Permanent TSB shares slide 10% amid calls for rate cuts

Shares in Permanent TSB, which is majority-owned by the Government, slumped over 10% yesterday adding to huge losses for the mortgage lender in the last four trading sessions, as politicians stepped up pressure for Irish lenders to cut their variable home loan rates.

PTSB is directly in the firing line because it is a specialist mortgage lender and therefore much more exposed than competitors Bank of Ireland and AIB to potential erosion in earnings from lowering mortgage rates.

The share price slump came despite PTSB, in a trading update, saying it was still profitable, but that a delay in selling the rest of its UK loan book amid uncertainty over Brexit will weigh.

PTSB shares have lost up to 21% of their value in the last four days. They traded yesterday as low as 202 cent, down 56% this year.

The Government sold 25% of the lender in an initial public offering to investors just over a year ago.

The PTSB share price fall quickened late last week after Fianna Fáil finance spokesperson Michael McGrath told the Irish Examiner of his party’s pledge to re-introduce legislation in the Dáil to empower the Central Bank to impose some sort of controls over what he described as “excessive” mortgage rates levied by Irish banks.

Mr McGrath said following the election the Dáil arithmetic favoured the legislation getting onto the statute book.

Part of the Fianna Fáil agreement struck to support the Fine Gael minority-led administration from the opposition benches includes a commitment to cut mortgage costs.

Sinn Féin, which also presented legislation in the previous Dáil pressing the Central Bank to cap variable mortgage rates, will also re-introduce an amended bill.

“Bank of Ireland and other lenders have mortgage rates which are way above the European norm,” Pearse Doherty, Sinn Féin’s finance spokesperson, said yesterday.

Bank of Ireland shares traded at 24 cent, little changed on the day. They are down almost 28% this year.

The Independent Alliance had also put reform of the banks high up the agenda in its programme for government.

The Central Bank has publicly said it believes restricting home loan rates could dissuade new entrants from entering the banking market here.

On Monday, AIB, which is all but 100% owned by the Government, and KBC announced cuts to their standard variable mortgage rates.

“The biggest reaction you are going to see if there is going to be political pressure to cut rates is on PTSB because it has €7 billion of variable mortgages on its books,” said Darren McKinley, a senior analyst at Merrion Capital.

“If variable interest rates were cut by 25 basis points it would cost PTSB earnings”, he said.

Mr McKinley said it was not in the Government’s interest as an owner of PTSB to press for the bank to cut its variable mortgage rates. He believed that pressure would be targeted elsewhere.

After the AIB and KBC cuts, competition in the mortgage market could put pressure on Bank of Ireland indirectly to lower its variable mortgage rates. Mr McKinley said there was “no doubt” any plans for an IPO in AIB had been pushed out.

Finance Minister Michael Noonan told reporters yesterday the Government will probably hold off selling a 25% stake in AIB until the first half of next year.


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