Losses run to €166m at Permanent TSB in 2020

Home loans up in second half as share of new mortgages in Republic tops 15%, says bank

Permanent TSB is interested in acquiring at least part of Ulster Bank’s business in the Republic. File photograph: The Irish Times

Permanent TSB is interested in acquiring at least part of Ulster Bank’s business in the Republic. File photograph: The Irish Times


Permanent TSB chief executive Eamonn Crowley said the bank is seeing house prices rise despite fears that Covid-19 would send property values tumbling.

The lender reported on Wednesday that it lost €166 million before tax last year as the pandemic prompted it to set aside €155 million against possible losses on loans resulting from the economic impact of Covid-19.

Mr Crowley stressed that the mortgage-focused Permanent TSB took a “prudent approach” when doing this.

“We were leaving space for house price reductions, but critically what we are seeing is house prices going up,” he said.

Permanent TSB wants to buy at least part of Ulster Bank’s business in the Republic, which the lender’s British parent, Natwest, is seeking to offload. Mr Crowley indicated that his company could take on at least some of Ulster’s 88 branches should a deal happen.

“If we come together we would end up with a branch network that’s larger than we have. We would have better geographic coverage across the country than we have today,” he said.

The Permanent TSB chief executive did not say how many Ulster Bank branches his organisation would be likely to take on should it agree to buy the business from Natwest.

He also stressed that Permanent TSB did not intend closing any of its 76 branches as part of its own plan to cut costs. “We are not closing branches,” he said.

Mr Crowley cautioned that talks with Natwest could take a long time, while he also noted that any agreement would have to get the backing of shareholders, including the Government, which holds 75 per cent of Permanent TSB. The bank said that total new lending for 2020 fell 15 per cent to €1.4 billion as Covid-19 hit its business. New home loans were €1.3 billion last year, 14 per cent lower than in 2019.

However, Permanent TSB noted that home loans jumped 43 per cent from the first to the second half of the year. Its share of new mortgages in the Republic was 15.3 per cent.

The bank’s total operating income slipped 9 per cent to €375 million last year from €413 million in 2019.

Costs left it with an operating profit of €46 million for 2020, slightly more than half the €84 million it earned the previous year.

Along with the €155 million impairment charge, the lender had once-off expenses totalling €57 million, including a €31 million bill for restructuring stemming from cost cutting plans announced last year. These include 300 voluntary redundancies. Mr Crowley noted that talks with staff on this programme had been successfully completed.

Non-performing loans, where borrowers have fallen seriously in arrears with their repayments, were €1.1 billion in 2020, an increase of €80 million on 2019.

Payment breaks

Permanent TSB agreed Covid-19 mortgage payment breaks last year with 10,700 customers, who owed a total of €1.6 billion, equivalent to 10 per cent of its loans. By the end of 2020, 99 per cent of these breaks had expired.

“Around €19 million (103 borrowers) remained on active payment break at the end of January 2021,” said the bank.

Permanent TSB’s operating costs fell €1 million to €329 million last year. The total included €5 million in Covid-19 expenses.

In a statement, Mr Crowley acknowledged that 2020 was loss-making, but said that Permanent TSB boosted new lending and transactions in the second half of the year.

“Our active mortgage offer pipeline is at a strong level and positions us well to continue our strong performance into 2021,” he added.

Permanent TSB warned that economic recovery depended on the Government’s vaccination programme and the overall suppression of Covid-19.

Despite the uncertainty, new mortgage lending performed well at the start of the year, the bank noted.

“However, in light of the third lockdown, household spending has been curtailed, resulting in a continued build-up of deposits and a reduction in fee income due to lower transactional activity,” Permanent TSB said.