Finance Ireland, the state’s largest non-bank lender, saw profits fall by nearly a third last year as it set aside € 13.7m in provisions to absorb potential losses on loans resulting from the Covid-19 crisis.
Pre-tax income stood at 9.64 million euros compared to 14.1 million euros the previous year. Still, chief executive Billy Kane told the Irish Times he now expects the company to release some of the provision when finalizing this year’s accounts because the pandemic has not triggered a peak arrears or defaults.
The provision was made mainly on the commercial real estate and automotive financing portfolios of Finance Ireland. The group’s fast-growing mortgage business is financed off-balance sheet because it uses the international bond market to refinance the bundles of loans it takes out, in a process known as securitization.
Total new loans fell 18% last year to 654.7 million euros, due to a drop of more than half of commercial real estate loans to 100 million euros. Auto finance division First Auto Finance saw its new loans drop to € 196 million from € 241 million the year before, as the company went through a nationwide lockdown in early 2020.
The small business leasing division has had a “satisfactory year amid Brexit and Covid-19,” the company said, with new loans dropping from € 44m to € 33m. Agricultural finance loans fell to 44 million euros from 58 million euros.
However, Finance Ireland’s fledgling retail mortgages division saw new loans increase to € 283 million, from € 219 million in loans taken out in its first full year of operation, in 2019. The figure for last year was equivalent to around 3.3% of the EUR 8.4 billion in the Irish mortgage market in 2020.
Mr Kane said the group currently has a 6 percent share of the Irish mortgage market, with strong underlying activity being aided by Ulster Bank and KBC Bank Ireland’s decisions earlier this year to leave the Republic. .
Commercial mortgage loans
The total level of Finance Ireland loans, including those granted by the company but written off as part of securitization transactions, increased by 3% to reach € 1.1 billion in 2020. Mr. Kane a said 2021 is shaping up to be a “very strong year”. but with the exception of activity in commercial mortgages.
The company was forced to abandon its more than € 100 million initial public offering (IPO) in May 2020, as the rapid spread of Covid-19 globally plunged stock markets into turmoil .
It then raised 25 million euros in junior debt from its major shareholders, the Irish Strategic Investment Fund and US investment giant Pimco, who each hold 31% of the company’s shares.
Mr Kane said in April that the company would consider going public no earlier than the second half of next year, but it could extend until 2023.
“We now like to think that the Covid-19 effect is in our rearview mirror,” Kane said on Friday. An IPO “is definitely something we will keep on our radar.”