Permanent TSB shares drop after bank posts €425m loss

Shares in Permanent TSB closed down by 7.3 per cent in Dublin on Wednesday after announcing losses of €425 million for 2015.

The stock had traded down by more than 13 per cent at one point but rallied towards the end of trading.

In an interview with The Irish Times Business Podcast on Wednesday, PTSB chief executive Jeremy Masding said the price volatility was largely due to a lack of liquidity in the stock, which has a free float of just 25 per cent following its IPO last year.

“There is not a lot of liquidity in our stock. If you have a lack of liquidity in the stock one small transaction can make a huge difference to the volatility in the price,” he said, while also noting that bank shares across the board have been out of favour this year. “At the end of the day this is a long-term investment story. One day’s trading doesn’t reflect where we’re taking the organisation.”

PTSB’s loss last year was four times the deficit recorded in 2014. This resulted from exceptional items of €460 million from deleveraging costs, which wiped out its operating profit of €26 million.

Ironically, this was the group’s first underlying profit since 2007, and represented a turnaround of €65 million in its operating performance on the previous year.

However, the exceptional costs dragged the company into the red. These comprised losses on the sale of loans, the repurchase of capital contingent notes, and €7 million in restructuring costs.

Mr Masding said the bank has one more large sum of exceptional costs to incur, relating to the £2.4 billion of non-core mortgage loans at its Capital Home Loans business in the UK. This is expected to be sold this year.

New lending rises

PTSB, which is 75 per cent owned by the State, said new lending amounted to €519 million last year, up 6 per cent.

Gross mortgage lending amounted to €459 million, an increase of 2 per cent on 2014. The bank said it was not satisfied with this level of growth.

Its market share of new home loans was 9.5 per cent, well short of the 13 to 17 per cent range it has set itself to achieve by 2018.

“In response, we have launched an attractive new mortgage proposition, which we believe offers the best value in the variable rate segment,” the bank said.

Its net interest margin increased by 22 basis points to 1.12 per cent while its cost-income ratio fell to 84 per cent from 126 per cent in 2014.

PTSB booked an impairment charge of €35 million during the year, when analysts had been expecting provision write-backs.

On a brighter note, its non-performing loans declined by 27 per cent to €6.1 billion.

In terms of outlook, PTSB said the growth in the Irish economy provided a “strong backdrop” for the group’s “targeted return to sustainable profitability” but added that there were headwinds, including the increasing cost of regulation, resolving legacy issues, limited housing supply, and deteriorating market dynamics in the UK mortgage market.