State-controlled Permanent TSB bank makes €999 million loss

to €999 million in spite of its impairment charges on loans reducing by €549 million.

The substantial variance was due to the fact that PTSB, which was spun out of the former Irish Life & Permanent plc last year, booked an exceptional gain of €963 million in 2011 from so-called liability management exercises relating to subordinated bond debt. These were not repeated last year.

The bank's chief executive Jeremy Masding said PTSB was unlikely to return to profitability before 2016 due to the high level of problem loans on its books, tight net interest margins and the difficult economic environment.

PTSB said the percentage of residential mortgage cases in arrears of more than 90 days, including buy-to-let, was 16 per cent of its book compared to 12 per cent in 2011. Mr Masding described this as a “huge figure” but said the numbers of arrears is tapering off. PTSB’s operating income declined by 25 per cent to €197 million while its operating expenses were down 1.4 per cent at €286 million.

The bank’s impairment charged reduced to €891 million compared with €1.44 billion in the previous period.

This gave it an operating loss before exceptional items of €980 million for 2012, down from €1.47 billion in the previous year.

Exceptional gains of €58 million were more than offset by taxation of €77 million to leave it with a bottom line figure of just under €1 billion for the year as a whole.

Rate reduction
PTSB's net interest margin tightened by 20 basis points to 0.72 per cent last year, due largely to a reduction in its standard variable interest rate. Mr Masding said this rate needs to be 1.5 per cent.

The bank paid €165 million in bank guarantee fees to the State last year, €8 million lower than 2011. The scheme is due to end later this month, which Mr Masding said would save PTSB “tens of millions of euro” this year.

PTSB also published its annual report yesterday, which showed that Mr Masding earned €407,000 from February 2012, when he joined the bank, until the year end. This comprised a salary of €353,000, a benefit in kind payment of €51,000 and other remuneration of €3,000.

Permanent TSB Group Holdings plc, which is 99 per cent owned by the State with the rump held by former IL&P shareholders, paid its non-executive directors €630,000 in 2012 down from €670,000 a year earlier.