That was the message delivered by Permanent TSB chief executive Jeremy Masding following the release of abysmal results for the first six months of this year.
There was an after-tax loss of €566 million for the period, compared with a €413m profit for the first six months of 2011. However, last year benefited from a €763m gain on the back of a liability management exercise. Provisions for impairments increased to €437m over the first half of this year compared with an impairment provision of €333m for the corresponding period in 2011.
Mortgage arrears continue to mount. The arrears rate hit 17.3% of its €18.4bn residential mortgage book and 28.4% of its €6.63bn buy to let mortgage book is now in arrears.
The loan to deposit ratio is 190% down from 227% at the end of June last year. The total capital ratio is 21.5% compared with 17.9% a year ago.
The net interest margin at the end of June was 0.76% at the end of June compared with 0.92% at the end of December 2011. The bank attributed the lower net interest margin to a higher cost of funding, particularly deposits and a lower amount of funding from the ECB.
Since his appointment last February Mr Masding has presided over a restructuring plan that will see PTSB split into three divisions: a core retail bank, an asset management unit that will deal with its toxic, mostly tracker mortgages, legacy assets and a UK residential mortgage operation.
The troika is reviewing whether this complies with competition and State aid rules. It is not know when a decision will be made but it is expected by spring 2013 at the latest. Mr Masding says he has no part in these restructuring negotiations.
Speaking following the results, Mr Masding said he expected the bank to return to profitability at the end of 2014 or the beginning of 2015. The biggest risks to PTSB stemmed from a continued “irrational banking market” whereby the cost of funding was exorbitant and the interest rate on mortgages didn’t cover the cost of funding.
The flow of arrears has improved compared with this time last year on the back of an improved collections process and better customer performance.
Mr Masding said: “We are not out of the market, we are still lending.” But only when the bank had investment in proper risk controls and a new set of products would it resume “normal” lending, he added.