Permanent TSB may need more capital amid loan-sales push

Shares rating downgraded over nonperforming loans and ‘regulatory headwinds’

Permanent TSB on Grafton Street. Photograph: Alan Betson

Permanent TSB on Grafton Street. Photograph: Alan Betson


Permanent TSB faces the risk of needing to raise additional capital as it sells bad loans amid pressure from regulators, according to analysts at US investment bank Keefe, Bruyette & Woods.

The 75 per cent State-owned bank hired consultants EY in September to advise on loan sales as it prepares to move decisively on €2.68 billion of its worst mortgages. These are loans in default that remain “untreated”, either because the bank can’t find a sustainable solution or the borrowers haven’t engaged.

PTSB has the highest ratio of nonperforming loans among Ireland’s bailed-out banks, at 28 per cent of its portfolio at the end of June, even as it and wider industry have cut arrears cases at pace since their 2013 peak. Untreated nonperforming loans account for almost 13 per cent of its loan book.

The European Central Bank is piling pressure on banks with high nonperforming loans levels to come up with credible strategies to reduce them to single-digit percentages in the coming years or face additional supervisory, provisioning and capital demands.

Rating downgraded

Keefe, Bruyette & Woods (KBW) analysts downgraded their rating on PTSB’s shares on Tuesday to “underperform”, citing “regulatory headwinds to capital and uncertainty around the ability to dispose nonperforming loans without needing additional capital”. A spokesman for PTSB declined to comment on the report.

PTSB’s problem has been compounded by the fact that it was forced to sell its largely performing UK mortgage portfolio in the past two years under an EU restructuring programme tied to its €2.7 billion bailout in 2011.

PTSB raised more than €500 million of capital, mainly by way of equity, in 2015 after failing the last round of European bank stress tests.

Profits at PTSB helped the bank build its so-called transitional common equity Tier 1 capital ratio – a key gauge of a bank’s financial stability – increase to 17.4 per cent in September from 17.1 per cent three months earlier. That’s well above the 11.45 per cent minimum target set by the ECB for the bank for this year.