Mortgage Arrears in the Covered Banks

The release over the past few weeks of the Financial Reports of the covered banks has given a useful insight into the mortgage books of the covered banks.  All have generally followed the same template and have provided similar detail.

• AIB (+EBS) (pp. 112-122)
• BOI (pp. 87-102)
• PTSB (pp. 171-177)
• IBRC (pp. 169-173)

Here is a summary of the headline figures.

The full market figures come from the Financial Regulator’s Mortgage Arrears release.  The figure for the non-covered banks (Ulster Bank, National Irish Bank and other lenders) is the residual after the reported totals for the covered banks are subtracted.

It can be seen that there is a wide variation in the loan book performance for owner-occupied mortgages in Ireland across the covered banks.  AIB report the lowest level of arrears of 90 days or more with the highest level by far in the mortgage book of Irish Nationwide which has been subsumed into the Irish Bank Resolution Corporation.

The loss provisions follow a similar pattern with AIB allowing for a loss equal to 1.6% of the mortgage balances at the end of December.  The IBRC have allowed for a loss of over 20% on its owner-occupied residential mortgage book.

The level of arrears is higher in the non-covered banks and they make up about 35% of the market by mortgage balance.

Here is the projected stress-case loss rates from last March’s stress tests and the losses covered under the Central Bank’s three-year loss forecast on which the €24 billion recapitalisation sum was based.  Note that the figures in the stress tests relate to the 31st of December 2010 rather than the end of 2011 as with the figures above.

There is some disagreement between the tables.  Outside of the Irish Nationwide loans, AIB has the highest projected loss rate.  The projected losses are still significantly above the provisions currently being made by the banks.