Analysis: PTSB will need to work hard to reach 2018 goals

It's all about 2018 for Permanent TSB. This is the year when the bank's promises to investors and taxpayers on reaching a normalised lending nirvana are supposed to be met.

By then, the myriad legacy issues that have hobbled the lender since the 2008 crash should have washed through the operation, and when the various business metrics that have been laid out for the challenger bank should have been met.

Nosediving

Its 2015 full-year results, published on Wednesday, were not encouraging and resulted in the share price nosediving. The group achieved a pre-exceptional operating profit of €26 million in 2015, the first such surplus since the global financial crash. This was good news. But exceptional costs of €460 million – related mostly to deleveraging exercises – once again dragged it into the red.

Its mortgage lending growth was anaemic, at just 2 per cent. The market share of 9.5 per cent is some way short of the 13 to 17 per cent level that chief executive Jeremy Masding has mapped out for the end of 2018.

Then there’s the tracker mortgage redress scheme. The bank has set aside €140 million to meet the costs of compensating thousands of customers for its failure to apply the correct interest rates to their accounts.

The full extent might not be known until next year but it's a hefty cost on an issue that has damaged trust in PTSB, which is 75 per cent owned by the State. You'll recall that PTSB announced its initial redress scheme last July, after the Central Bank of Ireland intervened in what had been a long-running dispute with a large cohort of customers.

Some 1,372 customers were part of that scheme, and €40 million has been spent on offering redress to 90 per cent of them. Some 49 cases involved people losing their homes. It’s rather more difficult to fully compensate those people.

Elsewhere, there were improvements in PTSB’s net interest margin, its total lending, the arrears book, and non-performing loans. Its cost-income ratio reduced to 84 per cent but this is still well off the 50 per cent level that it is targeting for 2018.

Write-backs

An impairment charge of €35 million surprised analysts who had been expecting provision write-backs, as was the case in 2014. Masding said the write-backs will come in time.

He’s also believes there is a “reasonable chance” of the State being repaid the full €4 billion in bailout funds that the former Irish Life & Permanent received.

When? By 2018, if it has a strong wind at its back and stock markets recover. Now that would be nirvana. It might also be wishful thinking. We’ll have our answer in 2018.