Offer price will value Permanent TSB at around €2bn

Permanent TSB has initially priced its new share offering at a range of €3.90 to €4.50 per share which should value the company at around €2bn.

The banking group earlier this month confirmed it will use a public share offering to raise the bulk of the €525m it is looking for to pay back Government loans and shore-up capital shortfalls identified in last year’s ECB stress tests. Yesterday, it announced the expected price at which it will offer shares, ahead of its flotation on the main Irish Stock Exchange and secondary share listing in London.

“The price range for the placing has been set at between €3.90 and €4.50 per ordinary share. The mid-point of the price range implies a market capitalisation, at admission, of approximately €1.934bn,” the bank said yesterday.

As already announced, PTSB is set to raise gross proceeds of €400m — for Government repayment — through a placing of new shares to institutional investors, and a further €125m via a bond sale.

An open offer, for existing shareholders, will also be launched, with the Government not participating.

Resulting from the whole capital raise, it is expected that the State will remain majority shareholder in a streamlined core-banking focused PTSB, but with a much lower stake than its current 99.2% (but possibly still up to 75%).

Yesterday, also saw PTSB announce the agreed terms of its pending repurchase of €400m of contingent capital notes from the State — the 10% interest rate- attached loan issued by the Government to the bank as part of its bailout terms.

PTSB will buy the notes for €410.5m and save itself €49m in future interest payments, in the process.

“The net benefit to the group is the saving of future interest payments of approximately €49m, offset by the premium of €10.54m,” PTSB said.

Speaking earlier this month, PTSB’s chief executive Jeremy Masding said the overall capital raising effort marks the first stage in the return of the group to private ownership status and is “another important step” in the bank’s overall journey towards recovery and sustainability.

“We are excited by the opportunity that PTSB has to be a successful and competitive force in the Irish banking sector, which we believe offers profitable growth opportunities”, Mr Masding said at the time of PTSB’s detailed synopsis of its money-raising plan, earlier in April.

“We have made significant progress in transforming the bank, which following completion of our non-core deleveraging, will have an exclusive focus on Irish retail opportunities where we believe that we have the brand and scale to achieve our medium-term targets,” he added.

Earlier this week, Bloomberg reported that PTSB has warned potential investors that a return to profit may be at risk from political pressure to cut mortgage interest rates and a potential UK exit from the EU.

Funding costs would be “materially adversely” impacted by the UK leaving the EU. A British exit “would have profound implications for Ireland,” the report quoted the company as saying.

A small group of activist shareholders has launched a High Court challenge against PTSB’s capital raising plans, its intention to sell €5bn worth of non-core assets and its aim to refloat on the Irish Stock Exchange.