PTSB reports 25% rise in new lending to €300m

Permanent TSB (PTSB) said on Thursday that its new lending increased by 25 per cent in the first quarter to €300 million, with analysts also cheering the bank's improving interest margins and capital reserves levels.

PTSB’s new mortgage lending grew by 19 per cent in the first three months of the year, compared with the corresponding period in 2018, the bank said in a trading statement. It said borrowers were lured by its cashback offer.

The group’s share of the new mortgage market was 15.1 per cent, up from 14 per cent year-on-year and compared to about 2 per cent at the height of the financial crisis.

PTSB chief executive Jeremy Masding, who sold €3.4 billion of the group's problem loans last year to reduce its non-performing loans (NPLs) ratio from 28 per cent to 10 per cent, said a month ago that he is planning to put another portfolio of mortgages on the market in the future as it seeks to lower its NPLs level further.

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The bank indicated in the trading statement that it may increase its loan-loss provisioning for existing distressed loans as it seeks to reduce its NPL ratio, even though fewer loans turned sour in the first quarter than expected.

Buy-to-let

At the end of March 2019, the bank had 960 properties in its possession, mainly as a result of the bank’s voluntary-surrender programme for buy-to-let borrowers. Some 200 of the properties were for sale.

“The bank expects to sell the majority of these properties through various arrangements over the next 12 months,” it said.

PTSB’s net interest margin (NIM), the difference between the average rate at which it funds itself and lends on to customers, was 1.79 per cent in the first quarter, up 0.01 of a percentage point for the margin recorded for the whole of 2018.

Full-year 2019 has started well for the bank and operating metrics are improving

“We continue to manage the cost of funds actively, which supports a NIM of 1.79 per cent,” it said. “Overall, we expect NIM to remain stable through 2019.”

PTSB’s common equity Tier 1 capital ratio, a key measure of a bank’s reserve of money to withstand a shock loss, rose to 14.3 per cent at the end of March from 14 per cent in December.

Capital generation

“PTSB has recorded a strong start to the year,” said Davy analysts in a note to clients, adding that the bank’s capital generation “was ahead of our expectations”.

Goodbody Stockbrokers analyst Eamonn Hughes said: “This looks like a decent update to us, providing reassurance that full-year 2019 has started well for the bank and operating metrics are improving.”

While Mr Hughes said that the bank is only set to deliver a “mid-single digit” return on equity, a gauge of profitability, over the medium term, its stock is trading at only a third of the estimated value of its assets. Investors typically expect a return on equity of about 10 per cent from a healthy lender.