Written Answers Nos. 1-60
60. Deputy Éamon Ó Cuív asked the Minister for Finance his views on whether action in relation to warehousing of tracker mortgages is essential to ensure the long term profitability of the State supported banks; and if he will make a statement on the matter. [23934/13]
View answerAs the Deputy will appreciate, officials from the Irish authorities are in regular dialogue with all of the State supported banks in an effort to enhance stability and to facilitate the sectors’ return to profitability. The long term profitability of the State supported banks depends on many variables, the impact of trackers is only one of those. There has been improvement in many other variables that impact on profitability of the State supported banks. I would draw the Deputy’s attention in particular, to cost reductions, improved funding costs, reduced ELG costs as a result of the ending of the ELG scheme, expected reductions in impairments and Net Interest Margin improvements all of which should have positive impacts on profitability.
Obviously unprofitable tracker mortgages represent a drag on the profitability of the State supported institutions and my officials continue to discuss possible solutions with those institutions and market participants. The Deputy will recognise that there would be a cost associated with the removal of unprofitable tracker mortgages from the balance sheets of the State supported institutions and this cost would have to be borne by some entity.
The Deputy should be aware however that the State supported banks’ tracker mortgages are not a homogenous group of mortgages and the terms on which they were written can and do vary. In particular, while a significant number of tracker mortgages, especially those written during the later stages of the boom had low contractual margins over base rates, it is not the case that all tracker mortgages are unprofitable. The profitability or otherwise of a tracker mortgage is a function of a number of variables including the base rate, the margin the borrower is contracted to pay over the base rate and the funding cost to the institution of that mortgage.
As the Deputy is aware the State supported banks provide a considerable level of disclosure on their financial performance in their annual reports and other financial statements. Copies of these reports can be found on the websites of each of the State supported institutions. These institutions provide detailed information on their mortgage portfolios. The impact of tracker mortgages, as a group, on the financial performance of each State supported institution is not explicitly shown however.
As no decision to transfer the tracker mortgage portfolios of the State supported institutions to any other entity has been taken, I cannot outline the impact that such a transfer would have on the long term profitability of the State supported banks.
