Permanent TSB Group Holdings will resume dividend payments with a modest distribution and build towards a payout ratio of about 40% of attributable profit through the medium term, the bank said today after a sharp rise in half-year profit.
Majority owned by the state, PTSB received regulatory clearance in December to resume dividend payments for the first time since 2008.
Dividends had been blocked since 2016 as part of the lender's rescue plan after the 2008 financial crisis.
PTSB reported first-half pretax profit of €75m, up from €26m a year earlier, after net interest income rose 4% and it benefited from a €20m impairment charge release and lower regulatory fees.
The bank said its first-half underlying profit before exceptional items fell to €82m from €86m.
The mortgage-focused bank had a 13.5% share of the new home loans market in the first six months of the year and said it is building a strong pipeline heading into the second half.
The bank has been transformed into a much larger player in the past year after buying €6.75 billion of loans from Ulster Bank, when it left the Irish market.
Ulster Bank owner NatWest owns an 11.7% stake in PTSB as a result of the deal and the Government retains 57% after the bank's effective nationalisation more than a decade ago.
The bank said its total operating income increased by 4% year on year to €336m, while its Net Interest Income increased by 4%.
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PTSB said its customer deposits in the first half of the year rose by €0.6 billion since December 2023, mainly due to a 4% increase in retail deposit balances to €12.9 billion.
Its current account balances of €9.3 billion are broadly in line with 31 December 2023, it added.
The lender's Business Banking unit saw new SME lending of €63m, an increase of 5% compared to last year with a strong pipeline for the remainder of the year.
Since its acquisition last July, PTSB said its Asset Finance business has performed strongly with new lending of €117m in the first half of 2024, an increase of 24% on last year.
PTSB reported an increase of 10 basis points in its mortgage market share to 13.5%, with good momentum as it enters the second half of the year.
It noted that the market continues to be impacted by the low level of switching activity, but said it anticipates this segment will increase activity in the future as the ECB reduces rates.
The bank said its credit quality remains strong and is benefitting from the strict underwriting criteria it has in place. It had a non-performing loan ratio of 1.7% at the end of June.
"A net impairment release of €20m reflects strengthened asset quality and a positive macro-economic environment with strong employment and increases in the House Price Index observed during the first half of the year," it added.
PTSB last month announced a deal to sell a portfolio of non-performing mortgages worth €348m to a consortium made up of credit servicing firm Mars Capital and funds managed or advised by US based asset manager, Apollo Global Management.
The portfolio is made up of 1,244 loans secured on 1,489 properties and the loans are linked to 1,022 borrowers.
PTSB also said today that it aims to restart shareholder distributions over the medium term subject to available surplus capital, regulatory and shareholder approval.
"It is anticipated the bank will recommence with a modest distribution, building towards a target pay-out ratio of up to c. 40% of Profit Attributable to shareholders through the medium term," it said today.
"The bank will retain flexibility as to the distribution mix and will update the market in this regard in due course," it added.
Eamonn Crowley, PTSB's chief executive, said the lender delivered a strong performance in the first half of 2024 as it continues to further grow and diversify the business.
"We are offering customers much-needed choice with our market-leading six-month and one-year fixed term deposit rates which have supported a €1 billion increase in deposits since this time last year. Our Business Banking presence is growing with new lending tripling in the past 12 months," Eamonn Crowley said.
"We are focused on ensuring that we remain a strong and resilient competitor in the Irish retail banking market and as a result of our recent non-performing loan sale, we will be able to free up capital that will be used to support up to €2 billion of lending into the Irish economy," he said.
Despite the ECB cutting interest rates back in June, PTSB has yet to pass on those cuts to customers on variable rates.
When asked on Morning Ireland if the bank will pass on those reductions, Mr Crowley said they keep all rates under review.
"We have made significant cuts to our fixed rates products and they are the most popular products that we offer," he said.
"We will continue to monitor rates," he added.
PTSB's total performing loan book is now €20.7 billion, broadly in line with the end of last year.
Mr Crowley said the volume of mortgages in the first half of the year has been lower year-on-year.
"We have taken action by reducing rates and being more competitive in that space. We are seeing an increase in demand and we should see an increase in our book in the coming years," he said.
"It is not something we are concerned about, in fact what we are looking at is how do we diversify our business, how do we lend more to businesses, how do we as a challenger bank compete against the two larger banks in the market, how are we offering something different to customers - and I believe we are," he added.
In May, PTSB cut one of its best fixed deposit rates from 3% to 2.1%.
When asked if the bank is likely to cut savings rates further going forward, Mr Crowley said they will keep rates under review.
"Deposits are extremely important to us, we need them to fund our business and grow," he said.
The Access to Cash Bill published by the Government yesterday aims to ensure the continued availability of cash services across the country.
It places a number of obligations on the three main banks.
When asked if this new legislation will be an extra burden on the bank, Mr Crowley said PTSB has already been increasing cash services.
"We're the only bank that last year increased cash services in the country. We opened 25 new branches for supporting customers in areas that otherwise would not have been supported when Ulster Bank left," he said.
"We will abide by the legislation, we will provide cash services and welcome customers to our branches and ATMs in order to access that cash," he added.
Mr Crowley said they don't believe the legislation will be a restriction on the bank.
"Our view though, and this is a common view of the industry, is that more players should be involved in this act, not just the three main banks, there are other cash providers out there and they should also play a part," he added.
The CEO of PTSB also said he would like to see the bank returning to a mortgage market share of 16-18%.
The bank's share of the market fell to just below 13.5% towards the end of last year having soared as high as 23% on the back of elevated mortgage switching activity as the European Central Bank hikes interest rates.
"We got well above our share of the switcher market coming out of 2022 which fed into our share last year," Eamonn Crowley told a briefing at the bank's headquarters today.
"You could argue that the first half share was a little over where the normalised level would be and in the second half our position by way of our offer was a little bit outside of the market, but we've addressed that in quarter two becoming much more competitive," he said.
The CEO said that had seen the bank's pipeline improving significantly following the introduction of what he called "market leading" fixed rate products.
"Mortgages are traditionally the core of our bank," he told the briefing.
Mr Crowley said he was targeting a return to a market share of up 18%.
"We landed at a 16-18% level over the last few years which was relatively stable," he said.
"With fewer banks in the market but different competitors coming in, that's a level we would like to land at again," he said.
Mr Crowley said the bank was continuing to grow its business lending book.
"Our pipeline of engagement with business customers is up 40% since January," he said.
However, he said mortgages would continue to dominate the overall lending landscape. "If you look at the front book over the next few years, you could imagine 80% mortgages versus 20% others."
"From a security point of view, that's not a bad place," he concluded.
Shares in the bank moved higher in Dublin trade today.
