Trading Statement

Permanent TSB Group Holdings PLC

02 May 2023

 

2 May 2023                                                                                                                       

Permanent TSB Group Holdings plc ('the Bank')

Interim Management Statement - Q1 2023 Update

Comment by Eamonn Crowley, Chief Executive:

'The Bank reports a strong business and financial performance in the first quarter of the year. New lending volumes and transactional banking income have increased year-on-year, driven by the competitive market and a larger customer base. We also have a strong pipeline of activity across all of our key product lines. Although the global macroeconomic environment remains uncertain, the Irish economy continues to out-perform in terms of growth and employment levels.

In quarter one, we successfully completed the acquisition of 25 Ulster Bank Branches and c. 3,200 Ulster Bank SME loan accounts, valued at c. €165 million. This migration marked another significant step for us in the transformative transaction with Ulster Bank, and has allowed us to further expand our business offering and build valuable customer relationships. We look forward to completing the migration of Ulster Bank assets in the coming months, with the remaining non-tracker mortgage portfolio and the Lombard asset finance business due to migrate shortly.

Expanding our branch network to 98 branches nationwide, coupled with our €150 million multi-year investment in digital services is evidence of our commitment to deliver the best combination of all our channels - from Branch to App to Voice to Intermediaries - to support our customers' individual needs.'

Key Points:

·   The Bank maintains a strong capital position; fully loaded CET1 capital ratio of 15.2%; regulatory CET1 capital ratio 15.5%

·   New business mortgage market share of 25%[1] (versus 17% at March 2022)

·   Total Operating Income 77% higher year-on-year (YoY)

·   Net Interest Margin (NIM) of 2.26%, 82 bps higher than the Q1'22 NIM of 1.44% and 34bps higher than the Q4'22 NIM of 1.92%.

·   Operating costs of €98 million, 18% higher YoY, in line with management expectations

·   Customer deposits of €22.3 billion, an increase of c.3% (c. €0.5 billion) since December 2022

·   Non-performing loans (NPLs) of €0.7 billion and the NPL ratio of 3.3% at March 2023 are in line with December 2022

·   Successfully issued €650m MREL eligible senior debt in April 2023; order book was larger than any previous issuance and ~3x over-subscribed

Business Performance

Q1 2023 was another positive quarter for the Bank with new mortgage lending of €721 million, growth of 69% year-on-year, while the mortgage market grew 14%. This growth is supported by the strength in our mortgage proposition and the high proportion of Mortgage Switchers seen in the market in H2'22 and the early part of 2023 as customers sought rate certainty. Market share of mortgage drawdowns grew to 25% which was 8 ppts higher than the March 2022 market share (17%). However, it should be noted that the Mortgage Switcher portion of the mortgage market is expected to reduce over the remainder of the year which will lead to lower year-on-year growth in new lending than that observed in Q1 2023. The mortgage market in Ireland is estimated to grow c. 3% from €14.1 billion in 2022 to c. €14.5 billion[2] in 2023.

Income

Net interest income is up 86% year-on-year; with gross interest income 95% higher year-on-year due to organic loan book growth, the migration of Ulster Bank Mortgage and SME Assets and the changed interest rate environment. The net interest margin of 2.26% is 82bps favourable year-on-year; benefitting from the changed interest rate environment and increased loan book volumes. Fees and commission income performance is strong, 12% higher when compared to the prior year, due to increased transactional activity from a higher customer base.

Costs

In line with management expectations, Operating Expenses are trending c.18% higher than prior year. The Bank continues to maintain tight control over the administrative cost base; key investment programmes, the acquisition of the Ulster Bank portfolios, and inflationary pressures have caused this upward trend.  

Balance Sheet

Customer deposits of €22.3 billion at 31 March 2023 are €0.5 billion higher than 31 December 2022, primarily due to a c. 4% increase in current account balances to €9.3 billion. Approximately 70% of the Bank's total customer deposits at 31 March 2023 are covered under the Deposit Guarantee Scheme ('DGS'), in line with balances at 31 December 2022. The loan to deposit ratio of 89% and liquidity coverage ratio of 192% at the end of March 2023 provides the Bank with a strong liquidity position and a secure funding source for future growth in lending volumes.

The total performing loan book of €19.5 billion at 31 March 2023 is c. €0.3 billion higher than the total performing loan book at 31 December 2022, as a result of the Ulster Bank Micro-SME migration in February 2023, and new mortgage lending year-to-date exceeding repayments and redemptions. Asset Quality remains strong with Non-Performing Loans of €0.7 billion at 31 March 2023, in line with balances at 31 December 2022. While the global macroeconomic environment remains volatile, the Irish economy continues to record strong growth levels with no notable deterioration in the asset quality of the Bank's loan book evident to date.

With a weighted average LTV of c. 51% at March 2023 on the core performing loan book of residential mortgages and no material exposure to Commercial Real Estate, the Bank's Balance Sheet is well positioned and will strengthen further as we complete the migrations of the remaining Ulster Bank assets and deliver on our strategic initiatives to grow customer and new lending volumes.

Capital

Capital Ratios (%)	March 2023	December 2022
CET1 (Fully Loaded)	15.2%	15.2%
CET1 (Transitional)	15.5%	16.2%
Total Capital (Fully Loaded)	21.3%	21.3%
Total Capital (Transitional)	21.6%	22.3%
Leverage Ratio (Fully Loaded)[3]	7.5%	7.7%

The Bank's Common Equity Tier 1 (CET1) ratio on a fully loaded basis remains strong at 15.2% at 31 March 2023, unchanged when compared with the CET1 ratio on fully loaded basis at 31 December 2022.

The CET1 ratio on a transitional basis of 15.5% at 31 March 2023 reduced by 70 bps, primarily driven by annual transitional phase in of prudential filters, compared to the CET1 ratio on a transitional basis of 16.2% at 31 December 2022. The minimum regulatory requirement for CET1 on a transitional basis is currently 8.94%[4].

The Total Capital ratio on a transitional basis was 21.6% at 31 March 2023; regulatory requirement for Total Capital on a transitional basis is currently 13.95%.

The Bank's Leverage ratio on a fully loaded basis at 31 March 2022 was 7.5%; one of the highest amongst European banks.

2023 Outlook

Aided by a positive domestic macroeconomic backdrop, the Bank is in a strong position to continue to support our customers, the Irish economy and our shareholders. The scale and pace of any further interest rate increases by the European Central Bank remain unclear and, as such, the guidance for FY23 remains in line with prior market communications. The Bank will provide updated guidance for the remainder of the year at its HY23 Interim Results.

Total Income of c. €650 million will be c. 60% higher year-on-year while we maintain cost discipline, reducing the Cost Income Ratio to below 70% in 2023.

Asset quality continues to perform well and, as such, the previously communicated guidance for a cost of risk of <10bps remains.

Capital remains strong and, having assessed a range of scenarios, the CET1 ratio will remain above the Bank's minimum regulatory requirements.

- Ends -

For Further Information Please Contact:

Denis McGoldrick                                                               Leontia Fannin

Investor Relations Manager                                           Head of Corporate Affairs and Communications

Email: [e-mail]                Email: [e-mail]

Phone: [phone]                                 Phone: [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] Based on BPFI data as at 31 March 2023

[2] Source: Davy

[3] The Leverage ratio is calculated by dividing Tier 1 capital by gross balance sheet exposures (total assets and off balance sheet exposures).

[4] Regulatory requirements for both CET1 and Total Capital on a transitional basis excludes P2G

 

END