Permanent TSB introduces new mortgage cashback initiative

Moody’s upgrades lender’s long term senio unsecured debt and deposit ratings

Under the initiatives, a customer with a €300,000 mortgage will receive a €6,000 one-off payment on loan drawdown and a payment of €30.36 to their current account each month

Under the initiatives, a customer with a €300,000 mortgage will receive a €6,000 one-off payment on loan drawdown and a payment of €30.36 to their current account each month

 

Permanent TSB has confirmed the introduction of a new scheme for homebuyers in which it will “reward” customers with 2 per cent of each monthly mortgage payment made.

The new product will be available to all residential mortgage customers until December 2027 who receive loan approval from Monday next and who make their monthly mortgage payments from an “Explore Current” account.

The initiative is in addition to the bank’s existing offering of a once-off cashback payment of 2 per cent of the value of a full mortgage.

Under the two initiatives, a customer with a €300,000 mortgage will receive a €6,000 one-off payment on loan drawdown and a payment of €30.36 to their current account each month.

New offer

Customers who have recently received mortgage approval but who have not yet drawn down their mortgage will be invited to avail of the new offer. However, it will not be available for those taking out a buy-to-let mortgage.

Permanent TSB is confident the move will help increase the bank’s market share, which has rebounded since the financial crisis. The bank’s share of mortgage lending reached 10.8 per cent in the first six months of 2017, having slumped to just 2 per cent during the recession.

Moreover, the bank’s results for the first half of 2017 showed new mortgage lending increased 62 per cent year-on-year.

“Customers are already voting with their feet to choose Permanent TSB – we expect this will result in even more customers doing so,” said Permanent TSB commercial director Mark Coan.

Cashback initiative

In a note to investors, Goodbody said the cashback initiative should help the bank to reach 13 per cent market share by 2019.

Investec analyst Owen Callan said while the bank has struggled in dealing with problem loans over the last year, it has also tried to bring genuinely innovative product offerings to the market.

“We estimate the cashback offer as equivalent to a 10 basis points reduction in the effective cost of borrowing for customers, with the product only available to new customers who also agree to open up an Explore current account and mandate their monthly salary to be paid into this,”said Mr Callan.

“It should not have any significant adverse impact on net interest margin in the short term, and will also help in PTSB’s stated goal of growing its share of current account balances,” he added.

Moody’s upgrade

Meanwhile, on Friday evening ratings agency Moody’s upgraded PTSB’s long-term senior unsecured debt and deposit ratings. It raised its ratings to Ba3 for the long term debt and Ba2 for deposts. It said the move was “driven by the expectation of a further recovery in its asset quality and profitability in the context of the supportive operating environment in the Republic of Ireland”.

It said the sale of PTSB’s non-core UK mortgage book in December 2016 had enabled the bank to reshape its funding profile, “eliminating a key structural weakness, reducing its use of expensive wholesale funding and supporting improvements in its profitability and capital metrics”.

Moody’s also upgraded the standalong baseline credit assessment for the lender to b2 from b3, which it said reflected “improvements in the bank’s credit fundamentals”.