South African investment bank Investec has sold €540m of Irish mortgages to US private equity firm LoneStar, marking its second deal this month to get rid of loans it no longer wants.
Investec said it was selling its sub-prime Irish home loan business Start Mortgage and some other Irish mortgage assets to an affiliate of Lone Star Funds.
It said the deal was part of its plan to simplify and reshape its banking business.
Investec said that the existing contractual rights and repayment obligations of customers will remain unchanged under the new deal and any individual agreements with customers will be continued.
A sub-prime mortgage is a mortgage issued to a person who is not able to get a regular or prime mortgage because the person has an irregular income or a poor credit history.
Recent research shows that there are almost 18,000 sub-prime mortgages on homes, and almost 750 buy-to-let loans. 57% of these family home sub-prime mortgages are in arrears of 90 days or more.
One in every four home repossessions since the beginning of 2012 also relate to sub-prime loans, according to figures released during the summer to Fianna Fáil spokesman Michael McGrath in reply to a parliamentary question.
Lone Star recently bought a portfolio of assets from IBRC as well as property assets in Dublin.
Today’s deal follows the sale last week of its UK mortgage business Kensington for £180m to private equity firms Blackstone and TPG.
Investec has been hit by the sharp fall in property prices in Ireland and was forced to take substantial impairment charges for its losses here.
The bank said the sale of the Irish loan book would have a marginal negative impact on capital ratios.
But it added that with the sale of Kensington and its struggling Australian professional finance and leasing arm in April, its common equity Tier 1 ratio would improve to 11.1% from 8.8% on a proforma basis as at the end of March.
The deal with LoneStar is expected to be completed at the end of the year.