Losses rise at Permanent TSB

 

Losses at Permanent TSB rose in the first six months of the year as the bank incurred higher loan losses on its commercial property portfolio.

The interim results are the first posted since the State bought the Irish Life assurance business for more than €1 billion.

Although core losses at the bank shrank slightly from the same period in 2011, to €21 million, the State-controlled bank said losses from continuing operations were €566 million after tax, compared with a profit of €413 million in the six months to June 30th 2011.

Core losses do not include provisions for impairments, gains from liability management exercises and exceptional items. Last year's figures also included a €763 million boost from a liability management exercise.

The bank’s impairment provisions rose to €437 million over the six months, up from €333 million in the prior year. Permanent TSB attributed the rise to a €92 million increase in impairments on the bank’s commercial mortgage portfolio.

Some 14.1 per cent of the banks mortgages, including investment properties, are in arrears of more than 90 days, with 13.2 per cent of owner occupier mortgages in arrears. That compares with 12 per cent and 11.3 per cent respectively at the end of December 2011.

Also included in the results was an exceptional charge of €130 million, which covered restructuring costs and a writedown on assets held for sale.

Chief executive Jeremy Masding said the bank was “under no illusions” about the challenges facing it. However, he said Permanent TSB had made progress in identifying its way forward and implementing the necessary tough decisions to recover.

“Our goal is not just to restore profitability. It’s to lay the foundations for a best-in-class retail bank which enjoys the trust of its customers and the respect of the wider community,” he said. “To get there we will have to invest in some areas while cutting costs in others.”

Mr Masding said he planned to invest significantly in resources in areas such as finance, credit and collections, and the asset management unit.

“Ultimately we need to transform the culture at the bank and increase the focus on individual accountability,” he said.

The bank has already identified measures aimed at reducing operating costs by 10 per cent or €25 million. Its restructuring plan unveiled last month involves the closure of 16 branches and the shedding of up to 250 full-time staff over the next four years.

The Government decided in April to split Permanent TSB into three units under a plan that still needs European Commission approval. It wants to create a consumer lender with initial loans of €14.2 billion; an asset-management unit to run down €12.5 billion of so-called uneconomic loans; and another division with €7.1 billion of UK mortgages.

"There is a compelling case that a viable plan can be created from the current Permanent TSB by separating out certain elements into distinct businesses," said Alan Cook, group chairman.

Additional reporting: Bloomberg

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