AIB Group - housing charities to be allowed bid for NPLs

30 Jul 2019

The Irish Independent is reporting that AIBG will allow a set of housing charities bid for the owner occupied (PDH) residential mortgage portion of its upcoming Project Alder NPL portfolio disposal. 

Project Alder is reported to include up to €1bn in a mix of NPLs, including PDH, BTL, and CRE loans. The not-for-profit housing bodies provide alternative mortgage restructuring options (typically buying the property and entering into a long term rental agreement with the original borrower, often with state/local authority funding providing some or all of the rent), but have not been involved in any of the previous NPL disposals. AIBG will allow them to bid for the PDH portion of the portfolio, while also seeking bids for the entire portfolio from the usual mix of private equity of distressed debt asset managers. 

We see the AIBG decision as a useful, politically friendly expansion of its NPL disposal process, which should help reduce some of the criticism that would otherwise come with the Alder sale.


Pound gets pummelled

Sterling has continued its slide overnight, with the benchmark EUR/GBP rate reaching levels (just over £0.9150) not seen in almost two years. 

The source of downward pressure remains squarely focused on Brexit concerns and the possibility of a ‘no-deal’ come the 31 October. This move is reflecting investors’ concerns over the prospect of a no-deal Brexit, after an onslaught of negative Brexit news in recent days. Whilst there has been little in terms of substantial new Brexit news through the course of the day yesterday, it would seem that the weekend’s press reports of no-deal preparations and no-deal warnings are weighing heavily. 


No reprieve

The ‘no-deal’ onslaught continued into yesterday morning as Foreign Secretary Dominic Raab reiterated the hard line on Brexit negotiations and talked of "turbo-charging" no-deal Brexit preparations. Michael Gove's comments that the UK was planning on the working assumption of a no-deal also did not help. 

Through the day yesterday, mixed messages from other Cabinet ministers added to the concerned sterling mood, whilst PM Johnson’s attempts to settle worries saying the risk of a no-deal was still “a million to one”, did nothing to lift sentiment. Furthermore, worries were accelerated by anti no-deal MP Sir Oliver Letwin’s warnings that Parliament may well not be able to stop no-deal.


Up today

As was widely expected, ahead of the headline FOMC rate decision tomorrow, the Bank of Japan left rates and policy unchanged earlier this morning. Much like most other Central Banks of developed economies, they revised economic forecasts downwards. 2019 growth to 0.7% from 0.8%, 2019 inflation to 0.8% from 0.9% and 2020 inflation to 1.2% from 1.3%.
 
We should also begin to see the drip feed of news from the resumption of the highly anticipated US-China trade talks today in Shanghai with the official announcement expected tomorrow. 

Out of Europe, we will get German CPI data for July, Q2 French GDP numbers and Eurozone business confidence data.


TOTD

Oil markets little changed despite a large draw in inventories 

Last week saw little movement in oil prices with Brent having traded around the 63$/b level. We did see a large 10.8mb draw in US crude inventories but the news was insufficient to move prices significantly. US crude inventories are down by 43m barrels since the highs of June, but are still above the levels seen at the start of last year’s US driving season. 

With a month to go in this driving season, to match those inventory levels seen at the end of last year’s season, we would need to repeat the entire inventory decline seen thus far–arguably an unlikely scenario.


Economic Releases

13.00 GE German CPI
15.00 US CB Consumer Confidence
15.00 US Pending Home Sales