PTSB takes on Northern Rock deposits

PERMANENT TSB has agreed a deal to acquire the €650 million-plus Irish deposit book of British lender Northern Rock as it seeks to improve its stretched funding position and ensure a standalone future.

PTSB takes on Northern Rock deposits

Permanent TSB, the banking arm of Irish Life and Permanent, which has been effectively nationalised in the face of a €4 billion capital hole, did not detail the cost of the acquisition.

The Northern Rock deal comes six months after & PTSB acquired €3.6bn in deposits from Irish Nationwide Building Society in a bid to lower its loan-to-deposit ratio, which is the highest in the industry.

“Having successfully acquired almost €4.25bn in new deposits as a direct result of these two transactions, we are clearly on the right path and I look forward to welcoming the 17,000 new customers to our network,” its chief executive David Guinane said.

The bank has been a fierce competitor in the search for new deposits, attracting €2.6bn in deposits in the past 12 months ago after offering savers interest up front. It expects to increase its deposit book market share this year.

Once lauded as the only Irish bank to avoid a state bailout due to its lack of exposure to commercial property developers, Permanent TSB has been brought to its knees by its high proportion of costly tracker residential mortgages and its inability to access wholesale funding markets.

Stress tests showed PTSB needed to raise €4bn in capital, meaning that the institution has been effectively nationalised and its cash-rich life insurance business, Irish Life, put up for sale.

Question marks surround the future of Permanent TSB but yesterday it reportedly told the European Commission it is on track to turn a profit by 2014.

About 60% of its mortgage book tracks interest rates set by the European Central Bank, which have been at record lows during the financial crisis, draining the group’s profits and making it reliant on emergency central bank funding.

At the end of April, IL&P & was relying on the ECB for 30% of its funding and its loan-to-deposit ratio was 218%, compared to an industry average of 180%.

The bank reports half-year results today.

PTSB said all terms and conditions for Northern Rock’s Irish customers would remain the same, and all the deposits would come under the Irish guarantee schemes when transferred.

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