Bank of Ireland (BoI) has reached an agreement to dispose of its non-performing mortgage portfolio worth €1.4bn in Ireland and the UK. 

In Ireland, the lender has signed a deal with AB CarVa to sell its non-performing loan portfolio worth approximately €800m.

The Irish portfolio comprises private dwelling house (PDH) and buy-to-let (BTL) non-performing engagements (NPEs), along with a smaller portfolio of non-mortgage NPEs.

The UK portfolio, valued at around €600m, will be divested by way of securitisation.

Through the disposals, the bank will reduce its NPE ratio from 5.4% to 3.7% as of 30 June 2022 with a positive impact of five basis points on its CET1 ratio. 

BoI said the gross interest income from the assets being sold was approximately €30m on an annualised basis. 

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The Irish portfolio will continue to be served by BoI until it is transferred to CarVal.

Following the transfer, which is expected to complete later in 2022, Mars Capital Finance will manage the loans. 

BoI will continue to manage the UK mortgages and customer relationships; however, the assets will not be recognised on its balance sheet.

The securitisation is expected to complete on 15 November 2022. Both transactions are customary closing conditions. 

In September 2022, BoI returned to private ownership after the government’s shareholding returned to zero. 

The government raised around €6.7bn in proceeds from the sale of a stake, which was acquired following the bailout during the financial crisis.