Permanent TSB's H1 losses and impairment charges fall

Tuesday 19 August 2014 17.56
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Permanent TSB's impairments charges were down by two thirds to €149m in the first half of 2014
Permanent TSB's impairments charges were down by two thirds to €149m in the first half of 2014
Permanent TSB's Group CEO Jeremy Masding says 2014 will be a milestone for the bank
Permanent TSB's Group CEO Jeremy Masding says 2014 will be a milestone for the bank

The chief executive of Permanent TSB has said that the bank is sticking to its forecast to return to profitability across its businesses by 2017.

"I don't like to get ahead of myself. Today is a major step in the right direction but we're still loss-making and heavily loss-making," Jeremy Masding told a news conference today.

"I think I'll still stick to 2017 and if we over-deliver, I'm sure the minister and the taxpayer will be delighted," Mr Masding added.

Earlier, Permanent TSB reported an operating loss before exceptional items of €171m for the first half of its trading year.

The figure is 62% lower on the same time last year when it reported an operating loss of €449m.

The group reported an underlying operating profit, before impairment charges, of €4m.

Impairments charges - the money set aside to deal with expected loan losses - were down by two thirds to €148m from €429m the same time last year.

The group said it has boosted its rate of mortgage lending by 362% to €180m and it said it has a 13% share of new mortgage lending.

Permanent TSB also said that the number of customers in arrears of more than 90 days is falling, reflecting the general trend across the market.

Its proportion of homeowners in arrears for more than 90 days fell to 13.7% from 14.9% in December, while buy-to-let mortgage arrears fell to 15.5%.

The bank has offered 24,000 restructuring options for mortgage customers in arrears, and said that eight in ten customers who are in arrears are now engaging with it.

2014 "an important milestone" for PTSB

Permanent TSB's group chief executive Jeremy Masding said that 2014 is set to mark an important milestone in which the bank will report a sharp improvement in underlying losses for the first time since 2008.

"The group's underlying losses are down significantly and the Permanent TSB Strategic Business Unit - effectively our customer-facing business - recorded an operating profit of some €62m", Mr Masding said.

"The economic and commercial environment continues to improve and this provides an increasingly positive backdrop to the execution of our strategy," he added.

He also said the bank had cut its reliance on ECB funding by two thirds from the peak and it has grown its customers deposits. He noted that over 15,000 new payroll current accounts were opened so far this year and retail current account balances are up by over €250m.

PTSB, which is 99% state-owned, is seeking approval from European authorities to split itself and move its bad assets off its balance sheet. But is still awaiting a decision on a revised plan submitted to the European Commission last year.

Unlike its more diversified rivals - AIB and Bank of Ireland - PTSB's profitability is dragged down by expensively funded loss-making tracker mortgages that follow the European Central Bank's low interest rate and make up two thirds of its loan book. 

As a result, the bank's net interest margin - measuring the profitability of its lending - rose slightly to 0.88%, less than half the level of market leader Bank of Ireland.

Ahead of stress tests by the European Central Bank later this year, PTSB's core Tier 1 capital ratio, a measure of financial strength, fell slightly to 12.7%.

Commenting on today's results, Finance Minister Michael Noonan said that Permanent TSB is continuing to improve and has made significant progress in delivering key elements of its restructuring plan. 

The Minister said that in line with its strategic plan, PTSB has maintained a focused national retail banking presence, serving about 15% of the markets in which it competes. 

"It is likely to be an investable proposition well ahead of our original timetable given the significant improvements made by management and the continued improvement in the Irish economy," Mr Noonan concluded.