PTSB raises €500m in green bonds to help fund cheaper loans for homes with high energy ratings

PTSB raised €500 million on Wednesday from the sale of green bonds, joining its largest rivals in tapping this fast-growing part of global debt markets and boosting more climate-friendly lending.

The senior notes were priced to carry a coupon, or interest rate, of 4.25 per cent and attracted some €2.2 billion of orders from investors.

The bank issued about €700 million of green mortgage loans last year, accounting for almost a third of its new home loans. Homes with a building energy rating (Ber) of B3 or higher are eligible for green mortgages among Irish lenders and are typically priced more cheaply than standard home loans.

PTSB’s green three-year fixed-term loans start at 4 per cent, while a standard mortgage for the same term starts at 4.75 per cent, according to figures on the lender’s website.

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“Today’s outcome is a strong statement of confidence from the investor community in the excellent progress PTSB is making in evolving our business and diversifying our investor base and funding sources,” said the bank’s chief executive Eamonn Crowley.

AIB was the first Irish retail bank to venture into the green bonds market, in late 2020, while Bank of Ireland moved into it in March 2021. PTSB has sold its green bonds through a holding company at the top of its corporate tree.

Green bond sales have boomed in recent years, with investor demand growing for socially responsible investment opportunities. Green debt sales grew to $492.30 billion (€455bn) in 2023 from $446.18 billion the previous year, led by Europe, which made up nearly half of the global market, according to Climate Bonds Initiative data.

The increase came even as most global central banks raised interest rates, weighing on the wider international debt markets.

New EU standards for green bonds sales – which take effect in January 2025 – will add additional support to the debt market, said analysts. They aim to improve the transparency, comparability and credibility of the green bond market, helping investors assess the environmental, social and governance stance of debt issuers more closely.

“PTSB’s business mix, dominated by residential mortgages, and lack of commercial real estate exposure make it an attractive issuer from a credit standpoint,” said analysts at stockbroker Goodbody. The fact that the bank has to set aside higher levels of capital against new mortgages than its Irish rivals “provides further comfort to credit investors”, it added.

PTSB’s non-performing loans ratio has fallen to 3.3 per cent from a peak of 28 per cent in 2017.

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