Permanent TSB (PTSB) will "quite rightly" be fined for its role in the State's tracker-mortgage scandal, its chief executive, Jeremy Masding, said, as it revealed that €91 million of exceptional charges pushed down its profit last year.
Net profit fell to €3 million from €40 million for the previous year as the bank absorbed impairment charges relating to its sale of problem loans and set aside more money to deal with the tracker debacle.
Shares in PTSB fell by as much as 3.6 per cent to €1.52 in Dublin.
The scale of exceptional costs surprised analysts and took the focus off news that pre-tax profit before one-off items soared 45 per cent last year to €94 million with the lender grabbing a greater share of the mortgage market.
The 75 per cent State-owned lender lowered its non-performing loans (NPL) ratio from what Mr Masding termed a “pretty unsafe” 28 per cent to 10 per cent over the course of the year, as it sold €2.1 billion of soured mortgages to US private equity group Lone Star and refinanced €1.3 billion of restructured loans in a bond securitisation deal.
However, PTSB had to book an additional €66 million impairment charge against the loans that it offloaded. The bank, which set aside €145 million of provisions in 2015 to deal with almost 2,000 customers caught up in the tracker-mortgage scandal, ringfenced a further €20 million in 2018.
Group chief financial officer Eamonn Crowley said the additional tracker costs reflected rising advisory and legal costs relating to the examination of its books, even though its number of affected customers had remained stable in recent years. Mr Masding said the bank had factored in likely regulatory fines in its provisions.
Law changes
Changes in the law in 2013 doubled the maximum monetary penalty the regulator can impose on a financial firm for rule breaches, to €10 million, or 10 per cent of turnover, and for individuals from €500,000 to €1 million.
Meanwhile, Mr Masding said PTSB aimed to lower its NPLs ratio to a “low single digit” percentage by the end of this year and that it would “continue to look at all options” to meet the target.
It has also earmarked about €100 million of spending on its information technology systems over the next three to four years.
PTSB’s total new lending volumes increased by 40 per cent to €1.5 billion last year, giving it a 15.1 per cent share of the Republic’s growing mortgage market as borrowers were lured by its cash-back offer. Its slice of the market was 12.6 per cent in 2017 and had been as low as 2 per cent at the height of the financial crisis, as the European Commission weighed whether the bank had a viable future after receiving a €4 billion taxpayer bailout.
“2018 was a transformational year for Permanent TSB,” said Mr Masding. “It was a year in which the bank exited its [EU] restructuring plan, demonstrated its profitability, grew market share further and dealt decisively with its legacy NPL issue.”
However, the bank saw its net interest margin – the difference between the average rate at which it funds itself and lends on to customers – dip to 1.78 per cent from 1.8 per cent for 2017.
Gross loans fell by 18 per cent to €16.9 billion, mainly as a result of the group shifting NPLs off its balance sheet. However, performing loans stabilised for the first time since the onset of the crisis.
The bank, which had 2,380 employees at the end of December, moved in 2018 to cut about 250 roles, about 100 of which comprise fixed-term contractors. A further 60 are linked to loan portfolio that transferred to Lone Star.
The bank had about 1,200 properties in its possession at the end of last year, down from 1,800 a year earlier. They mainly related to properties previously owned by buy-to-let borrowers who availed of an offer to surrender their assets to secure a write-off of any debt beyond what could be achieved through a sale. The bank said it expected to sell most of these properties over the next 12 months.
