Permanent TSB made a loss of €424m last year

PERMANENT TSB, once the State’s biggest mortgage lender, made a loss of €424 million in 2011, compared with €321 million the previous year, as bad home and buy-to-let mortgages soared.

The loss was taken after a one-off gain of €1 billion from buying back debt at a discount from subordinated bondholders.

State-controlled Irish Life Permanent, reporting results for Permanent TSB ahead of its separation from Irish Life, set aside €1.4 billion for bad loans, up from €420 million in 2010.

Permanent TSB said €500 million of this increase related to a revised estimate that house prices would now fall 55 per cent from peak, compared with an estimate of 43 per cent in 2010.

A further €300 million of the charge was made after the Central Bank directed that provisions be taken for mortgages 90 days in arrears rather than 180 days. The final €200 million related to deteriorating loans at the bank.

The bulk of the impairment charge, some €1.2 billion, related to bad debts on the €25.4 billion Irish residential mortgage book. The biggest increase in impairments was on buy-to-let mortgages to landlords, which represent 24 per cent of the book.

Some 25 per cent of Permanent TSB’s Irish buy-to-let mortgages in terms of value are now classified as non-performing, compared with 11.8 per cent the previous year.

Now 99.2-per-cent-owned by the State following a €4 billion bailout, Permanent TSB took a charge of €580 million for bad debts on Irish home loans and €591 million on buy-to-let mortgages, up from €155 million and €88 million for 2010 respectively.

Arrears of 90 days or more on Irish mortgages rose to 20,816 cases, or 12 per cent of loans, compared with an industry average of 9.2 per cent in 2011 and 16,919 cases, or 6.3 per cent, in 2010.

“A key challenge for the business and for our customers is arrears, and we are working hard to manage this situation with our customers and with other stakeholders,” said Irish Life Permanent chairman Alan Cook.

Permanent TSB restructured 13,423 home loans, worth €2 billion, in 2011 to help borrowers who could not make full repayments, compared with 11,329 mortgages worth €1.7 billion in 2010.

In a majority of cases, borrowers were allowed to make lower payments that were higher than interest-only payments.

The bank borrowed emergency loans from the Central Bank last year for the first time, drawing €2.3 billion in exceptional liquidity assistance (ELA). This was on top of €12.1 billion drawn from the European Central Bank, up from €9.4 billion on average in 2010.

Fees paid to the Government for the guarantee rose to €173 million from €97 million as the bank took over deposits from Irish Nationwide in February 2011.

The loans-to-deposits ratio improved to 227 per cent from 249 per cent, as “exceptionally” low levels of new lending and higher retail deposits were offset by loan repayments. Expenses increased to €348 million from €279 million.