Permanent TSB has reported a pre-tax loss of €57 million for the first six months of the year, as the bank set aside an amount of €75 million to deal with expected bad loans.

Its half year results for 2020 show new lending of €600 million was down 16% year-on-year, reflecting reduced demand throughout the pandemic restrictions.

Customer deposits of €17.8 billion were up €600 million since the end of last year, with current account balances up 15% from December 2019.

The loan to deposit ratio was 87% at the end of June 2020.

Speaking following the publication of the results, Chief Executive, Eamonn Crowley said the first quarter saw a positive start to the year, while the second quarter has been dominated by the impact of Covid-19.

"As customers embraced the Government imposed lockdown, the bank saw new business volumes and transactional banking activities reduced to levels lower than the bank has seen in recent years, but we are pleased to say that volumes have increased again as the phased approach to opening up the Irish economy emerges," he said.

PTSB said it saw more positive signs of recovery in July, and with a range of indicators more encouraging than previously anticipated.

Mr Crowley said of the 10,500 payments breaks the bank had arranged during the pandemic restrictions, about half were now back to normal repayments.

Asked about the controversy around the charging of interest on the portion of the mortgage set aside for the payment break, Mr Crowley said he believed it was slightly unfair in the way in which the issue had been presented.

"The approach has been consistent with the vast majority of countries and banks across Europe. Indeed, customers expected this to be the case as it's the normal way we operate payment breaks."

He said customers would, on average, end up spending an additional €3 a month on their mortgages as a result of availing of the payment breaks.

Permanent TSB anticipates new lending could be around 40% lower than the €1.7 billion it lent in 2019.

The 75% state-owned lender's fully loaded core tier 1 capital ratio - a key measure of financial strength - fell to 13.9% from 15.2% three months earlier.

Its net interest margin also slipped slightly to 1.75% and is expected to dip further to low 170 basis points, the bank said.

That's partly down to enhanced customer deposits which ends up costing the bank as it has to put the money on deposit with the ECB, which charges it for the facility.

However, Mr Crowley said the bank had no intention of charging customers for their deposits.

"That's not something that's on our agenda. We've been managing liquidity quite closely. We want to lend that money to the market and be competitive in the mortgage and SME sectors."

On the desire of the ECB to see more mergers in the European banking sector, Eamonn Crowley said Permanent TSB had been talked of as a potential merger candidate for 'many, many years.'

"My main focus is to operate the bank as best we can to improve performance for all stakeholders, including the government."