Permanent TSB may find comfort in smaller scale
It’s the smallest of the three Irish banks with State involvement and arguably the most challenged
Tomorrow morning, Permanent TSB, which is 99.8 per cent owned by the State, will publish its results for the six months to the end of June.
It’s the smallest of the three Irish banks with State involvement and arguably the most challenged.
The Permo was decoupled from Irish Life in 2012 and spun off into a separate company called Permanent TSB Group Holdings plc.
Welshman Jeremy Masding was hired in January of last year and given the task of making a silk purse out of a sow’s ear.
In an interview with me in March, Masding revealed that he actually considered closing the bank as a way to resolve its difficulties. In the end, he decided PTSB was worth saving and could play an important role in providing consumers with competition in what has been a shrinking retail banking sector here since the crash in 2008.
Masding’s plan was simple, relatively speaking. PTSB would follow a “bank + two” strategy. It would be a three-legged stool.
Back at work
One leg is the good bank, which is back in the market offering competitive current accounts, deposit savings and residential mortgages.
The second is its asset management unit, which has been set up from scratch and is tasked with working through PTSB’s considerable arrears problem. Based on his previous experience in this area from 20 years with Barclays Bank, Masding is convinced that PTSB has a best-in-class arrears division in the Irish market.
Leg number three is non-core. This comprises Capital Home Loans Ltd in the UK, which has a buy-to-let book, and about €9 billion in commercial real estate here. These will be run down over time.
It’s a given that the Permo will report a loss for the six-month period. It was €999 million in the red in 2012 and Goodbody has pencilled in a deficit of €770 million for this year as a whole.
It’s not clear what the figure will be for the half-year but it won’t be flattering.
Of more importance will be the updates on the progress it has made in terms of attracting new customers and in dealing with its mortgage arrears.
Terms of temptation
After a few years of being an outlier in terms of its standard variable mortgage rate, Permo is now offering more competitive terms in a bid to win new business. It recently began offering free banking to those willing to put €1,500 each month into their current accounts.
We already have a couple of indicators about how this strategy is evolving. On Monday, without much fanfare, PTSB put out a press release on its switching campaign. Buried in the middle of the release was the fact that “almost 30,000 customers have already opened a current account” with PTSB this year.