PTSB’s operating profit soared to €164 million in 2023 and the lender said it will announce a policy later this year on how it plans to return to paying dividends for the first time since the onset of the financial crisis.
The profit was up from €14 million for 2023, the lender said on Thursday, driven by the acquisition of loans from Ulster Bank and a spike in interest rates.
However, shares in the PTSB dipped more than 11 per cent by mid afternoon to €1.42 in Dublin as investors mulled its outlook for this year, which points to a sharp decline in underlying profits as the bank ups investment.
Net interest income grew by 71 per cent to €620 million last year, while non-interest income increased by 2 per cent to €48 million.
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The group’s loan book increased by 50 per cent year since the middle of 2022 to €21.1 billion, driven as the bank group gradually took over €6.25 billion of mortgage and small business loans from Ulster Bank as the latter retreated from the Irish market.
Underlying operating expenses grew by 25 per cent to €495 million last year, as staff numbers rose 29 per cent to 3,206, including 330 people that transferred with the Ulster Bank loans and employees hired to help with a larger business.
PTSB’s profit before tax slumped 70 per cent to €79 million as it took €87 million of exceptional charges, driven by costs and the booking of a day one impairment charge on loans acquired from Ulster Bank.
Earnings for the previous year had been boosted by a €362 million negative goodwill gain, or what is often referred to as “badwill”, as it acquired €5.2 billion of Ulster Bank mortgage assets in November 2022 at a discount to their fair value.
PTSB hit an important milestone in December when it secured approval from financial regulators to return to paying dividends, helped by the effects of the transformational Ulster Bank deal. The bank said that it will announced a shareholder payments policy in the second half of this year.
At a press briefing, chief executive Eamonn Crowley said a first dividend payment after the regulatory “stopper” was lifted recently was likely within three years. “We will be reviewing that. If we believe it’s right not to pay dividends in ‘25 based on ‘24 profits I would see much more opportunity in ‘26 based on ‘25 profits. That’s the way I would think about it.”
PTSB, in which Irish taxpayers hold a 57.4 per cent stake, is alone among the State’s three surviving bailed-out banks in not having returned to paying dividends since the 2008 crash, having consistently delivered sub-par profit returns as its balance sheet shrank dramatically over more than a decade.
PTSB is also alone among the three banks left in the Irish market in not unveiling a bonus plan for staff, given that the Government relaxed the rules slightly on such payments. “We’re in negotiations and discussions with...the unions. We’re not ready to unveil it yet but would expect to do it later in the year. We will be coming with a scheme, it’s about working out the moving parts,” Mr Crowley said.
Looking ahead, the bank forecast that net interest income will be broadly in line last year as rising lending yields due to loan book repricing are offset with a higher cost of funds as customers increasingly move money from on-demand accounts, which are earning little or nothing, to higher-rate products. The highest PTSB savings rate is 3 per cent.
The bank expects a “mid-single digit” percentage increase in operating costs this year as it manages the impacts of inflation, business growth and required investment for the future. This will partially be offset by “efficiencies”, it said.
On the outlook, Davy analyst Diarmaid Sheridan, said: “For 2024, the outlook for underlying pretax profit is lower than anticipated. It will be a year of investment, with sustainable returns now likely in 2026. Relative to 2023, underlying profit is expected to be circa €50 million lower in 2024 at circa €115 million. This compares to the Davy forecast of €142 million.”
The bank has also lowered its level of non-performing loans from a post-crisis peak of 28 per cent to 3.3 per cent, through mortgage restructurings and loan portfolio sales.
The group rebranded itself in October as PTSB from Permanent TSB.
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