2019 Half Year Report Commentary
25 July 2019
PERMANENT TSB GROUP HOLDINGS PLC
2019 HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2019
Permanent TSB Group Holdings plc ("PTSB", "the Bank") today reports its half year results for 2019.
· Profit before tax of €28m; Profit before exceptional items and tax of €42m; Net interest margin (NIM) of 1.82%.
· Total new lending volumes of €0.7 billion increased by 22% year-on-year (YoY). Market share of new mortgage lending of 14.7%1, up from 13.8% at June 2018.
· Sale of properties in possession is progressing well, with c. 1400 properties sold over the last 18 months.
· Non-performing loans (NPL) of €1.7bn, NPL ratio remains at 10%, the Bank remains committed to reducing the NPL ratio to mid-single digits in the medium term.
· Pro-forma common equity tier 1 (CET1) ratio (on a fully loaded basis) is 14.4%2.
· Moody's upgraded the Bank's credit rating by two notches to Baa3. This is an exceptional achievement and returns the Bank to investment grade status for the first time since 2011.
· The Central Bank of Ireland's (CBI's) investigation into tracker mortgages at PTSB has now come to a close. The Bank has paid a fine of €21m. As the Bank had made relevant provisions in prior years, the financial impact in the 2019 financial accounts is €3m.
Jeremy Masding, Chief Executive, said:
"The Bank continued to demonstrate strong business performance in H1 2019, outperforming the market for new lending and gaining market share with a range of competitive, customer-friendly products. The underlying business and franchise remain strong, and well positioned to capitalise on market opportunities. We will continue to deliver sustainable shareholder value and fair customer outcomes, backed by a clear vision and strategy."
· Business performance continues to trend positively in line with expectations.
· New mortgage lending grew by 18% YoY, outperforming market growth of 11%1. As a result, H1 2019 market share of drawdowns was 14.7%1. Whilst the mortgage market in Ireland continues to grow steadily, it remains competitive. We continue to manage our offering carefully by maintaining price discipline and credit underwriting standards.
· Personal term lending grew by 16% YoY with lending through our direct channels up 42% YoY. SME lending also grew YoY, albeit from a low base.
· The Bank now has more than 300k active customers using its mobile App for their banking requirements, an increase of 23% on 2018 and more than 27 million successful account log-ins. More than 16k online Term Loan applications were made in the first half of 2019.
· Investment in digital transformation is progressing to plan. The Bank has selected four experienced partners to support business integration; systems integration and digital platform; renovation of the core banking platform; and, renovation of the mortgage servicing platform.
· Profit before exceptional items and tax of €42m for H1 2019, reduced by 42% YoY.
· Overall net interest income has reduced by 6% YoY as a result of reduced income from non-performing loans due to loan sales in 2018 and lower treasury income. However, performing loan income has grown 3% and, together with the continued management of the cost of funds, supports a NIM of 1.82%, 5 bps higher YoY. Overall, we expect NIM to remain stable through 2019.
· Fees and commissions income of €17m in H1 19 has reduced by €2m YoY due to lower overdraft fees.
· Net other income of €12m in H1 2019, primarily relating to gains on the sale of properties in possession, has reduced by 45% YoY as 2018 included one off gains from treasury activities.
· Total operating expenses (excluding regulatory charges and exceptional items) of €145m were broadly in line with the prior year and within expectations. We continue to focus on delivering cost saving initiatives to allow for the investment required to deliver both business efficiencies and drive digital transformation.
· Regulatory charges amounted to €18m and remained unchanged from 2018. Bank levy of c. €24 million to be paid in the second half of the year, overall regulatory charges are expected to be in line with the prior year.
· A modest impairment charge of €5 million in H1 2019 compares to a nil charge at June 2018. The underlying loan book is performing well reflecting the stability of the portfolio and the current macroeconomic environment.
· Exceptional items of €14m primarily relates to costs associated with the Bank's restructuring programme together with a €3m net charge in H1 2019, from paying the Bank's fine (€21m) in relation to the CBI's tracker mortgage examination.
· Customer deposits of €17.4 billion at 30 June 2019 were €0.4 billion higher than 31 December 2018, with current account balances up 7% from December 2018. The loan to deposit ratio was 91% at the end of June 2019.
· The total performing loan book at 30 June 2019 was slightly behind the total performing loan book at 30 December 2018 as the pace of repayments exceeded the strength of new business. Asset yield remains above 2%, despite the maturity of higher yielding treasury assets and the reductions made to certain fixed rate mortgage products.
· The Bank's funding position remains strong. All funding and liquidity metrics are well above regulatory requirements.
· Moody's upgraded the Bank's credit rating by two notches to Baa3. This is an exceptional achievement and returns the Bank to Investment Grade status for the first time since 2011.
· The Bank's indicative MREL issuance target remains in the region of c. €1 billion to be in place before 1 Jan 2021. The Bank intends to start issuances in the second half of 2019.
Non-Performing Loans And Properties In Possession
· Non-performing loans remain broadly in line with balances at 31 Dec 2018. The Bank continues to actively manage the NPL portfolio and is committed to reducing the NPL ratio to mid-single digits in the medium term, as per regulatory guidelines, whilst protecting capital.
· At the end of June 2019, the Bank held 882 properties in possession, with 372 for sale. The majority of these properties in possession are as a result of the targeted BTL voluntary surrender programme. The Bank is satisfied with the progress being made to date and expects to sell the majority of these properties through various arrangements over the next 12 months.
· The Bank's common equity tier 1 (CET1) ratio on a fully loaded basis remains strong at 14.4%2 at 30 June 2019 compared to a pro-forma of 14.0%3 at 31 December 2018. The CET1 ratio on a transitional basis of 16.8%2 remained broadly in line with the pro-forma of 17.0%3 at 31 December 2018.
· The Central Bank of Ireland Countercyclical Capital Buffer (CCyB) of 1.0% came into effect from 5 July 2019. As a result, the Bank is now required to hold an additional capital buffer equivalent to 1% of its RWAs going forward. The Bank's medium term target has now increased to c.13% on a fully loaded basis. The Bank remains confident that it is adequately capitalised for profitable growth and to deliver the NPL reduction strategy.
For Further Information Please Contact:
Eamonn Crowley, Chief Financial Officer, [email protected], +353 1 669 5354
Nicola O'Brien, Head of External Reporting, [email protected], +353 1 669 5283, +353 87 148 2275
Leontia Fannin, Head of Corporate Affairs and Communications [email protected], +353 87 973 3143
Ray Gordon, Gordon MRM, [email protected], +353 87 241 7373
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 BPFI as at 30 June 2019
2 Includes profits earned in H1 2019 which are subject to regulatory approval
3 Pro-forma CET1 ratios for 2018 were post Glas completion and regulatory approval of capital treatment on Glenbeigh transaction
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