The State is unlikely to recoup in full the net €2.7 billion it provided in bailout funds to Permanent TSB Bank, its chief executive Jeremy Masding has told The Irish Times .

In an exclusive interview this week, when asked whether taxpayers were likely to get their money back, Mr Masding said: “I think that’s unlikely.”

Permanent TSB was the banking arm of the former Irish Life & Permanent plc. In 2011 stress tests carried out on its capital ratios showed that IL&P needed an additional €4 billion in funding for the banking business.

This money was provided by the State in return for a 99.2 per cent equity share in the group.

The Government recouped €1.3 billion from the recent sale of Irish Life to Great-West Lifeco.

In a bid to give the bank a viable future, Mr Masding has created three distinct business units: Permanent TSB retail bank; an asset management unit to work out distressed and unprofitable loans in Ireland; and Capital Home Loans Ltd, which comprises its UK buy-to-let mortgages.

Mr Masding said the "prize" of rescuing PTSB was the creation of a "really well governed, well managed bank" that can be a "challenger" to AIB and Bank of Ireland, which have also received bailout funding from the State.

“We will put good products on the shelf. We'll have good people serving customers with commitment and passion. We'll lend money to people who want it and who can pay it back and we will make a nice shareholder return. It will be retail banking done well,” he said.

Mr Masding added the retail bank could return to private ownership at some point in the future and said it was likely that the asset management unit and CHL could be sold off in time to investors willing to take on the risk of managing out the loan books.

On whether PTSB will offer debt forgiveness or writedowns to those customers in mortgage arrears, Mr Masding said: “My definition of debt forgiveness is the unilateral forgiveness of debt without going through a mortgage [resolution] process. Unless the rules of the game change, that's not going to happen.”

“Depending on the customer's circumstance then it could be that we will have to write off [some debt] but ... my job is to protect taxpayers’ funds and to do everything I possibly can to put a customer on a long-term treatment that's sustainable.”