IL&P RESULTS:IRISH LIFE & Permanent (IL&P) has said it plans to raise up to €600 million in capital for Permanent TSB, before spinning off the loss-making bank in a merger which it believes could include Ulster Bank or Anglo Irish Bank.
The company has said that the bank could be a player in a “third force” in Irish banking by merging it with EBS and Irish Nationwide, which are already in merger talks.
However, finance director David McCarthy said that British-owned Ulster Bank and nationalised Anglo Irish Bank were also seen as possible partners for Permanent TSB in any consolidation across the banking sector.
IL&P posted a pretax loss of €319 million for 2009 as increased bad debts and higher funding costs left Permanent TSB with an operating loss of €270 million.
Irish Life made operating profits of €102 million. New sales in the business fell 32 per cent to €348 million in terms of annual premium equivalent in a better-than-expected performance.
The company said 7,000 mortgage customers were in arrears of 90 days or more out of 186,000 customers and that 41,000 were in negative equity.
Shares in Irish Life rose 1.9 cent, or 0.6 per cent, to €2.98 on low volumes as traders said the results attracted little interest.
IL&P plans to raise up to €600 million in capital through a “rights issue” cash call on investors but only after details emerge of Permanent TSB’s role in any merger.
This would not happen until the second quarter when the future shape of the smaller institutions participating in the National Asset Management Agency is clear, said chief executive Kevin Murphy.
The company expects to shed up to 300 people in an attempt to cut costs further, reducing its workforce from 5,200 at its peak to 4,500 at the end of this year.
Loan losses for the three years to 2011 were maintained at €800 million to €900 million.
Impaired loans totalled €828 million or 2.1 per cent of Permanent TSB’s €38.9 billion loan book, up from €202 million, or 0.5 per cent of loans a year earlier.
Gross new lending fell sharply to €1.2 billion during the year, down from €7.1 billion last year.
Top-ups for existing customers accounted for €500 million of this.
The company expects mortgage arrears to peak this year as the unemployment rate levels off.
Some 7,000 struggling mortgage customers had agreed moratoriums on their loans, said IL&P.
David Guinane, head of Permanent TSB, said that just over half these customers were paying between 25 per cent and 100 per cent of interest due on their loans.
Mr Murphy ruled out the possibility of swapping debt for equity in the homes of struggling customers as a long-term support.
IL&P expects to generate €200 million in a loan secured on Irish Life’s in-force business.
The company said this had been delayed as the Financial Regulator was “taking some time” to review it as it was an “innovative” transaction.
The company raised funding of €2 billion on the sale of a State-backed five-year bond yesterday.
Mr McCarthy said the “massive” refinancing across the domestic banks before the end of the blanket guarantee in September had “to be done in an orderly fashion”. IL&P plans to sell bonds every month.
Higher funding costs squeezed Permanent TSB’s net interest margin to 0.83 per cent from 1.05 per cent a year earlier. The decision to raise standard variable rates on €6 billion in mortgages last September raised the margin by 0.11 percentage points.
IL&P: results 2009
Operating loss:(€196m) (compares with €341m profit 2008).
Irish Life –
Operating profit:€102m (-64%).
Permanent TSB –
Operating loss:€270m
(€30m profit in 2008).
Pretax loss: (€319m)
(€364m loss in 2008).
SUMMARY
Irish Life & Permanent (IL&P) reported a loss of €319 million – or €196 million at an operating level. This was due to increased funding costs and a higher loan loss charge at mortgage lender Permanent TSB.
Lower new business sales at Irish Life, more customers lapsing on investment policies due to the recession and collapsing property values also contributed to the loss.
The company set aside €376 million to cover bad loans at Permanent TSB, up from €204 million in 2008, while higher funding costs – due to the cost of the Government guarantee and rising deposit rates – squeezed the net interest margin.
The company said it would not be profitable until 2011 by which time it expected to have offloaded Permanent TSB in a consolidation of the bank sector.
The bank’s performance this year would be similar to 2009, the company said, but there was expected to be improvement in the life company’s profits this year.
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