A debate about whether Permanent TSB can keep its independence and remain as a standalone bank has not gone away despite the huge strides made in restoring it to financial health since the crash, leading analysts have said.
The comments come as chief executive Jeremy Masding prepares to leave the lender in the coming months after eight years when he helped bring the lender, which is 75% owned by the Government, back from the brink.
Permanent TSB posted a sharply higher pre-tax profit of €42m for 2019, an increased share of the mortgage market, and a large reduction in its pile of non-performing loans to just over €1bn, but which represents a still-elevated ratio of 6.4%. Meanwhile, its net interest margin — a key gauge of profitability in banking — was only a little higher and remains under pressure.
The lender also said it was “at an early stage of engagement” with many hundreds of landlords who have been paying interest-only on their buy-to-let loans, for over 15 years. The bank stressed that the loans are performing and the landlords are meeting the terms of their loans and that it has provisions made against the loans. “For us, it is a normal market engagement,” it said.
Analyst Eamonn Hughes at Goodbody said that Mr Masding has bequeathed his successor a medium-term plan to boost returns but that the challenges it faces mean that a debate about a takeover “is not going to go away”. Mr Hughes also said the bank will continue to work to reduce its non-performing mortgage loans and though it might not need to do another loan sale “it is certainly one of the options”.
And Richard Flood, investment manager at Brewin Dolphin Ireland, said all banks face relentless pressures, amid lower-for-longer interest rates, low bond yields, and tight credit spreads which are squeezing their net interest margins.
Mr Flood said:
I would have thought in the medium term it is unlikely that a bank like Permanent TSB will remain independent, that is in the next three to five years.
Asked whether he was confident that Permanent TSB will remain an independent bank, Mr Masding told reporters the lender now has choices and has a strategy as an independent bank.
On the potential for the next government to regulate banks more heavily, Mr Masding said that party manifestos and policies tend to be different and that he will wait to see how conversations emerge.
Apologising again for the bank’s part in the tracker mortgage scandal, he said it had been through the tracker investigation, the enforcement process which led it to paying a €21m fine to the Central Bank.