Permanent TSB plays down concerns of mortgage arrears crisis as it posts €57m loss
Permanent TSB posted a loss of €57m for the first six months of the year as the mortgage lender took on €75m of loan impairments as the Covid-19 economic fallout hit hard.
However, new chief executive Eamonn Crowley played down suggestions that the Irish banking industry was heading for its second arrears crisis in under a decade, saying that the comparisons with the last financial crisis were imprecise.
Permanent TSB has in all provided 10,500 mortgage payment breaks since the onset of the Covid crisis, representing at one time a tenth of its loan book, but up to half of those customers have since resumed paying.
Mr Crowley said that those customers who had availed of payment breaks had restarted their payments when they returned to employment as large parts of the economy opened up again.
Mortgage brokers and debt advisers have warned that mortgage arrears will again scar many households when the second stage payment breaks offered by Irish lenders start coming to an end at the end of September.
“It is, I’d suggest, different from the last global financial crisis by way of the characteristics of customers who have difficulties in this area,” Mr Crowley said.
The extent of the mortgage arrears crisis will be linked to the number of jobs coming back as the economy opens up but there would nonetheless be a number of the customers availing of the payment breaks who will need assistance at the end of the six-month breaks, he said.
Permanent TSB said it had modelled for a fall in house prices this year but it appeared that commentators were now predicting less sever house price declines, Mr Crowley said.
Its new residential mortgage lending fell to €526m in the first six months from €610m a year earlier but volumes have increased in recent weeks, the bank said.
Personal lending in the period had fallen to €45m from €71m a year earlier, while lending to SMEs had declined to €25m from €31m.
The €75m charge for impairments which reflects “the impact of the deterioration in the forecast Irish macroeconomic outlook arising from Covid-19” compares with only €5m at the half-way stage in 2019.
And the loss of €57m loss compares with a profit of €28m a year earlier. At the end of June, the lender had €1.1bn of non-performing loans, a ratio of 6.8%.
Shares in Permanent TSB, which is 75% owned by the Government, fell 2%, to bring the losses in the past year to 58%.
Shares in the two largest lenders, AIB and Bank of Ireland, which report their half-year results this week rose in the latest session. Their shares have also slid in the past year, by 61% and 52%.
Permanent TSB reiterated its plans to increase lending to small firms as a path toward building its loan book.
“As customers embraced the Government imposed lockdown, the bank saw new business volumes and transactional banking activities reduced to levels lower than the bank has seen in recent years, but we are pleased to say that volumes have increased again as the phased approach to opening up the Irish economy emerges,” Mr Crowley said.
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