposure from 5.4% to around 3.7%, well below the 5% threshold required by regulators.
In total, the portfolio generated annual gross interest income of around €30 million.
The move could be seen by analysts as another significant step by the Bank of Ireland to clean up its last post-crisis balance sheet over a decade ago.