Permanent TSB plans to raise €525 million from private investors to fill the capital hole identified by the European Central Bank's stress tests last year.
As previously revealed by The Irish Times, it will use €400 million of the proceeds to repurchase the State’s contingent capital notes (CoCOs). This will be the first repayment of its €2.7 billion State bailout from 2011.
It plans to complete the capital raising by the end of June, in advance of its July 26th deadline to close the €855 million capital hole identified in the ECB’s tests last year. By the time the test results were issued last October, the bank said the deficit had been closed to €125 million.
It has not said how much of the bank will be sold to private investors but said the State would retain a majority shareholding after the fundraising has been completed. PTSB’s 134,500 small shareholders are to be offered the opportunity to participate in the capital raising.
This was revealed on Wednesday as the company published its full-year results, which show that the group made a loss of €48 million, down from €668 million in 2013.
It core trading retail bank made a profit before exceptional items of €5 million last year, compared with a loss of €694 million in 2013. Its total income rose by €56 million in the year to €308 million.
The bank’s bottom line result was aided by a €43 million impairment writeback last year.
PTSB, which is 99.2 per cent owned by the State, also confirmed that it has agreed to sell half of its Capital Home Loans mortgage book in the UK, which is currently in run down, to Cerberus Capital LP. The face value of the loans amounts to €3.5 billion and the sale is expected to close by the end of July. The bank said it has also agreed to sell its CHL legal entity and its loan-servicing platform to Cerberus.
In addition, it has agreed to sell non-core loans in Ireland backed by commercial properties with a face value of €1.5 billion. These portfolios are called Leinster and Munster.
European Commission approval
The bank said it has received initial approval from the European Commission for its restructuring plan while the number of customers in arrears with their mortgages by 90 days or more fell by 8,000 last year, down 32 per cent from the peak in 2013.
PTSB’s owner-occupied and buy-to-let mortgage arrears levels fell by five percentage points and three percentage points respectively in 2014 and were at 10.7 per cent and 13.6 per cent of total cases at end December 2014.
Chief executive Jeremy Masding said PTSB repossessed about 50 properties last year while another 150 homes were returned by customers.
Commenting on the results, Mr Masding said: “The encouraging level of engagement we have received from potential investors reflects the enormous progress we have made and the strength of our business model.”
He said the core bank was “well placed to return to sustainable profitability on schedule”.
Mr Masding declined to comment on whether the capital raising from private investors might involve any form of bonuses or long term incentives for senior executives.
He said this would be a “discussion for Minister Noonan and the board [OF PTSB]”.
Mr Masding reiterated that it was unlikely that the State would get all of its €2.7 billion in bailout funds back but the bank would “try and get back as much as we can”.
PTSB’s annual report shows that Mr Masding received total remuneration last year of €453,000 last year, down from €457,000 in 2013. This comprised a salary of €400,000 and other remuneration of €53,000.
Chief financial officer Glen Lucken was paid total remuneration of €442,000, down from €445,000. This comprised a salary of €375,000 and €67,000 in other pay.
Chairman Alan Cook received a fee of €180,000, unchanged on 2013.
The bank’s cost-income ratio increased by 7 points to 126 per cent due to a rise in general and administrative expenses and the €27 million payment of a bank levy to the State.
