Permanent TSB Group Holdings has warned potential investors that a return to profit may be at risk from political pressure to cut interest rates and an UK exit from the European Union.
The bank may be forced to lower its existing 4.5% standard variable rate on mortgages because of mounting political, regulatory or competitive pressure, PTSB said.
It made its comments in a 132-page capital raising document obtained by Bloomberg News.
Officials at Permanent TSB and Deutsche Bank, lead manager of the capital raise, declined to comment.
State-owned PTSB is seeking to sell €400m of equity and €125m of so-called additional Tier 1 bonds to shore up its capital after failing European stress tests last year.
Its chief executive Jeremy Masding said on April 8 that the bank is close to returning to profit, without giving details of a timeframe. Permanent TSB posted a €48m pre-tax loss last year.
Earlier this month, Taoiseach Enda Kenny told the Dáil that the Government was not happy that Irish mortgage rates are higher than the euro-area average, after banks raised variable rates to offset losses on tracker loans during the financial crisis.
Such loans are linked to the European Central Bank's key rate, which stands at a record-low 0.05%.
"The group is exposed to risk in respect of the manner in which it determines and implements interest rate changes," PTSB said in today's document.
PTSB also said that its funding costs would be "materially adversely" impacted by the UK leaving the European Union. So-called Brexit "would have profound implications for Ireland," the company said.
Should UK Prime Minister David Cameron win a second term next month, he has pledged to renegotiate Britain's EU membership and hold a vote by the end of 2017 on whether to remain in the common market of over 500 million people.
PTSB's new shares and AT1 securities may be priced next week, according to two people with knowledge of the matter, Bloomberg said. A final decision has not been made yet.
Companies seeking to raise capital typically highlight a series of risks potentially facing investors, with PTSB pointing to 33 such factors.
