Property crisis sees Bank of Ireland reins in commercial lending

The Bank of Ireland has slashed commercial lending, telling some British customers it has shut its doors to new business for three months.

The bank has been one of the most aggressive lenders to the UK property sector and its decision to limit funding will have repercussions for struggling developers looking for already limited finance.

A spokesman for the bank said: "In the context of the impact of the credit crunch and the slowing economy, we are taking a cautious and selective approach to growing our business."

She insisted the bank is still open for business and will increase its loans over the course of the year.

But a number of senior players in the property industry have told The Daily Telegraph that Bank of Ireland has informed some UK clients it has completely mothballed lending for the next three months.
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The hiatus is said to be to give Bank of Ireland a chance to assess the UK property market, where it does around half of its commercial lending.

The bank has a market cap of just over €5bn (£4bn), but has seen its share price halved this year - it closed down another 3pc at €5.02 yesterday.

Merrill Lynch analysts said in a note in April that Bank of Ireland, together with Anglo Irish Bank and Allied Irish Bank are the banks most exposed to credit risk in the UK commercial property market.

The Merrill analysts warned that the British commercial property bubble is bursting and that "banks will lose money as a result".

A survey by the investment bank found Irish banks generally, including Anglo Irish Bank and Allied, have lent very aggressively to UK commercial property developers.

The survey, based on responses from valuers, named HBOS - which has lent nearly £40bn to construction and real estate companies including struggling McCarthy & Stone and Crest Nicholson - and Royal Bank of Scotland as the most aggressive lenders.

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Property crisis sees Bank of Ireland reins in commercial lending