Statements & Blogs


Key Points:

  • Profit Before Exceptional Items and Tax of €53 million
  • Net Interest Margin increased by 38 basis points to 1.81% from 1.43% in H1 2016
  • Operating Expenses reduced by €8 million (5%) Year-on-Year (‘YoY’)
  • Low Impairment Charge of €6 million
  • Fully Loaded CET1 ratio increased by 10 basis points to 15.0%
  • Over 20,000 Current Accounts were opened
  • Total New Customer Lending increased by 61% YoY to €392 million

Jeremy Masding, Chief Executive, said:

“The business is in great shape and growing strongly. In the first half, we continued to generate profits and our competitive performance was excellent, with new lending growth outperforming the market and our new Explore current account exceeding our expectations.

Whilst acknowledging there are legacy challenges, which we are addressing robustly, we are well placed to take advantage of the opportunities presented by Ireland’s fast-growing economy. We will do this by competing vigorously, innovating continuously and delivering more of what our customers want.”

Business And Financial Performance

During the first half, we acquired new customers through our Current Account product ‘Explore’ and opened over 20,000 new accounts.

New Mortgage Lending grew strongly by 62% YoY while the overall market to the end of May 2017 grew by approximately 35%[1]. As a result, our market share of drawdowns increased to 10.8%1. Term Lending also grew by 59% YoY. Approximately 25% of new Term Lending was originated via online channels as customers responded positively to our new online offering.

NIM improved to 1.81% in the first half primarily reflecting the completion of Non-Core deleveraging in Q4 2016, lower Cost of Funds and prudent balance sheet management.

Operating Expenses (excluding Regulatory Charges) reduced by €8 million (5%) YoY mainly due to a reduction in professional fees and project related costs. Regulatory Charges amounted to €18 million, a reduction of €7 million YoY, primarily due to timing differences. Regulatory Charges are expected to total approximately €55 million for the full year 2017.

The Impairment Charge for the first half was €6 million. This compares to a write-back of €61 million for the same period in 2016. The write-back for 2016 consisted of €35 million resulting from a House Price Inflation related adjustment and €26 million primarily from cures. For 2017, we are guiding a full year charge of approximately 25 basis points before considering the impact from recalibrating the House Price Inflation buffer.

Balance Sheet

Customer Deposits amounted to €16.9 billion at the end of June 2017, marginally reduced from €17.0 billion at end December 2016 and represent 81% of Total Funding. ECB Funding reduced further by €1.2 billion in the first half to €0.2 billion (approximately 1% of Total Funding) which represents the Bank’s participation in the ECB’s Targeted Longer-Term Refinancing Operations (TLTRO) Scheme.

Net Loans amounted to €18.6 billion at end June 2017, marginally reduced from €18.9 billion at end December 2016 as repayments and redemptions exceeded new lending.

Non-Performing Loans

As part of the 2012 Troika Programme of Support for Ireland, Permanent TSB (and other Irish banks) set out to deal with the problem of mortgage arrears. Since then, both the industry’s and the Bank’s arrears levels have reduced by over 50% from their peak in 2013. This was predominantly achieved through a range of sustainable and affordable long term forbearance measures. We have been executing this strategy successfully over the last four years. We have assessed approximately 40,000 customers and offered long term treatments to over 35,000 customers. Over 90% of accepted treatments are performing to their restructure terms. At 30 June 2017, 53% of our NPLs are in some form of forbearance treatment. We continue to collect significant amount of cash from these customers notwithstanding the fact that these loans continue to be classified as NPLs.

Whilst the Bank has made good progress in reducing its stock of NPLs, the Board and Management recognises that its current NPL level remains unsustainably high due, in part, to non-engagement and/or lack of affordability on the part of customers, and constraints in the legal system. In response, the Bank intends to report progress in reducing its NPL% to a high single digit number over the medium term through a range of strategies including: accelerated workout; maximised repayments; natural cures; closures (Assisted Voluntary Sales and Foreclosures); and, portfolio sales.

Capital [2]

During H1 2017, the Fully Loaded Common Equity Tier 1 (CET1) Ratio increased to 15.0% compared to 14.9% at 31 December 2016 while the CET 1 ratio on a Transitional Basis marginally reduced to 17.1%. The Total Capital Ratios were 16.0% on a Fully Loaded Basis and 18.4% on a Transitional Basis. Risk Weighted Assets (RWAs) at 30 June 2017 amounted to €10.6 billion, unchanged from the 31 December 2016 level.

The Total Capital Ratio, at 30 June 2017, includes a preliminary downward adjustment of approximately 1.5% relating to IRB model recalibration (TRIM). We continue to engage in discussions with the regulatory authorities in respect of the TRIM Programme.

As guided at year end 2016, we expect these discussions to lead to a material change in RWA intensity. At present, we expect that these discussions should conclude in early 2018 with an estimated additional impact of c.2.5% on the CET1 Ratio. The Bank's Regulatory Minimum CET1 Ratio is 11.45% on a Transitional Basis.


Note on forward-looking information:

This Announcement contains forward-looking statements, which are subject to risks and uncertainties because they relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Bank or the industry in which it operates, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements referred to in this paragraph speak only as at the date of this Announcement. The Bank undertakes no obligation to release publicly any revision or updates to these forward-looking statements to reflect future events, circumstances, unanticipated events, new information or otherwise except as required by law or by any appropriate regulatory authority.

[1] Source: Mortgage drawdowns YTD to May 2017, BPFI.

[2]Profit earned in the first six months of the 2017 is included in the calculation of Capital ratios. The application for the inclusion of the Interim Profit in the regulatory capital metrics is being sought under Article 26 (2) of the Capital Requirements Regulation (CRR).