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Permanent TSB Group (IL0A)


Wednesday 26 February, 2020

Permanent TSB Group

Commentary on Annual Financial Report

RNS Number : 1244E
Permanent TSB Group Holdings PLC
26 February 2020

0700hrs 26 February 2020








Permanent TSB Group Holdings plc ("PTSB", "the Bank") today reports its annual results for 2019.



Business and financial performance continues to trend in line with market expectations as the Bank increases p rofitability, grows new lending, maintains cost discipline, retains capital above regulatory requirements and reduces Non Performing Loans (NPLs).


The Bank continues to support its customers by delivering net mortgage growth for the first time in over a decade. In addition, it has successfully grown other products and services, including an enhanced digital offering. The Bank continues to make progress on key strategic priorities, improve its risk profile and position itself strongly to deliver for customers and shareholders. 



Key Points


· Profit Before Tax of €42 million, an increase of €39 million year-on-year.

· Total New Lending volumes increased by 14% year-on-year to €1.7 billion, supporting the Bank's performing loan book growth in 2019.

· Market Share of New Mortgage Lending of 15.5%, up from 15.1% at December 2018.

· Net Interest Margin (NIM) of 1.80%, increased by two basis points from 1.78% at year-end 2018.

· Non-Performing Loans (NPLs) reduced by 38% to €1.05 billion at December 2019; NPL Ratio is now 6.4% and the Bank remains committed to a mid-single-digit NPL ratio.

· Pro-forma Common Equity Tier 1 (CET1) ratio (on a Fully Loaded basis) of 15.0%1.

· Pillar 2 Requirement (P2R) remains unchanged at 3.45% and the dividend restriction remains.

· Sale of Properties in Possession is progressing strongly, with c. 400 properties in stock at 31 December 2019.


1.  CET1 Ratio Post Glas II Completion in February 2020


"Our strong performance in 2019 reflects the attractiveness of our customer offering and the progress we are making in growing our business while managing costs rigorously. The Bank continues to outperform the market for new mortgage lending and thereby increasing its market share; The Bank's rewards-based Explore current account continues to attract new customers; and its Personal Term Lending and SME Lending continue to grow.

Our ongoing digital investment programme is delivering significant benefits, with customers responding very positively to the range of digital enhancements we have introduced. There is much more to come and the Bank has a strong platform to deliver sustainable shareholder value as the Bank of Choice in the Irish retail and SME banking market."  


Jeremy Masding, CEO



Business Performance


· New Current Account openings of 34,000; Current Account balances increased by 10% to €4.7 billion.

· Retail Deposit balances remained broadly in line with 2018.

· Total New Lending volumes grew 14% to €1.7 billion in 2019 from €1.5 billion in 2018.

· New Mortgage Lending grew by 13% year-on-year to €1.5 billion, outperforming market growth of 10%. 

· As a result, full year 2019 market share of drawdowns was 15.5%. Whilst the mortgage market in Ireland continues to grow steadily, it remains competitive. The Bank continues to manage its offering carefully by maintaining price discipline and credit underwriting standards.

· Personal Term Lending grew by 15% year-on-year to €140 million. Digital adoption is improving customer experience; for example, Term Lending through our direct channels is up 31% year-on-year, representing more than 35k online Term Loan applications. SME lending also grew year-on-year, albeit from a low base.

· The Bank now has more than 360k active customers using its mobile App for their banking requirements; an increase of 44% on 2018 with more than 63 million successful account log-ins. In August 2019, the Bank launched end-to-end Credit Card applications through the mobile App providing a third channel of choice.

· The Bank's Net Promoter Score is joint 1st in the market for 2019, with Customer Care and Value being the positive drivers.



Financial Performance


· Profit Before Tax of €42 million, an increase of €39 million year-on-year, with Underlying Profit Before Tax of €74m, meeting the objective of improving quality of earnings.

· NIM of 1.80% increased by two basis points from 1.78% in 2018. Lower interest income from the Treasury Asset portfolio and the deleveraging of NPLs has been offset by further improvements in the cost of funds.

· Operating Expenses, excluding Bank Levy and Regulatory Charges, and net of reinvestment, of €283 million reducing by 1% year-on-year. Decisive actions are being taken continuously to build an efficient and effective operating model. Strong focus on cost management, with approximately €20 million of underlying savings in 2019, enabling the required investment in people, processes and technology across the Bank. Regulatory charges of €47 million remained flat year-on-year.

· Impairment Charge of €10 million is reported under IFRS 9. Underlying loan book continues to perform well reflecting the quality of the portfolio and the current macroeconomic environment.

· Exceptional Items of €32 million consist of €16 million of Restructuring and Other Charges as well as €16 million of NPL Deleveraging costs associated with the Glas Tranche II Sale.

· The Central Bank of Ireland's investigation into tracker mortgages at PTSB came to a close in 2019. The Bank has paid a fine of €21m. As the Bank had made relevant provisions in prior years, the financial impact in the 2019 financial accounts, included in exceptional items above, is €3m.



Balance Sheet


Funding And Liquidity


· The Bank's funding position continues to remain strong. All funding and liquidity metrics are well above regulatory requirements.

· Customer Deposits increased by 1%, amounting to €17.2 billion, which represents 95% of Total Funding.

· In September, the Bank completed its first 5 year senior non-preferred (SNP) MREL compliant €300 million bond at mid swaps + 255 basis points (equating to 2.15%) which is callable in year 4. The order book was over-subscribed with more than 50 investors participating. The overall MREL issuance target is in the region of c. €0.8 billion to be in place before 1 Jan 2021.

· Standards & Poor's, Moody's and DBRS have upgraded the Bank's credit ratings in 2019; we have now returned to Investment Grade status for the first time since 2011. 


Performing Assets


· The Performing Loan book of €15.3 billion at December 2019, an increase of 1% on the Performing Loan Book at December 2018, as the strength of new business outpaced the repayments on the loan book. Asset yield remains above 2%, despite the maturity of higher yielding Treasury Assets and reductions made to certain fixed rate mortgage product pricing. 

· The Bank currently has 17% of the Performing Mortgage Book paying Interest Only (the majority of which are Buy-To-Let balances). The Bank is engaging with some customers in relation to these Interest Only Mortgage Loans; to determine credible Capital Repayment Plans as a means of assessing loan status; the programme is at an early stage of maturity; further detail will be provided at H1 2020.


Non-Performing Loans And Properties In Possession


· NPLs reduced by €0.6 billion to €1.05 billion following the sale of €0.5 billion of NPLs (Glas Tranche II), announced in September 2019, together with organic cures of c. €0.1 billion, bringing the NPL ratio to 6.4%.

· The remainder of the NPL portfolio is actively managed, and the Bank is committed to meeting a mid-single digit NPL ratio, as per prudent balance sheet management and regulatory guidelines, whilst continuing to protect capital.

· At 31 December 2019, the Bank held c.400 properties in possession, with 80 actively for sale. The majority of the properties in possession are as a result of a targeted BTL voluntary surrender programme. The Bank is satisfied with the progress made to date and expects to sell the majority of properties through various arrangements over the next 12 months.




· The Bank's Pro-forma CET1 ratio, on a Fully Loaded and Transitional basis, increased to 15.0%1 and 18.0%1 respectively when compared to pro-forma CET1 ratio of 14.0% and 17.0% at 31 December 2018.

· The increase in the ratios is primarily due to a net increase in organic profits and a decrease in Risk Weighted Assets (RWAs) arising from the deleveraging of NPLs.

· The Bank's reported CET1 ratio at 31 December 2019, on a Fully Loaded and Transitional basis, was 14.6% and 17.6% respectively.

· In view of a number of emerging risks such as the management of the remaining NPL balances and the Interest Only Mortgage portfolio, the Bank will continue to adopt a prudent approach to Capital Management and improve its Total Capital Position over time.

  1.  CET1 Ratio Post Glas II Completion in February 2020.


Guidance And Outlook


· Performing Loan book is expected to continue to grow in 2020 as we focus on quality customer service and retention.

· The Bank is expected to grow Consumer Finance and offer new propositions to SME customers.

· Gross Interest Income will be lower as a result of NPL deleveraging; however, with continuous management of cost of funds, we expect NIM to remain stable in the medium term.

· NPL ratio is expected to meet mid-single digit guidance.

· Operating Expenses are expected to remain broadly flat in 2020, where strong management of the cost base will deliver underlying savings from efficiency initiatives, together with non-recurring projects, will be utilised for Business and 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 environment for the banking sector remains challenging, with ongoing competitive pressures and a demanding regulatory agenda. The increased political certainty around Brexit will be welcomed across the business community. We have undertaken steps to mitigate

risks arising from Brexit and we will continue to monitor developments in the coming months as the UK's future trade relationships with the EU become more apparent.







For Further Information Please Contact:


Eamonn Crowley | Chief Financial Officer | [email protected] | +353 1 669 5354


Nicola O'Brien | Head of External Reporting and Investor Relations | Nicola.O'[email protected] | +353 87 148 2275


Leontia Fannin | Head of Corporate Affairs and Communications | [email protected] | +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.

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