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Bank of Ireland halts UK commercial property lending as shares plummet 50% this year
The Bank of Ireland has slashed commercial lending, telling some British customers it has shut its doors to new business for three months.
The bank has been one of the most aggressive lenders to the UK property sector and its decision to limit funding will have repercussions for struggling developers both in the UK and Ireland, looking for already limited finance. There is recent anecdotal evidence of Irish developers trying their luck with UK lenders.
A spokesman for the bank said: "In the context of the impact of the credit crunch and the slowing economy, we are taking a cautious and selective approach to growing our business."
She insisted the bank is still open for business and will increase its loans over the course of the year.
But mortgage brokers have found that Bank of Ireland has informed some UK clients it has completely mothballed lending for the next three months.
The hiatus is said to be to give Bank of Ireland a chance to assess the UK property market, where it does around half of its commercial lending.
Bank of Ireland's UK mortgage subsidiary, Bristol & West, has been targeted as a buying opportunity by Clive Cowdery who said last week his restructuring vehicle Resolution would monitor various banks and undervalued mortgage lenders over the summer and seize on any buying opportunities.
Bristol & West is heavily involved in buy-to-let mortgages, which are increasingly seen as a big negative for the share price and shareholders are expected to question CEO Brian Goggin about the health of this business at the AGM today.
The bank has a market cap of just over €5billion (£4billion), but has seen its share price halved this year - it closed down another 3% at €5.02 yesterday, after Standard & Poors lowered its outlook on the bank's debt. Bristol & West has a mortgage book valued at over £24billion, 49% of the UK mortgage book is either buy-to-let or self-certified".
Merrill Lynch analysts said in a note in April that Bank of Ireland, together with Anglo Irish Bank and Allied Irish Bank are the banks most exposed to credit risk in the UK commercial property market.
The Merrill analysts warned that the British commercial property bubble is bursting and that "banks will lose money as a result".
A survey by the investment bank found Irish banks generally, including Anglo Irish Bank and Allied, have lent very aggressively to UK commercial property developers, which has been the highest margin area of lending.
The survey, based on responses from valuers, named HBOS - which has lent nearly £40bn to construction and real estate companies including struggling McCarthy & Stone and Crest Nicholson - and Royal Bank of Scotland as the most aggressive lenders.
The bank has been one of the most aggressive lenders to the UK property sector and its decision to limit funding will have repercussions for struggling developers both in the UK and Ireland, looking for already limited finance. There is recent anecdotal evidence of Irish developers trying their luck with UK lenders.
A spokesman for the bank said: "In the context of the impact of the credit crunch and the slowing economy, we are taking a cautious and selective approach to growing our business."
She insisted the bank is still open for business and will increase its loans over the course of the year.
But mortgage brokers have found that Bank of Ireland has informed some UK clients it has completely mothballed lending for the next three months.
The hiatus is said to be to give Bank of Ireland a chance to assess the UK property market, where it does around half of its commercial lending.
Bank of Ireland's UK mortgage subsidiary, Bristol & West, has been targeted as a buying opportunity by Clive Cowdery who said last week his restructuring vehicle Resolution would monitor various banks and undervalued mortgage lenders over the summer and seize on any buying opportunities.
Bristol & West is heavily involved in buy-to-let mortgages, which are increasingly seen as a big negative for the share price and shareholders are expected to question CEO Brian Goggin about the health of this business at the AGM today.
The bank has a market cap of just over €5billion (£4billion), but has seen its share price halved this year - it closed down another 3% at €5.02 yesterday, after Standard & Poors lowered its outlook on the bank's debt. Bristol & West has a mortgage book valued at over £24billion, 49% of the UK mortgage book is either buy-to-let or self-certified".
Merrill Lynch analysts said in a note in April that Bank of Ireland, together with Anglo Irish Bank and Allied Irish Bank are the banks most exposed to credit risk in the UK commercial property market.
The Merrill analysts warned that the British commercial property bubble is bursting and that "banks will lose money as a result".
A survey by the investment bank found Irish banks generally, including Anglo Irish Bank and Allied, have lent very aggressively to UK commercial property developers, which has been the highest margin area of lending.
The survey, based on responses from valuers, named HBOS - which has lent nearly £40bn to construction and real estate companies including struggling McCarthy & Stone and Crest Nicholson - and Royal Bank of Scotland as the most aggressive lenders.
Tue, 8th Jul 2008