Permanent TSB Group

Commentary on 2021 Annual Financial Report

RNS Number : 2972D
Permanent TSB Group Holdings PLC
02 March 2022

02 March 2022


Permanent TSB Group Holdings plc ('the Bank')

Annual results for year ended 31 December 2021

"2021 was a transformational year for Permanent TSB as the Bank signed a legally binding agreement with NatWest Group Plc and Ulster Bank DAC to acquire approximately €7.6 billion of the Ulster Bank Retail, SME and Asset Finance business in the Republic of Ireland . Coupled with positive organic growth, this once in a generation opportunity will enable the Bank to grow its mortgage book by over 40%, triple its SME business relative to today, increase its Branch network by c. 30%, and welcome circa 450 new colleagues to the Bank. We are also preparing to welcome Ulster Bank deposit and current account customers who will need a new provider with an attractive offering, a strong community and customer ethos, and a nationwide branch network that is growing. 

The fundamentals of our business remain robust, delivering a strong business performance in 2021 with mortgage market share growing to 17.8% and SME lending continuing to increase. As our economy recovers, and the trend towards digital services accelerates, we are investing to deliver long term value in the Bank and drive sustainable growth. We will do this by being a Purpose led organisation that focuses on meeting the needs of our customers now and into the future.

I'm delighted to have announced the Bank's new Sustainability Strategy during 2021. This is designed to align the Bank's activities with the requirements of customers, colleagues and shareholders to serve communities in a more sustainable way, while playing a stronger role in addressing climate change and supporting the green transition. We have been making significant progress on our Sustainability journey over the last number of years. Highlights include accreditation to the 'Business Working Responsibly Mark'; committing €350,000 to O'Cualann Co-housing Alliance to support the development of affordable homes; winner in the Employee Empowerment and Trust category at the 2021 CIPD Awards; and adding our signature to the Task Force on Climate-Related Financial Disclosures."

Eamonn Crowley, Chief Executive

Key Highlights FY 2021

§ The Bank maintains a strong Capital position; proforma regulatory CET1 ratio [1] 17.4%, proforma fully loaded CET1 capital ratio[1] of 15.1%

§ Underlying Profit Before Tax[2] of €17 million (FY20: Underlying Loss Before Tax of €109 million)

§ Loss Before Tax of €21 million (FY20: Loss Before Tax of €166 million)

§ Strong new lending of €2.1 billion; 44% higher compared to prior year

§ New mortgage market share increasing to 17.8%[3], up from 15.3% at December 2020

§ Total Income 4% lower year on year (YoY); Underlying Net Interest Margin[4] (NIM) of 1.76%, 3bps lower than prior year (see further comment)

§ Underlying Operating Costs[5] of €345 million, €16m (+5%) higher than prior year as we continue to invest in the business

§ Exceptional Costs of €38 million are €19 million lower than prior year, primarily relating to costs associated with the transaction to acquire a portion of Ulster Bank's Retail and SME businesses from NatWest Group Plc and Ulster Bank DAC

§ The NPL Ratio reduced from 7.6% at 31 December 2020 to 5.5% at 31 December 2021

Business Performance

Throughout 2021 the Bank has continued to deliver a strong operating performance; growing in key areas and accelerating our digital transformation to improve customer experience and make our business more efficient for the future.

We have supported our customers through the recovery in 2021 with total new lending of €2.1 billion, increasing 44% YoY. New mortgage lending of €1.9 billion grew by 45% YoY, outperforming the mortgage market which grew by 25%. Market share of mortgage drawdowns grew from 15.3% at December 2020 to 17.8% at December 2021. We continue to manage our offering carefully, maintaining price discipline and credit underwriting standards.

SME Lending of €98 million in 2021 reflects an increase of c. 104% from the prior period. We continue to build on our SME service offering through a number of partnerships including our partnership with the Strategic Banking Corporation of Ireland (SBCI) which has proven successful with €38 million of €50 million in available funding drawn down during 2021. We will also participate in the Brexit Impact Loan Scheme where we will offer a further €32 million in low-cost loans for Brexit-impacted businesses, the additional funding brings our total commitment to customers through the SBCI to €82 million. The Bank has also recently announced a significant expansion in its SME offering with a new €1 billion SME lending fund over the next three years, for businesses throughout Ireland.

New consumer term lending of €93 million reduced by 4% YoY, impacted by the slowdown in demand over the last two years as a result of higher household deposits and the impact of the Covid-19 pandemic. However, we are pleased with the progress in digital adoption, with 81% of new term lending drawdowns through our direct channels[6], this is a 6% increase YoY and 15% growth since 2019.

The digitalisation of customer journeys is crucial to our future growth; as a result the Bank has invested in over €100 million of technology and digital capability over the last number of years and has committed to a further €50 million of investment in digital capability going forward. This has facilitated changes in how our customers and colleagues interact with the Bank and significant progress has been made in this regard.

In 2021 the Bank launched its Digital Current Account which enables existing and new customers to open a new current account on the Bank's App in less than 10 minutes; an Online Mortgage Application Journey which enables customers to submit their mortgage application online and upload all supporting documentation; and a Customer Correspondence Management (CCM) platform successfully migrating c. 500k customer letters to the new platform.

The Bank has also launched Google Pay, enhancing our mobile payment portfolio for our Personal and SME customer base. The use of digital channels continues on an upward trajectory with digital activity reaching 116 million successful logins (+16% YoY); customers can now complete applications for a Current Account, Overdraft, Credit Card, Term Loan, Mortgage and Deposit Account online. The Bank's digital channel, through the App, has received over 44k customer product applications since January 2021; 82% of customers who opened Deposit Accounts did so via the online channel.

We continue to invest further in customer fulfilment and servicing journeys, ensuring a secure and resilient platform for scalable growth, through a combination of digital and in person customer interaction. The ongoing focus the Bank has on customer loyalty, trust and digital innovation has enabled the Bank to achieve a top-two position in Relationship Net Promoter Score (RNPS).

As we work to renew and rebuild the Bank for the future, following the onset of the global pandemic, it is critical that we continue to evolve the organisation.  As part of the next phase of our journey, the Bank has embraced the introduction of smarter and more flexible ways of working for colleagues at all levels of the organisation. In recognition of our 'Ways of Working' Programme, the Bank was proud to win the prestigious CIPD Award for Employee Empowerment and Trust in 2021.

The Bank continues to work with NatWest and Ulster Bank DAC towards the acquisition of certain elements of the Ulster Bank Retail, SME and Asset Finance businesses in the Republic of Ireland. The transaction remains subject to obtaining the required regulatory approvals from the Competition & Consumer Protection Commission (CCPC) and the Central Bank of Ireland. As the transaction constitutes a Class 1 transaction for PTSBGH under the Irish listing rules, it is also subject to the approval of PTSBGH shareholders by a simple majority, which is expected to be sought in mid-2022 at an Extraordinary General Meeting (EGM).

Financial Performance

The challenging operating environment for Irish and European banks remained throughout 2021 with the continued lower for longer interest rate environment plus the uncertainties that remained with the Covid-19 pandemic. The Bank delivered an Operating Profit of €17 million (FY2020: Operating Loss €109 million) and a Loss before Tax of €21 million (FY2020: Loss before Tax of €166 million).

Net Interest Income decreased by 8% during the year, reflecting lower income post deleveraging transactions in Q4'20 and Q4'21, lower income on Treasury Assets as a result of the prolonged low interest rate environment, and lower income on the residential home loan portfolio following rate changes announced in Q3'20. The 2021 exit NIM of 1.51% has reduced by 22 basis points from 1.73% in the prior year, primarily as a result of the higher costs from holding excess liquidity. The underlying NIM, excluding the cost of excess liquidity is 1.76%. The Bank expects the NIM to remain in the low 150bps throughout 2022, as we continue to hold excess liquidity which will be required to fund the acquisition of the agreed loan portfolios from Ulster Bank DAC, expected later this year.

The Bank has applied negative rates to certain cohorts of non-personal deposits to mitigate some of these costs since February 2022. 

Fees and Commission Income of €35 million was 25% higher than the prior year as transactional activity recovered quickly following the removal of severe Covid-19 Government restrictions in quarter one. Other Income also generated €13 million (FY2020: €6 million) through the revaluation of and gains on the disposals of properties in possession.

Underlying Operating Costs of €345 million are 5% higher than the prior year, as the acceleration of investment drives higher costs including a higher depreciation charge of €47 million, +27% YoY as we pay for the investment in the business.

At 31 December 2021, Staff Numbers of 2,236 FTE reduced by c. 200 FTE; the voluntary severance scheme, which closed in early quarter one saw c. 300 colleagues exit the Bank delivering c. €18 million in full year payroll savings, while the Bank announced the creation of c. 300 new roles in demand areas across Technology, Business Banking, Risk Management and Data Analytics. The restructuring charge of €27 million from the cost of the Voluntary Severance Scheme was captured in exceptional items in the prior year's annual results.

Cost management remains a key focus for the Bank as we continue to pay for transformation projects and absorb cost inflation, however operating costs are expected to be higher as we close the acquisition transaction with Ulster Bank DAC and integrate the assets and new colleagues over the next 2 years.

The Bank reports an Exceptional Cost of €38 million at 31 December 2021. The exceptional cost is primarily driven by costs associated with the transaction to acquire a portion of Ulster Bank's Retail and SME businesses from NatWest of €28m, together with some additional restructuring costs of €14m. The Bank has also made a provision of €15 million relating to legal, compliance and other costs related to legacy issues, this is offset by €19 million of gains from the deleveraging of assets and the release of provisions held in relation to legacy deleveraging transactions.

Balance Sheet remains robust with strong capital, funding and liquidity levels

The Bank's funding position continues to remain strong. All funding and liquidity metrics are well above regulatory requirements. Total Customer Deposits of €19.1 billion at 31 December 2021 are €1 billion higher than at 31 December 2020 reflecting a 23% increase in current account balances to €7.1 billion. The loan to deposit ratio of 75% at 31 December 2021 provides the Bank with a strong liquidity position and significant potential to lend.

The Total Performing Loan Book of €14.0 billion at 31 December 2021, is €0.2bn higher than the total performing loan book at 31 December 2020 with new credit formation offsetting repayments and redemptions. The Residential Home Loan book has grown by 2% YoY as the pace of new lending exceeds the repayments on the book.

Non-Performing Loans of €0.8 billion at 31 December 2021 are €0.3 billion lower than balances at 31 December 2020 through a combination of loan sale and organic cures. An impairment release of €1 million reflects a prudent approach to provisioning, as we balance a better than anticipated macroeconomic forecast with the impact which may arise over the coming months from the removal of pandemic related State supports for households and businesses. The total Provision Coverage Ratio on the Bank's loan book of 4.1% has reduced by 80 bps YoY due to movements within stage classifications, however the Provision Coverage Ratio on Stage 3 loans has increased from 34.3% to 37.3% following the NPL sale in quarter 3 ('Glenbeigh III').

In April 2021, the Bank redeemed its legacy 2015 €125m AT1 following regulatory approval and the successful issuance of a replacement AT1 instrument in 2020. In May 2021, the Bank issued €250m of Tier 2 capital notes at a fixed rate of 3% per annum, maturing in 2031. The Bank remains above management and regulatory MREL requirements.


The Bank's Pro forma[7] Common Equity Tier 1 (CET1) ratio on a fully loaded basis remains strong at 15.1% at 31 December 2021, in line with the CET1 ratio on a fully loaded basis at 31 December 2020.

The Proforma CET1 ratio on a transitional basis of 17.4% at 31 December 2021 reduced by 0.7% compared to the CET1 ratio on a transitional basis of 18.1% at 31 December 2020; regulatory requirement for CET1 on a transitional basis is currently 8.94%[8].

The table below details the Bank's capital ratios at 31 December 2021 and compares them to the capital ratios at 31 December 2020.

Capital Ratios (%)

(Pro Forma)









CET1 (Fully Loaded)




CET1 (Transitional)




Total Capital (Transitional)




Total Capital (Fully Loaded)




The Proforma Total Capital ratio on a transitional basis was 22.4% at 31 December 2021; regulatory requirement for Total Capital on a transitional basis is currently 13.95%2.

Sustainability Strategy

Responsible and sustainable business continues to be a key focus. The Bank has launched a new sustainability strategy that includes commitments to introduce a range of sustainable finance products, reduce the Bank's carbon emissions, and maintain a nationwide branch presence in communities throughout Ireland. The Bank has also joined the global Task Force on Climate-related Financial Disclosures (TCFD) network to increase transparency and hold the Bank accountable for meeting its sustainability and climate action targets. The Bank conducted its first materiality assessment to inform the next stage of its Sustainability Strategy and also signed Business in the Community Ireland's Low Carbon Pledge, joining 61 of Ireland's leading businesses in committing to setting new climate action goals. Through the pledge we have committed to setting science based carbon emission reduction targets by 2024, this includes measuring and reducing our entire carbon footprint; the Bank has delivered a 1% reduction in Scope 1 and 2 carbon emission intensity in 2021 and a cumulative reduction of 56% since 2009.  

2022 Outlook

As we begin 2022, there is some optimism that the pandemic might finally have come to an end as the more virulent but less severe Omicron strain fades over the coming months. Some uncertainties remain, the residual impacts of Covid-19 together with the emerging geo-political developments in Eastern Europe, however the outlook across our core markets is positive.

GDP is above pre-pandemic levels after growing ~14% in 2021. Modified Domestic demand shows spending enjoying a V-shaped rebound from the low levels of 2020 and it's expected to grow by 5.8% this year, led by robust consumer demand, and a rebound in construction and business investment. Demand for labour has bounced back strongly while the labour supply remains somewhat constrained due to a fall in in-ward migration since the beginning of the pandemic and competition for talent internationally. The challenge facing Ireland is one of labour supply and capacity; wage inflation pressures have already emerged and we expect these to intensify in 2022 as the unemployment rate returns to pre-pandemic levels.

New mortgage lending is forecast to grow from €10.5bn in 2021 to c. €12bn in 2022. This should deliver the first substantial rise in the stock of mortgage loans, the first growth since the 2000s. The Bank's business activity remains strong with robust pipelines; as the mortgage market size grows and we meet our ambition in the SME market, we expect new lending volumes for this year to be ahead of prior year volumes.

Net Interest Income is expected to grow, supported by the Ulster Bank acquired mortgage assets migrating in Q4'22, however NIM is expected to remain in the low 150 basis points due to retaining higher levels of excess liquidity with negative yields until Q4'22 together with the lower reinvestment rates on treasury assets and continued price competition in the mortgage market. The acquisition of certain Ulster Bank DAC assets is expected to generate an additional c. €180m in gross interest income (excluding discount unwind) in FY23.

As previously guided, total Operating Costs in 2022 are expected to be c.12% higher than 2021, as we accelerate the expenditure to further enhance our digital offerings, streamlining sales and service processes and ensuring IT security and operational resilience. The ongoing cost of the acquired business from Ulster Bank DAC will drive an additional cost for the Bank of c. €50 million in a full year, however the Bank remains committed to continuing to actively deliver cost savings in the medium term to help pay for investment and manage inflationary pressure.  

While the macro-economic environment looks more favourable, with unemployment expected to remain at c.5% and house prices expected to increase further, the Bank will keep the Expected Credit Loss under constant review throughout the year. With 97% of the Bank's assets comprised of secured residential lending, the impairment charge in 2022 is expected to be less than the previously guided through the cycle impairment loss rate of c. 30 basis points.

On the expectation that the acquisition of Ulster Bank DAC retail and SME business completes in quarter four 2022, the Bank will have exceptional accounting gains which will increase the overall profitability of the Bank and positively contribute to the Bank's capital position. Capital remains strong and having assessed a range of scenarios, the CET1 ratio will remain well above the Bank's minimum regulatory requirements.

- Ends -

For Further Information Please Contact:

Nicola O Brien Leontia Fannin

Head of Investor Relations Head of Corporate Affairs and Communications

Email: [email protected]  Email: [email protected]  

Phone: +353 87 148 2275      Phone: +353 87 973 3143


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.


[1] The Proforma CET1 transitional (regulatory) and fully loaded CET1 ratio includes c.0.5% uplift for 'Glenbeigh III' NPL sale completed in Q1'22

[2] Underlying Profit or Loss before Tax is the Profit or Loss before Exceptional Items and Tax

[3] Based on BPFI data as at 31 December 2021

[4] Underlying Net Interest Margin (NIM) is the reported Exit NIM less the high cost of holding excess liquidity (c.25bps)

[5] Underlying Operating Costs are Total Operating Costs per the financial statements less a provision for legal, compliance and other costs shown in Exceptional Items for ease of comparison (see further details in the Financial Performance)


[6] Direct channels include Desktop, App and Voice through Open24

[7] Pro Forma capital ratios include c.0.5% expected uplift from the NPL sale ('Glenbeigh III') which has been fully completed in Q1 2022. Of the total c.0.6% uplift from the transaction, c.0.1% has been recognised in FY21.

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

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