Permanent TSB to shut branches and cut jobs
Permanent TSB’s chief executive Jeremy Masding appeared yesterday before the Oireachtas Joint Committee on Finance, Public Expenditure and Reform to face a barrage of questions about the bank’s future, how it plans to tackle mortgage arrears and whether it plans to pass further interest rate cuts onto customers.
He declined to give the exact figure of how many job losses and branches would be closed as part of a restructuring programme the bank is conducting with the assistance of the Government and the Troika.
Mr Masding has only been at the helm since February 20 — the same month it announced it would need to make provisions of €1.4bn on the back of impairments incurred in 2011 and a posted net loss of €424m.
Permanent TSB has enjoyed something of a pariah status in the Irish mortgage market over the past few years in view of the interest rate it charged on standard variable rate mortgages, which were at one stage 6.15%. Mr Masding said the bank had brought the interest rate on SVRs in line with its competitors. “Last week, when the ECB reduced its interest rate by 25 basis points, we announced we will pass this reduction on — plus a further 10 basis points — to all variable rate customers.”
Mr Masding acknowledged some people believe the bank’s rate were stilltoo high, but given the landscape there wasn’t too much room for manoeuvre. Irish banks pay comparatively high costs for deposits, high impairment charges on loan losses and a high cost of the overall funding rate. Because of these, Permanent TSB has a high cost base and consequently it has to charge a rate on its financial products that will ultimately deliver a profit and make the bank viable in the future, he argued. He said the bank would lower the rate on its mortgages and other products once its cost of funding came down, he added.
Mr Masding said that unless the bank was successful in off-loading its loss making tracker mortgage book, which accounts for roughly 58% of its overall mortgage book, to a special purpose vehicle or some type of bad bank then the bank would not be viable in the future.
Mr Masding is currently in negotiations with the Troika and the Government and is exploring options on how this might be achieved, he told the Finance Committee.
He said they would not introduce a policy of general debt forgiveness because “that would be a catastrophe for the bank.”
Independent TD Stephen Donnelly accused Mr Masding of hypocrisy, given his earlier comments that the behaviour of the banks had contributed to the crisis and that the banks had been recapitalised with taxpayers’ money.
Permanent TSB will work with all customers in arrears on an individual basis and go through the MARS (mortgage assistance relief services) process and only then will a decision be made whether a debt write-off will be made, the bank chief executive said.
The Irish banking sector could unfold in either one of two directions, concluded Mr Masding. It could remain emasculated and reliant on support from the taxpayers or difficult decisions could be taken to return the banks to health and profitability.
