PTSB narrows losses as impairment charges fall

Bank cuts H1 operating losses to €171 million as impairments fall by 65%

Permanent TSB is benefiting from declining impairment charges, as charges on the bank’s Irish residential mortgages book fell from €338m in 2013 to €114m in the first six months of 2014.

Permanent TSB narrowed its first-half losses by 62 per cent to €171 million, down from €449 million in the same period in 2013, driven by a sharp improvement in impairments, which analysts say may help the bank return to profitability earlier than the expected 2017.

Impairment charges in the six months to June 30th 2014 fell by 65 per cent to € 149m, as the bank reported growth of 362 per cent in mortgage lending to € 180m, garnering the bank a mortgage market share of 13 per cent, up from 1.6 per cent. Loss before tax stood at €171 million, up from €131 million in 2013, as the bank benefited from an exceptional €318m gain in that period in 2013. On an underlying basis (pre-impairment and non-recurring items), the bank reported an operating profit of €4 million, its first since 2010.

Group chief executive Jeremy Masding said: "2014 is a key year for permanent tsb. The group's underlying losses are down significantly and the permanent tsb strategic business unit, effectively our customer facing business, recorded an operating profit of some € 62m".

Mr Masding said that the bank has made “huge progress” on the arrears problem.

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“The number of customers in arrears over 90 days is down 14 per cent. Of those in arrears over 80 per cent are engaging with us and we’re delivering sustainable, affordable treatments.”

Minister for Finance Michael Noonan welcomed the results.

“PTSB have demonstrated in their half year results that the bank is continuing to improve and has made significant progress in delivering key elements of its restructuring plan. PTSB continues to work to enhance the value of our investments through the banks work on arrears and improving competition through new mortgage lending and current accounts.”

In line with its strategic plan PTSB has maintained a focused national retail banking presence, serving about 15% of the markets in which it competes. It is likely to be an investable proposition well ahead of our original timetable given the significant improvements made by management and the continued improvement in the Irish economy.”

Impairment charges on the bank’s Irish residential mortgages book fell from €338m in 2013 to €114m, although charges on its UK book grew from €11m to €18m.

Customer deposits grew to €20.5 billion, up from €19.5 billion, and the bank’s reliance on ECB funding declined. The bank now has a loan to deposit ratio of 141 per cent, down from 151 per cent in 2013.

The bank’s net interest margin increased from 0.82 per cent to 0.88 per cent.

In a note, Goodbody Stockbrokers said that while the bank’s income is a “little better than anticipated, costs are much higher than we expected”.

“However, the impairment charge is about € 100m+ lower than we anticipated, which if rolled forward, may help in attaining profitability earlier than the prior 2017 timelines.”

Fiona Reddan

Fiona Reddan

Fiona Reddan is a writer specialising in personal finance and is the Home & Design Editor of The Irish Times