Permanent TSB (PTSB) chief executive Jeremy Masding has appealed for time to give his best shot at increasing the earnings and value of the bailed-out bank, before facing possible talks with his board and the Government about taking part in an industry merger.
Mr Masding, who initially helped save PTSB when he took over in 2012 before restructuring it through loan sales in Ireland and Britain, said that his team was now entering a chapter when it can go about growing the bank, which required a €4 billion taxpayer bailout during the financial crisis.
“I would now like to give it my best shot with my [executive committee] to see what is the best we can do,” Mr Masding told reporters on Thursday, after the 75 per cent State-owned bank reported interim results.
“The sceptics would say: ‘Even doing your best might not get there.’ That might be true. But what I do know is that we’ve not maxed out yet.”
Mr Masding said PTSB was “basically illiquid and insolvent” when he stepped in. If it’s decided in the coming years that “we have maxed out, then there’s a different set of conversations that I have to have with both the board and the Minister for Finance, which would be around some sorts of tie-up”, he said.
PTSB's pre-tax profit fell by 50 per cent to €28 million in the first six months of the year, as the bank lost income on restructured loans sold late last year and it had to put aside additional money to cover a Central Bank fine relating to the tracker mortgage scandal.
Refinanced
The bank offloaded €3.4 billion of non-performing loans (NPLs) last year, with €1.3 billion of these assets comprising restructured loans making cash payments that ended up being refinanced on the international bonds market in November.
The group’s net interest income reduced 6 per cent on the year, from €193 million, as a result.
The bank’s profits were also dented as it took a €5 million charge against impaired loans during the reporting period, though its NPLs ratio remained broadly unchanged at 10 per cent from the end of December. It aims to cut the level in half over the medium term. Further loan sales are expected.
Still, performing loans income grew by 3 per cent, as PTSB continued to manage its funding costs, resulting in its net interest margin – the difference between the average rates at which it raises finance and lends on to customers – rising by 0.05 percentage points to 1.82 per cent.
PTSB was fined €21 million in May for it is handling of the tracker mortgage issue, which resulted in more than 2,000 of its customers being denied their right to a cheap mortgage linked to the European Central Bank (ECB) rate as far back as 2008. The bank said that it set aside a final €3 million to cover the fine this year, having previously provided for most of the penalty.
The main challenge facing Mr Masding is the fact that the European Central Bank (ECB), which was preparing last year to increase rates in 2019, is now on track to lower borrowing costs in September in a bid to reboot the slowing euro-zone economy. This would drag on PTSB’s €9.6 billion ECB-tracker loans, or 57 per cent of all its mortgages.
‘Key battleground’
In the climate of “lower for longer” official interest rates, Mr Masding said that “key battleground” will be in improving operating efficiency, which analysts have taken to mean cost cutting.
Mr Masding also hinted that he will cut rates on some mortgage products in the coming months, but declined to give details.
Meanwhile, the bank, which has offered buy-to-let borrowers in default a chance to surrender their properties in recent years in exchange for having the shortfall on their loans written off, sold 1,400 units in its possession over the last 18 months, it said. At the end of June, it continued to hold 882 properties in possession, with 372 of these currently for sale.
Drawdowns
New mortgage lending grew by 18 per cent at the bank in the first half, outperforming market growth of 11 per cent. PTSB’s share of drawdowns in the period came to 14.7 per cent.
“Whilst the mortgage market in Ireland continues to grow steadily, it remains competitive. We continue to manage our offering carefully by maintaining price discipline and credit underwriting standards,” it said.
