First Trust parent AIB prepares for major sale of bad loans in Republic
First Trust parent company AIB, which is based in Dublin, is preparing to launch the largest non-performing loan sale in its history next month.
The bank, led by Bernard Byrne, is embarking on the final phase of its post-crisis balance sheet purge amid a fresh crackdown on the sector from the European Central Bank.
It is understood soured loans with a face value of close to €2bn (£1.8bn) will be marketed for sale at the end of November, in a process dubbed Project Redwood.
The smaller Project Pine book contains soured loans linked to assets in the UK, with over half the debts tied to assets in Northern Ireland.
Irish lenders remain under pressure to swiftly resolve legacy-era debts as the ECB threatens more punitive measures on those banks still saddled with non-performing exposures (NPEs) which exceed the region's average of close to 5% of the total loan book.
Hundreds of staff within AIB's loan work-out unit, known as the Financial Solutions Group (FSG), which manages distressed loans across the group, are understood to be working on Project Redwood, as the bank races to conclude a deal ahead of its annual results in March.
Sources said a smaller portfolio of non-performing loans - initially earmarked for separate sale - has now been folded into Project Redwood. The bank remains on course to offload a further €300m (£268m) worth of impaired loans by December, underscoring its determination to radically reduce its legacy book - a move that in turn frees up capital and increases the prospect of a special dividend.
AIB declined to comment on either of the loan sales.
But a spokesman for the bank pointed out that in the first half the lender has cut its impaired loans from roughly €9.1bn (£8bn) to €7.8bn (£7bn).
He said AIB "works through loans on a case by case basis" and added: "We remain focused on reducing impaired loans to a level more in line with normalised European peer levels and will continue to implement sustainable solutions for customers who engage with the bank where feasible."
The bank's accelerated resolution of its non-performing exposures comes as Permanent TSB in Ireland also intensifies efforts to cleanse the balance sheet.
It's now expected to push forward with a €1.25bn (£1bn) portfolio of toxic loans early next year.
Yet, as Investec's Owen Callan pointed out, the European Banking Authority's efforts to standardise the classification of asset quality has led to a "less sympathetic" result for Irish banks.