Permanent TSB may repay €2.7bn to State by 2018

Permanent TSB's chief executive Jeremy Masding believes the bank could return to full private ownership and have repaid its State bailout of €2.7 billion by the middle of 2018.

This follows the lender’s success yesterday in raising €525 million from capital markets through the sale of €400 million worth of shares and €125 million via a debt instrument.

The stock was priced at €4.50 a share, the top of the price range indicated last week. It follows what Mr Masding described as “exceptional” investor interest in the bank, which fell into State control in 2011.

Speaking to The Irish Times, Mr Masding said that, based on the business plan presented to investors in recent months and a continued recovery in the Irish economy, a return to private ownership was possible by the end of 2017 or mid-2018.

Bailout funds

“Returning the bank to private ownership is my goal and, based on the business plan presented to investors, that timeframe is a realistic objective,” he said. “The Minister could see that as an achievable objective but the final decision would be with the Minister.”

Mr Masding also believes the State might now get all of its bailout funds back, having stated on several occasions previously that this was unlikely.

This view was based on “what I’ve seen in the past couple of months” and was a “much more realistic objective” than when he joined the company in 2012, he said.

To achieve these goals, Mr Masding said PTSB would need to complete its deleveraging of non-core assets, address issues around its mortgage pricing and arrears, succeed in operating as a challenger bank and contribute to Ireland’s economic recovery.

It is understood PTSB will address the issue of its standard variable rate in the next six to eight weeks.

The bank will pay €410.5 million of the funds raised to the Government through the repurchase of the State’s contingent capital notes. In addition, the Government is selling 21.8 million shares in the group for €98 million.

All of this will have the effect of netting the State €508.5 million and reduce its holding in the company to 75 per cent from 99.2 per cent. With the bank’s market capitalisation set to be €2.07 billion on admission to the main stock markets in Dublin and London, the Government’s remaining stake in the business will be worth about €1.5 billion.

Capital hole

The identities of the new investors were not revealed but they are believed to be from the United States and Europe.

PTSB also raised €125 million through the issue of AT1 capital with a competitive coupon rate of 8.625 per cent. This money will be used to plug the capital hole identified in regulatory stress tests last October.

The bank also plans an open offer to existing retail shareholders, who own the residual 0.8 per cent of shares in the bank. This will be on the same terms as offered to the new investors and will close in three weeks.

Minister for Finance Michael Noonan said the capital raising was an "important milestone" for PTSB and expressed his satisfaction at the State retaining a "valuable" 75 per cent holding in the bank.

“The move to the main markets on both the Irish Stock Exchange and the London Stock Exchange [where it will be listed from Tuesday next] is a positive for the bank and allows the State additional flexibility and liquidity to manage its sell down of PTSB in the future,” Mr Noonan said.