Permanent TSB Group Holdings said today that it is starting to observe a change in customer behaviour, with some moving to a cheaper variable rate for the first time in a number of years when their fixed rate mortgage term matures.
Analysts at Davy Stockbrokers said the move towards variable rates together with a slowdown in the growth of PTSB's deposits and new mortgage lending in the third quarter will likely result in it lowering its 2024 and 2025 forecasts for the bank.
PTSB said its new lending was up 9% year-on-year in the first nine months of 2023, compared to an increase of 36% at the end of June while customer deposits rose by €0.1 billion to €22.7 billion in the third quarter.
The bank's guidance on key indicators for this year remains broadly in line with prior market communications, it added.
Ireland saw a huge move towards fixed rates in recent years, with customers keen to take advantage of previously low European Central Bank interest rates by locking in the repayment cost of their mortgage, most often for three or five years.
The ECB has since raised its key interest rate to a record high of 4%, while also signalling that September's 10th increase in just over a year was likely to be its last.
PTSB, which had a 21% share of the mortgage market at the end of September, said that while fixed products continued to represent 97% new mortgage lending so far this year, some of its existing customers were starting to move back to variable rates.
The bank's standard variable rate currently starts at 4.3%, compared to three-year fixed rates of between 4.55% and 5.1%.
In an interim management statement today, Permanent TSB Group Holding also reported an increase in deposits as well as a higher mortgage market share for the third quarter of 2023.
Customer deposits increased by about 9% to €22.7 billion compared to the same time last year.
The bank also said its new business mortgage market share of 20.7% compares to 16.9% at September 2022.
New mortgage lending of €1.8 billion grew by 11% year-on-year while the mortgage market was down 10% over the same time, the bank noted.
Meanwhile, its Net Interest Income soared by 93% on an annual basis due to the changed interest rate environment, loan book growth and the migration of the Ulster Bank loans to the lender.
Permanent TSB said that its asset quality remains strong with Non-Performing Loans of €0.7 billion at the end of September this year, in line with balances at 31 December 2022.
"While the global macroeconomic environment remains volatile, the Irish economy continues to record strong growth levels with no notable deterioration in the asset quality of the bank's loan book evident to date," it added.
Earlier this month, the bank announced a major overhaul of its brand and business, which it said would reflect its position as a full-service, customer-focused personal and business bank.
It said the change reflected the much larger scale and business diversification of the bank, its customer focus and growth ambitions for the coming decade.
Looking forward, PTSB said it remains in a strong position to continue to support its customers, the Irish economy and its shareholders, with the guidance on key performance indicators for the rest of the year remaining broadly in line with prior market communications.
"Changes in mortgage customer rate choice plus a lower level of market growth than previously expected in retail deposits are factored into our FY23 expectations. Asset quality continues to perform well and capital remains strong, having assessed a range of scenarios, the CET1 ratio will remain above the Bank's minimum regulatory requirements," it added.
Eamonn Crowley, the bank's chief executive, said that PTSB continued its positive business and financial performance in the third quarter of the year and so remains in a strong position to continue to support its customers, the Irish economy and shareholders.
"Central to this performance has been our strong capital and liquidity positions, growth in the customer deposit base and increased income. Asset quality remains robust and we continue to take a measured approach with respect to the impact to our customers of ECB interest rate rises," the CEO said.
"Our investment into our recently announced new brand name, PTSB, visual identity and customer promise represents our intentions to differentiate ourselves as a full service bank and our commitment to bring the best of technology and the best of our people together, putting customer needs at the heart of what we do and ultimately deliver a better banking experience for all," he added.
Shares in the bank slumped in Dublin trade today.
