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Ulster Bank to sell €1.6B of defaulted mortgages

Ulster Bank Ireland DAC is looking to sell a €1.6 billion portfolio of defaulted mortgages, The Irish Times reported.

The portfolio, known as Project Scariff, comprises €900 million in owner-occupied loans from 3,600 accounts and €700 million in buy-to-let mortgages from 2,900 accounts, the report said. The potential sale is expected to be completed in six months and will likely lower the bank's nonperforming exposures to between 10% and 11%.

The loans are also reportedly expected to be sold at a steep discount compared to their face value. Sources told the newspaper that the average owner-occupied loan being sold had missed 43 payments and is €52,000 in arrears, while the average buy-to-let loan in the portfolio has missed 15 payments and is €31,000 in arrears.

An Ulster Bank spokeswoman confirmed the planned sale, saying it was a "difficult decision" as the "continued extension of forbearance cannot be maintained." The average loan in the book has been through three forbearance arrangements, the sources added.

The Royal Bank of Scotland Group PLC unit still has a nonperforming exposure ratio of 17%, higher than the 5% EU average, The Irish Times noted, adding that the potential deal brings the amount of bad loans being sold on the Irish market to over €12 billion.