Mortgage arrears at PTSB fall 21%

There has been a 21% drop in customers in mortgage arrears between the start of the year and the end of August at Permanent TSB.

There were a total of 16,443 residential mortgage owners in arrears over 90 days at the end of August, compared with 20,800 at the start of 2014. The decrease in arrears in the buy-to-let sector has been a more modest 11.6%. There were 3,341 customers in arrears over 90 days in the buy-to-let sector at the end of August.

PTSB set up an asset management unit in 2012 to deal with customers in arrears as part of a restructuring of the troubled bank.

Since the start of 2013, it has received 27,500 completed standard financial statements from customers in arrears and 25,000 solutions have been offered, according to the head of the Asset Management Unit, Shane O’Sullivan.

“We are proposing solutions which the vast majority of customers are accepting and which we believe they will be able to abide by over the long term. We believe we are striking the right balance between recovering the bank’s capital over time and a customer’s monthly repayment capacity,” said Mr O’Sullivan.

Split mortgages account for 26% of all restructurings. “The split mortgage is a key offering and our experience is that home loan customers are very positive about the arrangement. We charge 0% interest on the warehoused section of the mortgage and we review a customer’s circumstances — typically every three years — with a view to ultimately eliminating the warehoused amount,” added Mr O’Sullivan.

“PTSB appears to have grasped the nettle on restructuring unsustainable mortgage debt and is making tangible progress on working out its stock of impaired loans. We estimate that the bank’s owner-occupier 90+ day mortgage arrears books is declining at the rate of 40 basis points per month over the course of 2014, significantly outperforming the overall market which is falling by just 13bps per month (according to Central Bank statistics),” said Merrion Capital analysts, Ciaran Callaghan.

“This positive momentum, coupled with the improving Irish economic backdrop bodes well for the PTSB’s future asset quality metrics, albeit we doubt this rate of progress can be maintained over coming years, with legal obstacles likely to eventually slow the pace of arrears decline (protracted court processes will take longer to resolve).”

PTSB is currently undergoing ECB stress tests. Mr Callaghan said that notwithstanding PTSB’s improved performance, it could face problems in the forward looking stress tests because of the size of its loss-making tracker mortgage book, which is 68% of its overall loan-book. The bank reported an underlying profit of €4m before impairment charges for the first six months of the year.