PTSB may not increase interest rates

Permanent TSB may not automatically raise interest rates following next month’s expected European Central Bank (ECB) hike, chief executive Eamonn Crowley indicated on Friday.

The lender’s shareholders backed its plan to buy €7.5 billion worth of mortgages and small business loans from departing rival Ulster Bank, at a meeting in Dublin.

Speaking afterwards, Mr Crowley said PTSB had yet to decide how it would respond to the ECB’s expected rise in wholesale borrowing rates.

“It depends on the pace, the size and the scale of any ECB increases,” he said. Mr Crowley said that PTSB and other Irish banks were likely to tread very carefully when it came to boosting mortgage and other borrowing charges.

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He noted that home loans were central to the bank’s business and that it was one of the leading Irish players in that market.

“We want to maintain our competitive position and be as competitive as we can be,” he responded when asked if his company would hold off on any interest rate increases.

ECB president Christine Lagarde confirmed recently that next month’s borrowing charge hike would be 25 basis points or 0.25 per cent. Most analysts believe further increases of up to 0.75 per cent are on the way later this year.

Reports show that the expected interest rate hikes are cooling Irish property price inflation, as buyers fear their banks will increase borrowing charges in response, driving up mortgage costs and repayments.

Interest rate rises would boost PTSB’s own balance sheet, Mr Crowley confirmed during the shareholders’ meeting that voted on the Ulster Bank loans.

A 0.5 per cent rise would add €40 million, he calculated. This includes €11 million that PTSB would save on what the ECB charges it to keep cash on deposit, as the European institution would also raise deposit rates.

Currently these are “negative”, which means the ECB charges lenders like PTSB for keeping excess cash on deposit with it. The remaining €29 million would come from gains on other investments that the Irish bank holds.

Shareholders overwhelmingly voted for PTSB’s proposed take over of mortgages and small business loans from Ulster Bank at an extraordinary general meeting on Friday.

The loans, totalling around €7.5 billion, consist mostly of mortgages, but also include small business borrowings and asset finance, giving PTSB bigger footholds in these markets.

State mergers watchdog, the Competition and Consumer Protection Commission, must approve the deal before it goes ahead. The regulator recently moved to a second phase investigation of the proposed transaction.

“We await their decision in due course,” Mr Crowley said.

The regulator recently required Bank of Ireland to provide €1 billion in finance to non-bank lenders and honour different discounts as a condition of allowing it to take over KBC Bank Ireland loans.

Mr Crowley argued that it was “fair to say that Bank of Ireland and PTSB are coming from two different places”. He said that taking on Ulster Bank’s loans would boost his organisation’s ability to compete.

Customers of Ulster Bank and KBC are currently switching their accounts to other banks, including PTSB. Mr Crowley confirmed it had opened three times the number of new current accounts so far this year over 2021.

He said that PTSB hope to keep on customers of 25 Ulster Bank branches that it has agreed to take on once its rival closes its business.

In a statement, the bank said that Ulster Bank’s loans would begin transferring in the final quarter of this year. “This is a major step forward in Permanent TSB’s transformation,” said Mr Crowley.