Permanent TSB (PTSB) was focusing on the fallout of Covid-19 and was not weighing the "hypothetical” outcome involving a review at rival Ulster Bank, its CEO Eamonn Crowley has said.
Mr Crowley acknowledged that Permanent TSB has itself long been the subject of reports that it would be involved in merger and acquisition in the Irish banking industry but he insisted that reports of Ulster Bank winding down its operations remained “speculation”.
He was speaking to reporters after Permanent TSB executed a large sale of buy-to-let, or landlord, home loans, that will result in the value of its overall loan book shrinking to only €14.8bn.
In turn, the sale of the profit-making loans strengthens the lender’s capital base and could help it more readily bolster its lending to residential borrowers, and to increase its as yet small level of lending to SMEs, a loan book that it wants to grow.
The revelation last month that Ulster Bank’s parent, the NatWest Group had put the future of its bank in the Republic up for review raised new fears about the limited competition in banking services.
Last week, Finance Minister Paschal Donohoe met with the chief executive of Ulster Bank in the Republic, Jane Howard, and other senior executives at the bank.
The Ulster review has also raised speculation that Permanent TSB -- which is 75% owned by the Government -- would want to bid for all or parts of the €20.5bn in loans held by Ulster Bank if NatWest were to decide to wind down the lender in the Republic.
Before the future of Ulster Bank was put into doubt, Permanent TSB because of its relatively small loan book had long been thought to be the potential target of consolidation by Ulster.
However, Mr Crowley said that Permanent TSB was focused on its growth plans and in managing the payment breaks during the Covid-19 pandemic “and nowhere else”.
“But really our focus is on developing a strong Permanent TSB with a strong capital base that can compete and compete effectively against the other players in the market and that is what our interest rate cuts were about and this is what this transaction is about,” he said.
Permanent TSB said that the sale price of €1.2bn matched the book value of the loans.
The transaction involves the accounts of 3,400 landlord-borrowers paying interest-only on the buy-to-let loans.
The buyer is Citibank, which plans to syndicate the loan book. After a period of six months, Pepper Finance will service the accounts.
Unlike its previous sales of loans, the €1.2bn loan book was performing, meaning that it was making money for Permanent TSB and contributing €2m last year in operating profit, according to the bank.
Permanent TSB nonetheless said the key to the transaction was it had freed up capital for the lender, releasing reserves that it has to hold under banking regulations in case such loans went bad.
Equivalent to €200m, the released capital can go to build the bank’s core lending to residential borrowers, and its fledgling SME loan book.
On the other hand, the sale shrinks Permanent TSB’s overall loan to €14.8bn, of which around €1.1bn, or 7.7%, is non-performing.