Irish Banks: Significant Reduction in Payment Breaks; NPLs Contained For Now

In response to the COVID-19 pandemic, Irish banks have been offering payment breaks to support households and SMEs hit by the economic consequences of the COVID-19 pandemic. Nevertheless, we note that there has been a significant reduction in the number of accounts and loans with outstanding payment breaks as of mid-October 2020 compared to end-July 2020.

Key highlights from DBRS Morningstar’s commentary include:
• There has been a significant reduction in outstanding retails loans with payment breaks in October 2020 to around EUR 3 billion from nearly EUR 10 billion at end-July 2020.
• The reduction in payment breaks has been across mortgages, SMEs and consumers segments and with very similar expiration rates across the different banks.
• Irish banks' Non-Performing loans and NPL ratios remained stable at end-Q3 compared to end-H1, which could be partly explained by the fact that most customers that requested payment breaks had resumed payments by October 2020.

“Irish banks reported that the majority of the expired payment break accounts have returned to their regular payment schedule, however, as the effect of the pandemic and additional restrictions on the Irish economy unfold, borrowers may require additional financial support. We expect banks' asset quality to deteriorate and NPLs to increase over coming quarters although the final impact will depend on the length of economic shutdown, any further support measures and the degree of economic contraction.” said Mario De Cicco, Vice President from the DBRS Morningstar Financial Institutions team.

The commentary focuses on H1 2020 results and Q3 2020 trading updates of Irish banks rated by DBRS Morningstar (Irish banks), including The Governor and Company of the Bank of Ireland (BoI), Allied Irish Banks, p.l.c. (AIB) and Permanent tsb p.l.c (PTSB).
The full commentary “Irish Banks: Significant Reduction in Payment Breaks; NPLs Contained For Now” is available at www.dbrsmorningstar.com.