Permanent TSB's new chief executive, Eamonn Crowley, plans to redouble the bank's efforts to crack the small-business lending market and generate more income from fees, as he acknowledged it has "a slightly higher mountain to climb" than rivals in dealing with challenges facing the sector.
Speaking to reporters on Monday, hours after the mortgage-focused bank confirmed his appointment as chief executive with immediate effect, Mr Crowley said he saw an opportunity for Permanent TSB (PTSB) to take advantage of Covid-19 leading to an increased need for SME lending.
“We are dealing with customers with regard to their mortgage but we’re not dealing with regard to their business requirements – and that is an opportunity for us,” he said. PTSB’s SME lending amounted to €47 million last year having more than doubled off a very low base in 2018.
Mr Crowley (51), who joined the bank three years ago as chief financial officer, also signalled that he would be focusing on increasing the bank's fee income. He highlighted that the bank generates only 10 per cent of its income from fees, compared with 30 per cent at Bank of Ireland and AIB and 20 per cent at Ulster Bank.
“We’ve an opportunity by way of how we think about fees but that opportunity has to be balanced on the basis that we’re providing a service for customers and providing value to customers,” Mr Crowley said.
The outgoing chief executive, Welsh banker Jeremy Masding, has over the past eight years saved the bailed-out bank from being wound down, secured European Union approval for a restructuring plan, returned the business to the main stock market and presided over a reduction in non-performing loans from 28 per cent of its portfolio to about 6 per cent. He plans to return to the UK with his family later this summer.
Mr Crowley takes over at a time when PTSB and the wider banking system is preparing for a surge in bad loans as a result of the economic shock caused by Covid-19 – and the prospect of already ultra-low interest rates remaining in place for an extended period of time. PTSB has the lowest net interest margin, smallest balance sheet and the highest cost level, relative to income, among the banks in which the State has a stake.
The bank forecast last month that it would take a €50 million bad-loans charge in the first half of this year as a result of the coronavirus crisis. While it warned that the “outlook for profitability is challenging”, it said that it was confident its capital reserves level would remain above minimum levels required by regulators, even after assessing “a range of scenarios”.
The bank has approved payment breaks on 10,000 loans, equating to 9 per cent of its total loan book by value.
New lending is expected to fall by as much as 50 per cent from the €1.7 billion figure delivered in 2019, while non-interest income will also be dented by lower business activity, it said at the time.
Mr Crowley declined to give an update on guidance ahead of first-half results being reported at the end of July. However, he said that mortgage applications, which fell off a cliff in recent months as a result of Covid-19 restrictions and market nervousness, have begun to pick up again.
“We’ve seen in the last week or so that they’ve increased slightly so there’s a start of momentum coming back into the market – but it’s still at a low level,” he said.
