Former Permanent TSB flotation adviser downgrades stock

One of the advisers to Permanent TSB’s share initial public offering (IPO) last year has downgraded the stock and warned that the deterioration in its profit outlook makes it “hard to see a re-rating in the short term”.

In research published yesterday, UK-based analysts at Keefe, Bruyette & Woods (KBW)downgraded PTSB to "underperform" and set a price target of €2.20 for the stock, which floated at €4.50 at the time of its IPO on the Dublin and London stock markets in April 2015.

“Asset quality trends should continue to remain a positive, but operating profits will be hit by lower-than-expected growth in Irish mortgages and higher bank levies,” said KBW. “The uncertainty in the UK has also meant a delay in the disposal of non-core UK assets.”

Joint bookrunner

KBW was the co-lead manager and placing agent on PTSB’s IPO last year, in which it raised €400 million through the sale of shares.

It was a role KBW shared with Goodbody Stockbrokers while Deutsche Bank acted as the global co-ordinator and Davy was the sponsor and joint bookrunner.

In spite of KBW’s negative sentiment, PTSB’s shares closed up 2.8 per cent in Dublin yesterday at €2.27.

KBW initiated coverage of Bank of Ireland in the same report with an "outperform" rating and a price target of 30 cent. The stock closed yesterday at just under 25 cent.

“Although the potential for re-rating is not what it was, we believe the outlook for shareholder returns is still positive, with potential aggregate returns of 24 per cent through to 2018,” it said.

“Strong levels of capital should also allow the bank to gradually return to a 50 per cent cash dividend by 2018.”

AIB capital ratio

KBW also initiated coverage on AIB but did not give it a rating. It estimates AIB will have the highest capital ratio of its peers in Europe at about 15.9 per cent.

“This should enable AIB to restart a cash dividend programme as early as the 2016 results,” said KBW, adding that it expected the State to IPO about 25 per cent of the bank next year.

Separately, Minister for Finance Michael Noonan has opened a public consultation on the current bank levy, which was introduced in late 2013 and covered the period 2014 to 2016. It is payable by banks whose Dirt payments exceeded €100,000 in 2011. The consultation will run for four weeks to July 8th.