Permanent TSB Group Holdings PLC CEO Jeremy Masding warned that the Irish state-owned lender's high level of nonperforming loans is dangerous for the country, as he defended the bank's sale of bad loans to a Lone Star affiliate, The Irish Times reported.

Permanent TSB PLC had agreed to sell its "Project Glas" portfolio of nonperforming loans, which have a gross balance sheet value of €2.1 billion, to two affiliates of U.S.-based private equity fund Lone Star for €1.3 billion.

Masding reportedly said that if there is an economic shock, such as an international trade war or disorderly Brexit, the loans can cause the bank difficulty in terms of capital.

The sale of the portfolio will reduce the Irish bank's nonperforming loans ratio from 25% to 16%.

To move the ratio to a single-digit figure, Permanent TSB is likely to shift €1.5 billion of restructured loans, like split mortgages, off its balance sheet in the next three to six months through a sale, securitization or another structure, according to the report.