Permanent TSB plans to stick to cash back mortgage incentives

Permanent TSB said it aims to keep its increased share of the new mortgage lending this year, as it affirmed it will extend offering cash back incentives with its home loans through 2019.

Unveiling earnings for 2018, chief executive Jeremy Masding said one of the lender’s achievements last year was winning an increased share of over 15% in new mortgage lending, adding that customers appreciated the cash back incentives.

PTSB said it aims to maintain that 15% share of new mortgage lending this year, in a market it estimates will grow to €10.2bn, and will continue to offer cash back incentives through the whole of the year.

Cash-back mortgages have been put in the spotlight by regulators and mortgage campaigners because they can make it difficult for borrowers to compare mortgage rates across the market.

Mortgage broker Michael Dowling said that PTSB relied on cash-back incentives to compete, as some rival lenders offered lower mortgage rates. PTSB “will have a challenge” to meet its market share if cash back incentives were ever withdrawn from the market, without it cutting the cost of its loans, Mr Dowling said.

The lender, which is almost 75%-owned by the Government, said it kept in the black in 2018 despite dealing with the €66m cost of selling bad loans.

Two groups of loan sales, called Glas and Glenbeigh, had helped it sharply cut its non-performing loan ratio to 10% by the end of 2018. And it was keeping its options open on ways to achieve further large reductions to meet the demands of European banking regulators.

A capital ratio of 14% gave the lender time to consider ways in time to return value to shareholders, Mr Masding said. He told reporters that tackling bad loans would ensure that the value of the bank was reflected in its share price.

After Bank of Ireland, which is heavily exposed to Brexit, PTSB shares have been the second worst performer of the Irish-listed banks in the past year.

Its shares fell 2.5% in the latest session and are now 25% lower from a year ago.

Since its turnaround, Mr Masding said the lender had the potential to expand its mortgage lending as well as personal loans.

It posted an underlying profit of €94m for 2018, compared with €65m in the previous year. However, its net profit slumped to €3m from €40m, after accounting for loan disposals and other costs. Its 2018 net interest margin – a key measure of profitability – eased to 1.78%.

After recent sales, it said that it currently holds about 1,000 repossessed properties, down from almost 1,800 at the end of 2017.