NPL Chart of the Week: 03 December 2019
Wholesale and retail, accommodation and food, and agriculture, forestry and fishing account for almost two thirds of the total volume of small and medium enterprise (SME) NPLs in Ireland, or EUR 1bn out of a total EUR 1.5bn, according to data from a financial stability note released by the Central Bank of Ireland. In terms of NPL ratios, the real estate and construction sectors come out top for SMEs, at 19.3% and 18.4% respectively.
The data as of December 2018 includes loans from three banks, Allied Irish Banks (AIB), Bank of Ireland, and Ulster Bank, which between them provide 90% of SME lending. AIB and Bank of Ireland had total NPL volumes of EUR 6bn and EUR 5bn at year-end 2018, according to their financial reports. Ulster Bank, a subsidiary of Royal Bank of Scotland, did not report an absolute NPL volume, though its NPL ratio was 10%.
The final six months of 2018 saw a significant decrease in the SME NPL ratio – which fell from 17.5% to 11.1% overall. Of the SME NPLs as of June 2018, 19.9% by volume were resolved by so-called "exit", which covers enforcement and loan sales. A roughly equal portion of NPLs, 18.8%, were "cured", and returned to performing status.
At their peak in December 2013, 40% of Irish SME loans were classified as non-performing, compared to 32% of total loans in the main five retail banks. The Irish SME NPL ratio has continued to fall in the first two quarters of 2019, said the report, citing aggregate supervisory data.
Earlier in November, AIB sold a EUR 850m portfolio to Cerberus Capital Management , which included both granular SME debt and corporate CRE loans, as reported.
Residential NPLs make up the majority of the NPL volume of the three Irish pillar banks, EUR 5.6bn out of EUR 9.5bn as of the end of 1H19, as reported.