Permanent TSB may absorb initial ECB rate hikes, CEO says

The first transfer of loans from Ulster Bank to Permanent TSB is scheduled to begin in the final quarter of this year

"I think it's fair to say that Irish banks, given their liquid position and given where they are, can withstand for a portion of time some of those interest rate increases," Eamonn Crowley (pictured, right) said. Photo: Fennell Photography

Permanent TSB may choose to absorb the first two rounds of European Central Bank interest rate hikes and not increase its own mortgage pricing in a bid to grow its market share, the bank's chief executive has said.

The ECB outlined plans this month to end quantitative easing on July 1 and then raise rates by 25 basis points on July 21. It plans to hike again on September 8 and go for a bigger move, unless the inflation outlook improves in the meantime.

"I think it's fair to say that Irish banks, given their liquid position and given where they are, can withstand for a portion of time some of those interest rate increases," Eamonn Crowley told reporters after the company's AGM.

"You could imagine the first couple of moves being okay, it depends on the pace and the size and the scale ... No decisions have been made, no strategies have been adopted but we want to maintain our competitive position, that's the key message."

The majority State-owned PTSB is the third-largest mortgage lender in Ireland with a 17% share of the market at the end of March.

Crowley said the bank estimates it would make a €40m gain from a 50 basis point rate hike as it would no longer be charged for holding excess cash and its stock of mortgages that track the ECB rate would automatically reprice.

He also said the bank's pipeline of approved mortgage loans continues to increase and that he expects the Irish mortgage market to keep growing through the current cost-of-living crunch due to the demand for loans far outstripping housing supply.

PTSB shareholders also approved the €7.5bn deal to buy mortgage and business loan books, branches and the asset finance business of Ulster Bank.

The first transfer of loans is scheduled to begin in the final quarter of this year following thousands of current account holders who have been closing their accounts with Ulster and KBC banks.

“This is a major step forward in Permanent TSB’s transformation," Crowley said. "It paves the way for us to complement our organic growth, serving more customers, widening our range of products and services, and using our greater scale and bigger branch network to drive competition in the Irish retail banking market."

Reuters