PTSB lodges funding plan with EU regulator to close €855m gap

Permanent TSB has lodged its funding plan with the Single Supervisory Mechanism (SSM) in Frankfurt aimed at plugging the €854.8 million capital shortfall identified in the recent pan-European stress tests run by the European Central Bank.

The SSM is an arm of the ECB that this week took over direct supervision of the financial sector in the euro zone.

In a statement issued after the close of trading on the Irish Stock Exchange, the bank “confirmed that the group has . . . formally submitted its capital plan to the ECB ahead of the deadline for submissions of [tomorrow]”.

A spokesman for the bank declined to comment on the contents of the submission.

The bank is 99.2 per cent owned by the State following a €2.7 billion bailout and now has nine months to plug the capital gap identified by the ECB.

The results of the stress tests were announced on October 26th, after which the bank said it had already accounted for more than 80 per cent of the capital shortfall identified by the ECB through various actions. The actual shortfall is put at about €125 million.

CoCos

There are a number of reasons for this. PTSB has €400 million in contingent convertible capital notes, or CoCos as they are

known, that form part of its State bailout. While the bank might not convert them, as it would dilute its return on equity, it can recognise them in the capital plan as an accounting treatment.

In addition, the bank has sold some assets, most recently its Springboard subprime mortgage book in Ireland, that flatter the numbers. There are also provision releases that it can take – it has €4.2 billion of provisions on its books – and other technical items that emerged in the stress test exercise that it can use to its benefit.

The bank is also hoping to raise funding from private investors by selling a large stake in the bank. In an interview with The Irish Times after the stress test results last month, its chief executive, Jeremy Masding, said the minimum it would raise would "probably" be €200 million.

Mr Masding spent a number of days in London this week meeting potential investors in what is termed a “non-deal roadshow”. He is expected to travel to New York next week to meet other investors.

These meetings are intended to reintroduce the bank to potential investors, having effectively been off-radar since the crash of the banking sector here in 2009.

Investor canvass

The bank has engaged Deutsche Bank and Davy to advise it on its capital-raising and it plans to canvass more than 30 institutional investors and private-equity groups in Europe and the US.

Any sale of equity in PTSB would require the approval of Minister for Finance Michael Noonan and regulators.

The bank is expected to seek firm bids from interested parties before Christmas with a view to agreeing a deal by the end of next March. The bank plans to resubmit its restructuring plan to the European Commission shortly and is hoping for approval early next year.