Permanent TSB said it expects to set aside €50m in the second quarter to cover expected loan losses from the 10,000 coronavirus-related repayment breaks approved to date. 

In a trading update for the first three months of the year, Permanent TSB said it will keep this position under constant review and will update the market further when it reports its half year results. 

Permanent TSB also said that due to the "significant" change in the operating environment and economic expectations, some of its previous guidance for 2020 is no longer appropriate.

It predicted that business activity will be lower, which will impact new lending volumes and its ability to grow its income.

The bank said that new lending this year could reduce by about 40-50% of last year's volumes of €1.7 billion.

But it said it remains "operationally resilient" with over 1,200 of its staff working remotely, while all of its 76 branches remain open.

It has also redeployed over 100 of its workers to its contact centres to support in answering customer queries. 

It said achieving cost reductions in the current economic environment would prove challenging but the bank retained its outlook that operating costs would remain stable and that it would continue to deliver cost savings in the medium term.

Its share of the Irish mortgage market slipped to 14.7% at the end of March, from 15.5% at the end of December.

Total new lending was up 1% year on year in the first quarter before housing transactions ground to a halt from the middle of March. 

The lender, whose non-performing loan (NPL) ratio fell to 6.4% last year from a 2017 high of 26% after a series of loan sales and securitisation deals, said its NPLs remained broadly in line with balances at the end of last year.

Permanent TSB's fully loaded core tier 1 capital ratio (CET1 ratio) - a key measure of financial strength - inched up to 15.2% from 15.0% three months earlier.

This makes PTSB the only of the three domestic lenders to boost its capital in the first quarter. 

Like its bigger rivals Bank of Ireland and AIB, PTSB said it had assessed that its CET1 ratio would remain above minimum regulatory requirements across a range of scenarios, in PTSB's case a mark of 8.94% following some easing of regulatory guidance. 

Jeremy Masding, Permanent TSB's chief executive, said the bank's business and financial performance remained stable in the first quarter, despite a decline in new lending towards the end of the quarter as the Covid-19 situation unfolded. 

Permanent TSB CEO Jeremy Masding

"The pandemic is having an unprecedented social impact on people and businesses in Ireland, and across the world. The resultant economic impact and outlook is challenging with the long term consequences of Covid-19 largely dependent on its severity and, the ensuing timeline over which business activity and employment levels begin to recover," Jeremy Masding said. 

The CEO said that PTSB's business model, with its focus on secured lending, did give it some protection against an impairment shock.  

"That said, we will continue to monitor closely both the macro-economic environment and quality of the loan book, to ensure we maintain prudent levels of coverage," he said.

"Following significant progress made over the last number of years through increasing new lending; reducing non-performing loans (NPLs); maintaining profitability; and, strengthening capital, the bank is currently in a strong position to deal with a significant economic downturn," the CEO added.