Permanent TSB said this morning that its financial performance improved in the third quarter of this year and it expects a "continued" reduction in loan losses due to the improving Irish economy.
In an interim management statement today, PTSB said growth in the Irish economy is providing a “strong backdrop” for the group’s return to sustainable profitability.
“At the same time, challenges remain in the form of increasing costsof meeting higher regulatory standards, limited housing supply resulting in constrained growth of the mortgage market and over supply and volatility in the UK mortgage asset market,” it said.
In addition, PTSB also said some 76 per cent of the 1,372 cases that were identified in its mortgage redress programme announced in July had been “redressed” by the end of October. These cases involved a failure by the bank to apply the correct tracker mortgage interest rates to customer accounts from 2006 onwards.
The bank, which is 75 per cent owned by the State, said its Irish retail deposit balances at €11.2 billion were in line with expectations while current account balances were up by 6 per cent since December 31st 2014.
Mortgage drawdowns have trended in line with the same period last year in a market that has not grown as fast as expected, “albeit we see this as a short-term supply lag”.
Term lending drawdowns have “trended positively” and are up 34 per cent year-on-year from a low base. The bank’s core net interest margin improved to 136 basis points for the nine months ended September 30th.
The cost-income ratio has reduced when compared to the first nine months of last year as a result of higher income and lower operating expenses. However, operating expenses for the second half of 2015 will be higher than the first half, as flagged at the interim results, due to the payment of the Irish bank levy of € 27 million in October.
While the exact amount is not known yet, PTSB said it expects to make a “sizeable contribution” to the Bank Recovery and Resolution Directive (BRRD) Fund later this year.
The impairment charge reduced further resulting from a decline in arrears levels. In line with the results from the first half of the year, the group expects to report a significantly lower underlying cost of risk compared to the medium-term target of 40 basis points.
In terms of non-core business units, PTSB completed the sale of € 500 million of commercial real estate non-performing loans in October, which was announced in early July.
It also expects to settle the majority of the remainder of the Irish Non-Core assets (predominantly geared property loans) by the end of 2015. Residual loans of € 400 million gross will transfer to the core bank from 2016, as previously indicated.
The group aims to have deleveraged the remainder of its £2.4 billion UK mortgage portfolio by June 2016, in line with its EU restructuring plan. “However, there is currently congestion in the market with similar portfolios for sale which may impact on the timing of the transaction,” the bank said.
Cases of mortgage arrears - home loans and buy-to-let - declined further in the third quarter.
