PTSB joins rivals in hiking forecasts on rising interest rates

Lender is benefitting from takeover of Ulster Bank loans

Permanent TSB (PTSB) has joined its two larger Irish rivals in upgrading its full-year financial forecast amid ongoing central bank rate hikes and as the bank increases its share of mortgage lending, even as activity in the wider market is showing signs of slowing.

The bank now sees its total income rising 65 per cent this year to €680 million, some €30 million, or 5 per cent, higher than previously guided, as European Central Bank (ECB) rates have risen more than previously assumed. PTSB sees the official deposit rate ending the year at its current 3.75 per cent level, up from 2 per cent at the end of 2022.

PTSB has also raised its underlying pretax profit forecast by 13 per cent to €180 million. The new projection compares with a figure of €45 million reported last year.

Group costs are expected to fall below 65 per cent of income this year compared with its prior forecast of below 70 per cent. Its medium-term goal is to reduce the ratio to about 50 per cent, which is widely seen as a key goal for retail banks internationally.


The group’s loan book increased by 42 per cent year on year to €21.1 billion as of the end of June, as the group gradually took over €6.25 billion of mortgage and small business loans from Ulster Bank as the latter retreated from the Irish market. A final batch of €500 million of asset finance loans transferred last month.

The company swung to an underlying profit of €86 million from a loss of €2 million for the same period last year. Total operating income rose 81 per cent on the year to €323 million, driven by the Ulster Bank deal and rising rates.

The improved outlook has come as little surprise to investors, following moves in recent days by AIB and Bank of Ireland to lift their forecasts as ECB rate hikes feed through to tracker mortgages, banks pass on some of the official interest increases to other borrowers, and they earn interest on surplus deposits stored with the Central Bank of Ireland. Shares in PTSB lost 3.5 per cent on Wednesday, but remain up almost 60 per cent on a 12-month basis.

PTSB’s total new mortgage lending rose 41 per cent in the first half to €1.3 billion, giving it a 23 per cent share of the market. That is well up from 16.3 per cent in the middle of last year. However, the bank now sees the Irish mortgage lending market declining by 11 per cent this year to €12.5 billion, mainly as a result of a fall-off in switching activity that had fuelled the market last year.

Still, the underlying market – excluding the switcher proportion – is expected to grow by about 10 per cent, it said.

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“The bank has made enormous progress over the past two years – with greater scale and diversification, an enhanced digital offering, a larger branch network, a bigger team of highly skilled and committed colleagues, and many more customers than before,” said chief executive Eamonn Crowley.

“Despite a challenging economic backdrop, we look forward to the remainder of the year with confidence. We are committed to supporting our customers in the face of cost-of-living pressures. We are and we will deliver on our ambition to provide real competition in the Irish retail and SME banking market.”

Mr Crowley told reporters that PTSB “is not seeing any particular stress” among home loan borrowers, as Irish employment levels remain strong and almost two-thirds of its mortgages have been written under lending restrictions set by the Central Bank in 2015 to avoid a future repeat of the post-crash arrears crisis.

Still, the bank set aside €9 million of loan-loss provisions, reflecting its expectation that Irish home prices will dip by 1 per cent this year. At the start of 2023, PTSB was factoring in 4 per cent growth in residential property prices.

The chief executive noted that day-to-day trading activity in PTSB shares had picked up since the Government and Ulster Bank’s parent, NatWest Group, sold a combined 10 per cent of the bank’s stock on to the market in early June.

NatWest received a 16.7 per cent stake last year as part-payment for Ulster Bank loans sold to PTSB. The share placing reduced Irish taxpayers’ stake in the bank to 57.4 per cent, while NatWest’s fell to 11.7 per cent.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times