IRISH LIFE & Permanent will propose splitting the company into a good bank and bad bank in a detailed restructuring plan to be submitted to the troika of lenders at its next review of the bailout programme later this month.
A good bank-bad bank split of the company, the State’s biggest mortgage lender during the property boom, is the preferred option of its management.
It is understood the company proposes moving loss-making tracker mortgages, which account for about 60 per cent of Permanent TSB’s €25 billion in Irish mortgages, into the bad bank.
This would facilitate a transfer of the tracker mortgages to State-owned Irish Bank Resolution Corporation, under the wider restructuring of State-controlled banks that is the subject of talks between Government and troika officials.
A company spokesman had no comment. Among other options considered was a wind-down of the bank, but this has been ruled out by the Minister for Finance.
The Government must decide on a future for Irish Life & Permanent – whose main business will be Permanent TSB after the sale of Irish Life to the State – by the end of the month under the bailout.
The sale will complete the €4 billion recapitalisation of the company by June 30th as directed by the EU-ECB-IMF troika.
The State’s purchase of Irish Life for €1.3 billion will complete the recapitalisation. The State effectively nationalised the lender in June after injecting €2.7 billion.
The company said in its 2011 results earlier this week that it was “undertaking a full strategic review of its banking operations” and this would decide if there was a “viable, standalone bank”.
Consultancy firm Bain has been advising chairman Alan Cook and new chief executive Jeremy Masding on the good bank-bad bank plan before proposals are put to the troika during their next review in the second half of the month.
The company is not expected to require further capital under the plan but wants to move troubled and loss-making loans to the bad bank to allow the company to provide a greater level of new lending.
Permanent TSB provided just €400 million in new loans in 2011.
“The strategic plan will deliver a fact-based, distinctive and financially robust business model that will enable the bank to participate fully in the Irish financial services market in the future,” Mr Cook said in his chairman’s statement.
The company’s UK mortgage business, Capital Home Loans, which was earmarked for disposal last year, may now be retained in the good bank, where it may be easier to sell at a later date given that its loans are performing better than the Irish mortgages.
