2018 Full Year Report Commentary

RNS Number : 2078R

Permanent TSB Group Holdings PLC

27 February 2019

 

27 February 2019

PERMANENT TSB GROUP HOLDINGS PLC

2018 FULL YEAR RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2018

Permanent TSB Group Holdings plc ("PTSB", "the Bank") today reports its annual results for 2018.

Key Points:

·     Profit Before Exceptional Items and Tax of €94 million, an increase of 45% year-on-year

·     Total new lending volumes increased by over 40% to €1.5 billion compared to 2017

·      15.1% Residential Mortgage Market Share, up from 12.6% in 2017 and 9.6% in 2016

·     Net Interest Margin (NIM) reduced marginally by two basis points to 1.78% from 1.80% at year-end 2017

·     Non-Performing Loans (NPLs) reduced by 68% from €5.3 billion in 2017 to €1.7 billion at 31 December 2018 with NPL ratio now at 10%

·      The Bank has strong funding and liquidity positions with System Funding now reduced to zero

·    Proforma Fully Loaded Common Equity Tier 1 (CET1) ratio of 14.0% following the completion of the NPL transactions in February 2019, which included the closure of Project Glas

·    As agreed between the State and the European Commission, the Bank has now fully exited its 2015 EU Restructuring Plan

Jeremy Masding, Chief Executive, said:

"2018 was a transformational year for Permanent TSB. It was a year in which the Bank exited its Restructuring Plan, demonstrated its profitability, grew market share further and dealt decisively with its legacy NPL issue. In addition, the Bank eliminated the last of its System Funding that, at one stage in 2011, made up approximately 40% of its resources.

Accordingly, the Bank proved, beyond doubt, it is a viable, well capitalised, competitive Retail and SME banking player and, that its underlying business and franchise are strong.

As we move into 2019, notwithstanding the geopolitical uncertainties mainly caused by Brexit, we remain positive. We believe we have a clear vision and strategy, and we are on the right path towards building an organisational culture that will deliver sustainable shareholder value and right customer outcomes".

 Business Performance

·    New Current Account openings of 38,000. Current Account balances increased by 12% to €4.1 billion

·    Retail Deposit balances remained broadly in line with 2017

·    Total New Lending volumes grew to €1.5 billion in 2018 from €1.0 billion in 2017

§ Mortgage Lending grew by 43% (compared to a market growth of 20%) significantly outperforming the market. As a result, mortgage market share increased to 15.1% compared to 12.6% in 2017

§ Consumer Lending increased by 36% to €122 million with the majority of Personal Loan applications now originating through Digital and Voice channels

·    The Bank's Net Promoter Score[1] remains within the top 2 Banks in the market through 2018, No.1 in the fourth quarter

·    Digital activity increased 38% year-on-year; greater than 10,000 In App Term Loan applications in Q4 (since Aug '18)

Financial Performance

·     NIM of 1.78% decreased by two basis points from 1.80% in 2017. This is primarily as a result of lower interest income from the Treasury Asset portfolio and NPLs, offset by improvements in the cost of funds  

·     Total Operating Income of €442 million remained broadly in line with 2017, with lower Net Interest Income being offset by an increase in Net Other Income which benefited from gains resulting from the sale of a portion of the Treasury Assets and the closure of a legacy treasury structure

·    Operating Expenses, including Bank Levy and Regulatory Charges, of €331m remained broadly in line with the prior year. Strong focus on cost management, with approximately €25 million of savings, has enabled further investment in people, processes and technology across the Bank

·    Impairment Charge of €17 million is reported under IFRS 9. As permitted, this is not directly comparable to 2017 as the prior year has not been restated for IFRS 9. The 2018 charge is in line with expectations

·     Exceptional Items of €91 million, primarily consists of €66 million of NPL deleveraging costs and a €20 million provision for legacy tracker related issues

Balance Sheet

Customer Balances

·    Customer Deposits amounted to €17.0 billion, unchanged from December 2017 and represent 87% of Total Funding

·   Gross Loans amounted to €16.9 billion, reducing by €3.6 billion (18%) from December 2017 primarily due to the deleveraging of NPLs through Project Glas and Project Glenbeigh

·     Performing Loan book recorded a modest growth in the second half of 2018

·    Loan To Deposit ratio was 93%, improving from 108% in 2017 primarily reflecting a decrease in Net Loans

Non-Performing Loans

·     NPLs reduced by €3.6 billion (68%) to €1.7 billion primarily resulting from the successful execution of Projects Glas and Glenbeigh, together with both the voluntary surrender programme for Buy-To-Lets and cures. As a result, the Bank's NPL ratio has significantly reduced to 10% from 26% at 31 December 2017

·   PTSB held approximately 1,200 properties in possession at 31 December 2018, a reduction of 33% compared to 1,800 properties at 31 December 2017. The Bank primarily acquired these properties through the targeted voluntary surrender programme on the Buy-To-Let portfolio. Approximately 500 properties were taken into possession in 2018 and 1,100 properties were sold, with a further 126 sold year to date 2019. We expect to sell the majority of these properties through various arrangements over the next 12 months.

Funding And Capital

·     ECB Funding has now been reduced to zero

·     Strong funding and liquidity position with Net Stable Funding Ratio at 120% and Liquidity Coverage Ratio at 160%

·     The Bank's Proforma CET1 ratio, on a Fully Loaded and Transitional basis, decreased to 14.0% and 17.0% respectively when compared to 15.0% and 17.1% at 31 December 2017

§ The decrease in these ratios were primarily due to both an increase in Risk Weighted Assets (RWAs) arising from the ECB's Targeted Review of Internal Models (TRIM) and the impact of IFRS9 transition

§ However, the negative impacts were offset by capital generated during the year through profits earned and the release of RWAs from NPL disposals (an additional 1.7% in CET1 capital on a Fully Loaded basis)

·     The Bank's reported CET1 ratio at 31 December 2018, on a Fully Loaded and Transitional basis, was 12.2% and 14.7% respectively

Guidance And Outlook

·     Performing Loan book is expected to grow in 2019

·     While Gross Interest Income will be lower resulting from the deleveraging of NPLs in 2018, NIM is expected to remain stable

·     NPL ratio is expected to continue to reduce towards mid-single digit in the medium term

·    Operating Expenses are expected to remain broadly flat, strong management of the cost base and savings from non-recurring projects are expected to be utilised for Digital Transformation in the medium term

·   The mortgage market is expected to grow over the medium term. While the market remains competitive, efficient distribution and disciplined pricing, coupled with a strong intermediary proposition, positions us well for the future

·     The Irish economy remains supportive with strong employment growth and a growing housing market translating to robust customer demand for credit. However, the eventual Brexit outcome, and the impact it would have on European economies, including Ireland, remains uncertain. We have undertaken steps to mitigate the risks arising from Brexit and we will continue to monitor developments in the coming months

 

Ends

For further information, please contact:
Investors and Analysts		Media
Eamonn Crowley Chief Financial Officer [e-mail] [phone]	Nicola O'Brien Investor Relations nicola.o'[e-mail] [phone]	Ray Gordon Gordon MRM [e-mail] [phone]

Note on forward-looking information:

This Announcement contains forward-looking statements, which are subject to risks and uncertainties because they relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Bank or the industry in which it operates, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements referred to in this paragraph speak only as at the date of this Announcement. The Bank undertakes no obligation to release publicly any revision or updates to these forward-looking statements to reflect future events, circumstances, unanticipated events, new information or otherwise except as required by law or by any appropriate regulatory authority.

 

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[1] Recommendation Net Promoter Score (NPS) - it is an index ranging from -100 to 100 measuring the willingness of customers to recommend a company's products or services to others based on the Red C research report commissioned by the Bank to December 2018.

 

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