PTSB chief plays down rekindled merger speculation

Bank says capital levels will fall as it meets ECB rules to set aside more money against mortgage risks

Jeremy Masding, chief executive of Permanent TSB. Mr Masding said there is “absolutely nothing going on as far as I’m aware”. Photograph: Colm Mahady/Fennells

Jeremy Masding, chief executive of Permanent TSB. Mr Masding said there is “absolutely nothing going on as far as I’m aware”. Photograph: Colm Mahady/Fennells


Permanent TSB chief executive Jeremy Masding has downplayed reignited speculation that the lender could shoehorned into a merger with a rival, saying his team has enough work ahead of it resolving its remaining “legacy” issues and rebuilding the business.

Responding to reporters’ questions about the prospect of an industry tie-up after the group unveiled a 33 per cent jump in first-half profits to €57 million, Mr Masding said there is “absolutely nothing going on as far as I’m aware”.

It emerged earlier this month that the chairwoman of the European Central Bank’s banking supervision arm, Danièle Nouy, had suggested to Department of Finance officials in April that a merger between Permanent TSB (PTSB) and Ulster Bank could boost the health of Ireland’s financial system. PTSB is 75 per cent state owned and Ulster is a unit of UK government-controlled Royal Bank of Scotland.

Mr Masding said he does not think PTSB “is anywhere near” delivering on its own “organic” prospects, as management has been preoccupied in recent years with a restructuring plan, the tracker mortgage scandal and lowering its non-performing loans (NPLs).

PTSB ring-fenced an additional €15 million of provisions for costs relating to the tracker mortgage scandal in the first half of 2018, having previously set aside €145 million three years ago. The bank also said it was continuing to “assess all options available” on how to move up to €1.5 billion of restructured homeloans off its balance sheet, as they continue to be classified as NPLs under European Central Bank (ECB) guidelines.

Shares in PTSB slumped by as much as 4.9 per cent to €2.045 on Wednesday as the group revealed that an ECB exercise evaluating the riskiness of its mortgages will result in a bigger-than-expected dent in its all-important capital ratios.


The review of euro-zone banks’ models means that PTSB will have to recognise a total of €3.4 billion of additional risk-weighted assets against which it must hold capital. That’s up from the bank’s previous guidance of €2.8 billion.

While the impact on the bank’s capital ratio in the second half of 2018 will be partly offset by capital relief from the sale of a €2.1 billion portfolio of distressed loans, its common equity Tier 1 ratio will fall to 12.9 per cent from 13.4 per cent.

Owen Callan, an analyst with Investec in Dublin, said the combined hit from the ECB exercise and the introduction of new rules this year that force banks to set aside provisions for expected loan losses – rather than the previous regime of provisioning only when losses occurred – will “leave little room for manoeuvre on capital” for PTSB.

However, Mr Masding said he is “reasonably confident that we’ll have excess capital” after it has resolved its NPLs issue and boosted its profitability in the coming years. He said the board will then have a decision to make on shareholder dividends, which have been on hold since 2008, or investing in technology and digitalisation.


PTSB’s first-half report showed that new lending volumes increased by 50 per cent during the reporting period to €585 million, while its share of the residential mortgage market increased to 13.8 per cent from 12.6 per cent.

The agreed sale of a €2.1 billion portfolio of non-performing loans (NPLs) – known as Project Glas – in July at a discounted price will reduce the bank’s NPL ratio to 16 per cent from 25 per cent.

The bank’s net interest margin – the difference between the average rate at which it funds itself and then lends to customers – slipped to 1.77 per cent from 1.8 per cent for 2017 as a whole.

PTSB gross level of loans amount €20.3 billion at the end of June, including the Project Glas portfolio, down 1 per cent during the first six months of the year as borrowers repaid loans at a faster rate than they took on new debt.