Shares in Permanent TSB plunged by as much as 16% yesterday as the bank reported a 55% annualised drop in first half net profit.
It also all but confirmed it would not meet its 2019 target of recommencing dividend payments and warned of the prospect of rising home repossessions due to its “unsustainably high” level of non-performing mortgage loans.
At 28% of its loan book, PTSB has the highest level of non-performing mortgage loans of any of the Irish banks. It wants to reduce that to less than 10% over the medium term, roughly meaning four to five years.
Of its non-performing loans (NPLs) 53% — or €3.1bn — are being treated through some sort of restructuring arrangements with borrowers, but 47% (or €2.7bn worth) remain untreated.
Chief executive Jeremy Masding said the time has come for the bank to tackle its untreated NPLs, saying a number of tools — including loan sales, higher repayment requirements and the “last resort” of foreclosure/home repossession — could be used.
He said material progress must be made before a block on PTSB returning to dividend payments is lifted, and that whatever option is used it is time to start bringing closure to the NPL problem at the bank and repaying the taxpayer which still owns 75% of the business.
PTSB reported underlying profits of €53m for the first half of the year. However, it took a €6m impairment charge against bad loans, pushing net profit down 55%, year-on-year, to €36m. First half pre-tax profits were €43m, 60% down on the same period last year.
That said, new lending was up by 62%, year-on-year, in the first half and PTSB’s share of the Irish mortgage market rose to 10.8%, with Mr Masding saying that level should, at least, be maintained for the foreseeable future, with flow into the second half of the year “really strong”.
While the bank is receiving medium-term ECB funding, it said its short-term funding reliance is now zero, illustrating its ability to fund itself in the immediate term.
Despite the obvious legacy issues at the bank, Mr Masding said PTSB is in “great shape” and proving its commercial worth and potential.
Management said that the bank’s level of bad loans has reduced by more than 50% since peak levels four years ago and that NPL restructuring work had to be stopped to facilitate the Central Bank’s now-completed tracker mortgage review.
PTSB’s share price ultimately closed yesterday down 14%, with the decline pulling the bank’s market value from just under €1.14bn to about €978m.
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