PTSB shares fall as mortgage market share dips and broker cuts forecast

Bank says that some mortgage customers coming off fixed-rate periods are now opting for variable rates for the first time in years

PTSB’s shares fell on Wednesday as its share of new mortgage lending contracted in the third quarter and its corporate broker signalled that it plans to lower income growth estimates for the bank for next two years.

The bank, which rebranded this month from Permanent TSB, said in a trading statement that it share of mortgage market drawdowns was 20.7 per cent for the first nine months of the year.

This implies that its slice of activity narrowed to 16 per cent in the third quarter from 23.1 per cent recorded for the first six months of the year, according to Goodbody Stockbrokers analyst John Cronin.

PTSB also said that some mortgage customers whose fixed rate period was coming to an end are now opting for a variable rate “for the first time in a number of years”.


The bank’s five-year fixed mortgage rate for loans of up to 80 per cent of the value of a property currently stands at 4.95 per cent, while its variable rate is 3.9 per cent, according to its website.

Diarmaid Sheridan, an analyst with Davy, PTSB’s corporate broker, said slowing new mortgage lending, deposit growth and customers increasingly opting for variable rates will likely result in him cutting his 2024 income growth forecast for the bank to 10 per cent from 12 per cent. Mr Sheridan also expects to tweak his 2025 estimate from 10 per cent to 9 per cent.

“Growth in deposit and new mortgage lending has slowed. Although this will not impact 2023, it will likely result in a lowering of our 2024 and 2025 forecasts,” said Mr Sheridan.

“Nonetheless, the investment case for PTSB remains intact: growing income and improving efficiency resulting in higher returns, coupled with capital efficiency, are not factored into current [stock] valuation levels.”

Still, shares in PTSB closed 3 per cent lower in Dublin at €1.93.

The bank said new mortgage lending increased by 11 per cent in the first three quarters of the year to €1.8 billion, even though the mortgage market was down from 10 per cent as switching activity slumped. However, PTSB’s new mortgage lending had been up 41 per cent in the first half of the year.

Could a Supreme Court decision have huge implications for workers in the gig economy?

Listen | 30:20

The contraction of PTSB’s share of new mortgage activity in the third quarter comes even as mainstream banks have been winning back market share ceded to nonbank lenders in recent years. Banks have generally been able to offer more attractive rates due to their reliance on cheap deposits for funding. Non-banks must finance themselves on the wholesale and capital markets, where funding costs have soared amid rising official interest rates.

The European Central Bank (ECB) has hiked its main lending rate from zero in July 2022 to 4.5 per cent, though it is widely expected to keep rates on hold after a meeting of its governing council on Thursday.

The mortgage market in Ireland is expected to shrink by 11 per cent this year to €12.6 billion of new lending, driven by a fall-off in switching activity, PTSB said, citing Goodbody Stockbroker estimates.

PTSB’s net interest income rose 93 per cent during the first nine months of the year, amid rising rates and as it bedded in loans acquired from Ulster Bank, which is exiting the market.

The group’s total performing loan book has increased by almost 50 per cent since the middle of last year, as it gradually took over €6.75 billion of mortgage, small business and asset finance loans from Ulster Bank. PTSB’s performing portfolio stood at €20.9 billion at the end of September.

Non-performing loans stood at €700 million at the reporting period, in line with a year earlier. However, the non-performing loans ratio declined to 3.3 per cent from 4.8 per cent, as a result of the acquisition of former Ulster Bank loans.

‘The bank continued its positive business and financial performance in the third quarter of the year and so remains in a strong position to continue to support our customers, the Irish economy and our shareholders,” said chief executive Eamonn Crowley.

“Asset quality remains robust and we continue to take a measured approach with respect to the impact to our customers of ECB interest rate rises.”

A private equity company controlled by Panda Waste founder, Eamon Waters, last week revealed that it now holds a 7.02 per cent stake in PTSB, having more than doubled its holding from when it first disclosed an interest in June.

The move makes Mr Waters’s Sretaw Private Equity vehicle the third-largest shareholder in the bank, after the Irish State at 54.7 per cent and Ulster Bank’s UK parent, NatWest Group, which owns 11.7 per cent. NatWest received shares in PTSB as part payment for loans purchased from Ulster Bank.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times