Further sale of non-performing loans likely, PTSB chief says

Permanent TSB (PTSB), which sold €3.4 billion of problem loans last year, is planning to put another portfolio of mortgages on the market in the future as it seeks to lower its level non-performing loans further, according to the bank's chief executive.

"I think there is a likelihood of a further sale," Jeremy Masding, who has led PTSB for seven years, told the Oireachtas finance committee on Tuesday.

However, he added that the size of any deal would “not be the same scale” as two transactions carried out last year. The bank still has €1.7 billion of non-performing loans (NPLs).

The 75 per cent State-owned lender cut its NPLs ratio from 28 per cent to 10 per cent in 2018 by selling €2.1 billion of soured mortgages to US private-equity group Lone Star and refinancing €1.3 billion of restructured loans in the bond market, in what is known as a securitisation deal. It is alone among the Republic’s three surviving bailed-out banks in actively disposing of owner-occupier loans portfolios in recent years.

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Euro-zone banks with high levels of NPLs are under regulatory pressure to lower their ratios to European norms, which currently stand at between 3 per cent and 4 per cent.

NPL ratio

“The bank’s residual NPL ratio of 10 per cent remains three times the European average and we will continue to work to reduce the proportion of NPLs on our balance sheet over the coming months,” Mr Masding said. The chief executive said it may take between two and three years for the bank to lower its NPLs ratio to the EU average.

Mr Masding also warned that an Opposition Bill that would prevent banks from selling home loans without borrowers’ permission would hamper the recovery of the industry from the financial crisis.

Sinn Féin's finance spokesman Pearse Doherty introduced the No Consent, No Sale Bill 2019 in January. Figures from Central Bank governor Philip Lane to Department of Finance officials and banks have argued that the draft laws would hurt the financial system, if enacted.

“Our concern is that this legislation will make it more difficult for banks to repair and strengthen their balance sheets, to deepen funding sources (including securitisation), to attract efficient capital, to increase competition or to reduce interest rates in the mortgage market,” Mr Masding said.

However, Mr Doherty clarified that the final legislation, if enacted, would exclude loans that are securitised or put up for refinancing through the sale of asset-backed securities.

Tracker scandal

Updating the committee on the bank’s exposure to the industry’s tracker-mortgage scandal, Mr Masding said the lender had completed refunds and compensation for 99 per cent of its 1,983 impacted loan accounts. However, 14 customers have chosen not to accept the payments at this point, while a further 19 – most likely now living abroad – cannot be traced, despite the use of international search agents, he said.

He reiterated that he expects the bank will – and “should” – be fined by the regulator for its involvement in the debacle.

When asked about an ongoing €500,000-a-year pay cap for banking executives and effective ban on bonuses across the industry, Mr Masding said this was an “operational risk” for the sector as an influx of financial activities to Ireland as a result of Brexit is putting pressure on banks as they seek to attract and retain staff.

The chief executive also told committee members that PTSB is set to “review the pricing and product strategy” for existing mortgage customers, following an overhaul of its offering for new fixed-rate customers. This has seen the bank lower its fixed rates for three- and five-year terms and introduce a seven-year rate.