PTSB posts annual profit of €166m and prepares payout policy to shareholders

Profits of the bank shot up due in large part to interest rate hikes from the European Central Bank. 

PTSB has unveiled an annual profit of €166m as the mortgage and small business lender benefitted from European Central Bank interest rate hikes and prepares later this year to outline a policy to distribute capital to shareholders.

The underlying profit for 2023 compares with the €45m the lender made in 2022 and marks a significant improvement for the bank that was never far from loss-making in recent years.

Net interest income rose 71%, reflecting the ECB rate hikes and a swelling loan book and customer base.

The bank’s performing loan book grew by €1.8bn to almost €21bn in the year despite the squeeze on households from the cost-of-living crisis, as the lender completed the transfer of the last of the loans from Ulster Bank.

The fortunes of PTSB were transformed three years ago when in quick succession NatWest's Ulster Bank and then the Belgian group KBC Bank announced plans to exit banking in the Republic.

PTSB acquired billions in euro of mortgage loan books from Ulster Bank, while its substantially larger rivals, AIB and Bank of Ireland also scooped up other mortgage and corporate loans from the departing banks.

PTSB is now in a position to return some capital to shareholders for the first time since before the banking crash. It said on Thursday it will announce some such distribution policy in the second half of this year.

However, PTSB said its new mortgage lending last year fell back to €2.3bn as the overall market contracted due to the mortgage interest rate increases. It secured a share of 19.2% in mortgage drawdowns last year, up from a share of 18.5% in the previous year, the bank said.

Non-performing loans at €700m were little changed in the year “with no notable deterioration in the asset quality of the bank’s loan book evident to date”, the lender said.

All three lenders have tightened their grip over mortgage and commercial banking and were exceptionally well placed to tap additional flows of interest income when the ECB started out to hike interest rates aggressively from July in 2022.

AIB earlier this week unveiled a record haul of €2bn in after-tax profits for 2023 while Bank of Ireland had announced last month it made €1.9bn in underlying pre-tax profit for the year.

Stock market investors are trying to work out whether the good times will continue this year for the Irish lenders when the ECB starts to cut interest rates.

Ahead of Thursday's earnings, PTSB shares had fallen 6% since the start of the year and were down sharply from a year ago. They had, however, gained significantly since it became clear in 2021 that the lender would participate in the carve up of the loan books of Ulster Bank.

PTSB, which is 57%-owned by the Government, is still dwarfed by AIB and Bank of Ireland, despite its deal-making with NatWest's Ulster.

Its relatively small stock market valuation compares with AIB's €12bn and the €9.25bn for Bank of Ireland.

PTSB chief executive Eamonn Crowley said that 2023 was marked by “a robust financial performance, driven by income growth, a strong franchise and good asset quality”.