Permanent TSB (PTSB) has agreed to sell loan portfolio of mainly non-performing mortgages worth around €390m to Morgan Stanley Principal Funding.

This transaction, set to close next year, is expected to raise the bank’s transitional common Equity Tier 1 (CET1) Ratio by approximately 60 basis points.

PTSB said that the sale would also alleviate the negative impact of calendar provisioning linked to the portfolio and reduce its NPL ratio.

Morgan Stanley will securitise the loan portfolio on international bond markets next year.

The bank said that the sale or the securitisation of the portfolio will not change the terms and conditions of individual loan accounts.

The portfolio is involves 1,200 borrowing relationships with Home Loan (PDH) products making up about 57% of it. The rest of the portfolio consists of buy-to-let mortgages.

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According to PTSB, 98% of loans are classified as non-performing as per regulatory definitions while the remaining 2% comprise loan products which originated before 2009. These products are currently not available to new customers.

The bank will continue to service loans within the portfolio for a period of maximum six months. After six months, the legal title and loan account servicing will be taken over by Pepper Asset Servicing, an Ireland-based loan servicing firm.

PTSB said in a statement: “As has been the case with previous loan sale and securitisation transactions undertaken by the bank, all customers whose loans are included in this transaction will continue to have the same regulatory protections under the Consumer Protection Code and the Code of Conduct on Mortgage Arrears after the sale.”

Earlier this year, PTSB turned to consumer credit reporting company Experian as its technology partner to improve its customer lending journeys.

In 2019, the bank was fined by The Central Bank of Ireland for regulatory breaches affecting tracker mortgage customers.