State and NatWest launch surprise sell-down of Permanent TSB shares

Both move to take advantage of hike in value by selling about 3% of PTSB’s stock

Permanent TSB chief executive Eamonn Crowley: Shares have soared almost 140 per cent since it emerged in February 2021 he was in discussions to buy much of Ulster Bank’s loan book after NatWest confirmed it was pulling out of the Republic. Photograph: Nick Bradshaw

The Government and UK banking giant NatWest moved on Thursday evening to start a surprise sell-down of some of the shares they each hold in Permanent TSB (PTSB), taking advantage of how the stock has soared more than 50 per cent in the past 12 months.

They each moved after European markets closed to place about 3 per cent of PTSB’s stock on the market in a co-ordinated move. It marks the first time the State, which committed €4 billion to PTSB during the financial crisis, has sold shares in the lender since 2015.

NatWest received a 16.7 per cent stake late last year as part payment for loans it sold in its Ulster Bank unit to PTSB. The share sale will reduce its holding to 13.6 per cent. The State’s holding will reduce from 62.4 per cent to 59.4 per cent.

“Permanent TSB welcomes the announcement this evening of the intention of the Minister for Finance and NatWest to sell a portion of their holdings of the bank, reflecting the strong progress made by the bank in recent years,” a spokeswoman for PTSB said.

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Shares in PTSB have soared almost 140 per cent since it emerged in February 2021 that its chief executive, Eamonn Crowley, was in discussions to buy much of Ulster Bank’s loan book after NatWest confirmed it was pulling out of the Republic. The price surge has also been fuelled by rising interest rates.

PTSB’s purchase of €6.1 billion of mortgages and €165 million of microbusiness loans since last November from Ulster Bank, and imminent purchase of the UK-owned lender’s Lombard Asset Finance Business, has transformed the prospects of the bank.

Central Bank rate hikes, with the European Central Bank’s main deposit rate having jumped from minus 0.5 per cent last July to 3.25 per cent, have also lured investors into PTSB and other banks.

Minister for Finance Michael McGrath is expected to raise about €35 million from the share sale, which would increase the amount recouped by the State since its €4 billion bailout in 2011 to about €2.74 billion. The total includes cash received from the sale of PTSB’s former sister company Irish Life, as well as a previous share sale, redemption of bailout bonds, guarantee fees and interest payments. Its remaining stake – after the share placing – is currently worth a little over €710 million.

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PTSB forecast in March that its return on equity (RoE) – a key measure of profitability relative to shareholders’ equity in the business – will rise to 13 per cent over the medium term. Analysts generally see an RoE ratio of between 8 per cent and 10 per cent as a sign of a healthy bank. PTSB was delivering an unsustainably low RoE of between 2 and 3 per cent before the pandemic and announcements by the parents of Ulster Bank and KBC Bank Ireland that they were quitting the Republic.

However, sources told The Irish Times last month that PTSB, which has not paid a dividend since before the financial crisis, is unlikely to be in a position to return to making payouts to investors for at least two years.

PTSB, which has been blocked by regulators from paying dividends since the financial crisis, is alone among the State’s three surviving domestic banks in not having returned to making distributions to shareholders since the 2008 crash.

The State sold its remaining crisis-era shares in Bank of Ireland last September and has continued to make headway reducing its holding in AIB.

AIB agreed last month to buy back €215.3 million worth of the Government’s shares in the bank, reducing its stake to 53.4 per cent. The Government had a 71 per cent stake in AIB at the beginning of January 2022, when the Government started a programme of selling down stock through a combination of drip-feeding shares on to the market, the placing of large blocks of stock on to the market and participating in share buybacks.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times