David McWilliams is out of the blocks describing the latest report from Bank of Ireland in less than stellar terms:
The report shows that only 14 per cent of Bank of Ireland’s total owner-occupier mortgage book is in such a healthy situation. When we examine its buy-to-let portfolio, we see that only 6 per cent of these mortgages are in such a healthy situation. In total, 12 per cent of mortgage holders have a ratio of less than 50 per cent.
In total, the loan-to-value of BOI’s owner-occupied loan book is estimated to be a rather convenient looking 100%. The negative equity of the €10,567 million of loans with LTVs of greater than 100% is estimated to be €2,474 million. The aggregate loan-to-value of the loans in negative equity is 131%. On the other hand the aggregate loan-to-value of loans not in negative equity is 81%. Finally, here is the spread of arrears and impairment across the different LTVs.
Unsurprisingly, arrears and impairment are more likely amongst those loans that are in negative equity though almost one-third of those in arrears are not in negative equity. The portion of the loan book that has a loan-to-value of more than 181% has arrears of 15.5% by loan balance compared to just 4.8% for all loans which are not in negative equity.
Overall, not great news. However, Seamus continues:
If the €2,474 million of negative equity on mortgages in BOI’s owner-occupied Irish mortgage book then, being 18.4% of the total market, this would imply that the level of negative equity in the residential mortgage market is around €13,500 million. As BOI’s loan book is better performing better than the rest of the market, and also has loans from before 2002 that newer entrants to the market do not have, this is likely to be an estimate from the lower range.
Worth discussing on this site: if Bank of Ireland is the least worst bank we have, and the bank’s own estimates don’t look that credible, what does this mean for the banking system as a whole?