Irish Life group may wind down Permanent TSB

THE WIND-DOWN of Permanent TSB is among the options being considered for the loss-making bank as part of the restructuring of its parent company, Irish Life &Permanent (IL&P). The other options under examination for the bank are its merger with another financial institution and continuation as a standalone entity.

“All options are being considered,” said a spokesman for the National Treasury Management Agency, which is monitoring the restructuring of the banks with the Department of Finance.

The €4 billion capital bill set for IL&P as part of the €24 billion recapitalisation of the banks will lead to the nationalisation of the bank. Plans for the execution of IL&P’s capital plan must be agreed with the Government by the end of May under the revised draft agreement governing the terms of the EU-IMF bailout.

The life business of IL&P, Irish Life Assurance, is to be put up for sale immediately and is estimated to raise about €1.7 billion of the €4 billion capital requirement. The remaining cash will be provided by the State in a move that will lead to the Government control and effective nationalisation.

Irish Life must be offered for sale by the end of October under a deadline set under the revised Government agreement with the EU and IMF as part of the bailout.

No plans were outlined for the future of Permanent TSB in the Government’s banking announcement last March or the latest terms of the bailout agreement.

The bank did not form part of the Government’s “two pillar” bank strategy to be built around Bank of Ireland and a combination of AIB and EBS building society under plans announced in March.

Minister for Finance Michael Noonan said at the time that ILP would require “a significant restructuring”. He assured customers of Permanent TSB in March that their deposits will remain fully guaranteed during the restructuring of the company.

Some €10 billion of non-core loans and other assets at Permanent TSB have been earmarked for disposal under the deleveraging plan to bring the bank’s loans closer in line with deposits.

Permanent TSB’s loans-to-deposits ratio, a gauge of dependence on external funding, is the highest across the Irish banks. About 60 per cent of its €27 billion Irish mortgage loan book are loss-making tracker products.

Meanwhile, the NTMA has appointed consultancy firm McKinsey to advise it on the mergers of EBS building society into AIB and Irish Nationwide Building Society into Anglo Irish Bank. The appointment is being made under the NTMA’s responsibility as managing the Government’s interests in the banking sector.

The AIB-EBS merger plan must be produced by the middle of this month and the legal union completed by the end of September, according to the revised draft of the EU-IMF bailout agreement.

A plan for the merger of Anglo and Irish Nationwide was submitted to Brussels last January.

Last year’s estimated loan losses at Anglo and a three-year and lifetime loss forecast on loans at Irish Nationwide are being examined by independent advisors. The Central Bank will release the findings of the independent advisers later this month.