Depressing results make bank’s future even more uncertain

Another set of all-too predictably depressing results for Permanent TSB only serves to make the bank’s future more uncertain than ever.

In its last set of financial results before being formally split from the rest of Irish Life, due to occur in a few weeks, Permanent TSB yesterday reported a total after-tax loss of €424m for 2011, over €100m more than the €321m losses it generated in 2010.

The loss wasn’t a total surprise as the bank had at the end of February warned that impairment charges — to cover rising loan losses — increased by €1bn during 2011 to €1.4bn.

IL&P chairman Alan Cook said management has made “considerable progress” in preparing Permanent TSB for the future and that work continues to be done, along with the Government, on developing “a clear strategy for the bank” that will help it be “a meaningful player in the Irish banking market”.

He added that the bank is strongly positioned to face the challenges ahead.

However, Permanent TSB’s rising loan losses are a real concern and, ultimately, the only opinion regarding its future that counts will be that of the troika, which returns to Dublin for its latest quarterly check at the end of the month. It will ultimately decide on the best option for Permanent TSB and its place in any minimised Irish banking sector.

Much has been speculated upon — that Permanent TSB may be subsumed into one of the two pillar banks, AIB or Bank of Ireland; or that it may be wound down completely. Talk of it being an effective ‘third force’ in Irish banking, through a merger with EBS, seems a long time ago now.

It may be well capitalised — with a core tier-1 ratio of just under 18% — but 12% of its Irish residential mortgage book was in arrears as of the end of last year; up from 6.8% at the end of 2010.

Permanent TSB’s future may rely on two things: The Government getting clearance to move non-profitable tracker mortgages (which make up 60% of the bank’s mortgage book) from the main lenders’ balance sheets to somewhere like the Irish Bank Resolution Corporation (IBRC); and some kind of real pick-up in the housing market.

If those things happened, Permanent TSB could start lending profitably again. A wind-down of the bank, however, may take a very long time — much longer than the 10 or so years granted to the IBRC, formerly Anglo Irish Bank — given that mortgages make up the majority of its loan book.

Either way, more jobs are likely to suffer. Even if the bank does survive, it surely cannot while supporting its current branch network and employee base of 2,000 or so people.