Permanent TSB shares surge on budget help-to-buy scheme

Shares in Permanent TSB surged to a fresh five-month high on Wednesday morning as analysts concluded the lender would be the main beneficiary from the Government's help-to-buy scheme aimed at first-time buyers.

The 75 per cent State-owned bank’s stock rose as much as 6.15 per cent in early trading on Wednesday to €2.33, though it is currently changing hands at almost half the €4.50 price at which PTSB and the Government sold shares in the group last year.

Bank of Ireland shares were also in demand, rising as much as 1.7 per cent to 17.6p, as the focus moved, for the moment at least, off the 40 per cent exposure of its loan book to the UK.

Tax rebate

Under the plan unveiled in the budget on Tuesday, first-time buyers of new homes will receive a rebate of income tax paid over the previous four years, up to 5 per cent of the purchase price of a new home valued at up to €400,000. Crucially, Minister for Finance Michael Noonan said the Central Bank had agreed to include any rebate under the scheme in calculating the deposit require for a mortgage under the regulator's home-loan restrictions, introduced last year.

"Permanent TSB is a pure play on Irish residential mortgages, whose profits until now have been weighted down by tracker-mortgage rates on legacy mortgages, provisions against impaired loans, high funding costs and a focus on meeting regulatory and capital requirements," said Merrion Capital analyst Darren McKinley in a note.

Davy analyst Emer Lang said first-time buyers acquiring newly-built homes accounted for just 2 per cent of transactions.

“The measure, which runs until the end of 2019, should be positive for the mortgage market, which at €2.3 billion [of] advances in the first half of 2016 remains well below a sustainable level,” said Ms Lang.

While mortgage lending peaked at about €40 billion at the height of the property bubble in 2006, analysts estimate that a sustainable level of lending at between €8 billion and €10 billion a year.

Separately, Ireland’s only publicly-quoted house-builder, Cairn Homes, saw its shares surge as much as 2.4 per cent in London, to almost €1.18.