Permanent TSB shares climb 5% as bank makes progress resolving mortgages scandal

Shares in Permanent TSB rose almost 5% yesterday after the lender detailed “progress” in dealing with loan arrears and resolving its recent mortgages scandal.

However, the shares are still trading significantly below the price the Government secured when it sold down an initial stake in the lender last spring.

In a trading update, PTSB said that it continues to work on its redress scheme for wronged customers launched in July when a Central Bank investigation revealed the full extent of a scandal involving 1,372 mortgage customers at PTSB and its Springboard unit.

It had relentlessly pursued the lenders through the courts despite the bank being responsible for the mistakes.

PTSB senior directors at the time offered their sincere apologies for the bank’s failures in not informing customers when they switched mortgages.

In a trading update, Permanent TSB has said its financial performance has improved further in the third quarter. https://t.co/a5Yg5fWUhu

— RTÉ Business (@RTEbusiness) November 10, 2015

In some cases, the actions of the bank led to customers losing their homes. Yesterday, the lender said that, of the 1,372 cases in its mortgage redress programme, over three quarters “have been redressed”.

PTSB had only recently set up a mortgage product review group to assess other tracker mortgages, but it did not say yesterday whether it had identified other serious issues at this early stage.

PTSB had put aside a provision of €120m to take account of the redress programme costs, and the lender said it did not currently intend to update the amount it had spent on the programme. It reported progress at its existing business.

Impairment charges had fallen and all of its UK mortgage book would be “deleveraged”. The bank also hinted at a conservative treatment for the way it assesses the benefits flowing from house price rises.

Arrears cases fell in the three months to the end of September. However, what it describes as “treated” non-performing loans as a proportion of all its non-performing loans has risen.

Its funding mix “improved further”, said the lender, with retail deposits accounting for 53% of its needs.

And it said its net interest margin, a measure of a bank’s efficiency, rose over the third quarter to 1.26%. It projects a “further improvement” in the net income margin through the rest of the year.

The shares, which had risen as high as €4.31 in Tuesday trading, ended at €4.25, almost 5% higher on the day.

This marks one of the largest intra-day increases since the Government sold an initial 25% stake in the lender.

However the shares continue to trade below the €4.50 sale price. Yesterday, PTSB was valued by the market at €1.918bn.

That gives a value of €1.438bn on the Government’s remaining 75% of the lender.