Permanent TSB downgraded by Standard & Poor's
STATE-CONTROLLED Permanent TSB was downgraded by ratings agency Standard & Poor’s, which said the bank faces numerous challenges in selling assets and returning to profitability.
The lender, which is 99.2 per cent State owned, was downgraded to a ‘B+’ rating from ‘BB-’ and its systemic importance reduced to “moderate” from “high” as SP said it lagged Bank of Ireland and AIB in the market.
The bank was put on negative outlook, meaning another downgrade in the short-term is possible.
The ratings agency said new lending by Permanent TSB had been “very limited” compared with Bank of Ireland and AIB, and it expected this to continue until progress had been made on the bank’s restructuring and deleveraging through the sale of assets.
“Permanent TSB should eventually prove an effective competitive alternative, leveraging off its good position in the Irish mortgage market and useful share of stock of retail deposits,” said the agency.
“Given its current relative absence from the lending market, its planned deleveraging, and the scale of changes to the Irish banking system over the past few years, we now believe that another institution could assume PTSB’s market role, or acquire some of its assets and liabilities, in the unlikely event that this became necessary.”
The Government took control of Permanent TSB last year following a €2.7 billion bailout. A further €1.3 billion was injected into the bank last month, completing its recapitalisation, after the State bought Irish Life.
Permanent TSB is being restructured, with a good bank being carved out and €12.5 billion of loans moving into an asset management unit to be sold or run down.
Standard & Poor’s said the bank will struggle to shed or run down these loans “without broader industry developments”.
The bank also has yet to implement more effective collections and arrears management, S&P said. Permanent TSB will struggle in the longer term to grow revenues, adjust costs to better reflect the smaller business and carve out a distinct retail business that can generate sustainable returns.
A spokesman for Permanent TSB said the downgrade was expected given the bank was being restructured and as a result of its separation from Irish Life.
“As we progress our restructuring plans we anticipate that the rating agency attitude to the bank will improve but that will take some time,” said the spokesman.
Permanent TSB plans to close at least 20 of its 92 branches, shed jobs and reduce deposit rates as part of the bank’s restructuring.