PTSB shares tumble 10% as lender unveils €166m annual profit

PTSB CEO Eamonn Crowley and CFO Nicola O'Brien: 2023 was marked by 'a robust financial performance, driven by income growth, a strong franchise and good asset quality'.

PTSB has unveiled an annual profit of €166m as the mortgage and small business lender benefitted from European Central Bank interest rate hikes, saying it will only be ready to start to lay out its policy about the timing of its first distribution to shareholders much later this year.

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. 

However, the shares, which slid 10% on Thursday, have now fallen 16% since the start of the year and are down 47% from a year ago.

Net interest income rose 71%, reflecting the ECB rate hikes and a swelling loan book and customer base, as the full benefits of the deal-making it had done with Ulster Bank in the Republic flowed through in 2023. 

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 loans 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, the lender 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. 

AIB and BoI

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 had 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, but had gained significantly since it became clear in 2021 the lender would participate in the carve up of the loan books of Ulster Bank. 

The slide of over 10% in PTSB shares on Thursday mirror similar steep falls when Bank of Ireland published its 2023 results last month. Since then, Bank of Ireland shares have recovered some ground and are now higher than at the start of the year. 

AIB appears to have been the relative winner in terms of its share price during the results season. Its shares fell 4% on Thursday, but are still 13% higher this year.  

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”. 

The bank projects that the new mortgage market will start to grow again this year to €12.8bn and then reach €13.8bn in 2025, but will still be below the €14.1bn value 2022. PTSB sees house prices rising 2% this year and in 2025.