REG - Permanent TSB Group - 2023 Annual Financial Results

Permanent TSB groupAnnouncement

07/03/2024 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240307:nRSG9088Fa&default-theme=true

RNS Number : 9088F  Permanent TSB Group Holdings PLC  07 March 2024

7 March
2024
 

Permanent TSB Group Holdings plc ('the Bank')

Annual results for year ended 31 December 2023

Comment by Eamonn Crowley, Chief Executive:

"Our results demonstrate real momentum through a robust financial performance,
driven by income growth, a strong deposit franchise and good asset quality.

2023 was a very significant year for PTSB as we supported customers with new
lending of €2.8bn, while also successfully completing the integration of
Ulster Bank businesses, including: 330 former Ulster Bank colleagues; over
65,000 mortgage customers; an Asset Finance Business, a Private Banking Team
and a Business Banking book.

In October, we announced a major overhaul of our brand and customer
positioning for the first time in over 20 years, with PTSB becoming the new
brand name for the Bank and the introduction of a new customer promise
'Altogether more human'. This repositioning reflects our ambitions as a
full-service personal and business bank and our focus on changing customer
needs.

Looking to the year ahead, we remain in a strong position to build on the
momentum of 2023 as we continue to grow our business, invest in our customer,
colleague and community experience, while delivering sustainable returns for
our shareholders."

 Key Points:

·   Underlying Profit Before Tax(( 1 )) of €166 million (FY'22: €45
million)

·   Profit Before Tax of €79 million (FY'22: €267 million, inclusive of
negative goodwill on the purchase of the Retail and Business Banking
businesses of the Ulster Bank transaction)

·   Strong capital position; fully loaded CET1 capital ratio of 14.0%;
regulatory CET1 capital ratio of 14.3%

·   Total new lending of €2.8 billion, in line year on year (YoY), as
growth in business banking and consumer finance loans offset lower new
mortgage lending

·   New Mortgage lending of €2.3 billion, 11% lower YoY, with the overall
new mortgage market c. 14% lower YoY. New business mortgage market share of
19.2% 2  compares to 18.5% at December 2022

·   Net Interest Income 71% higher YoY due to the changed interest rate
environment, loan book growth and the migration of the Ulster Bank loans

·   Net Interest Margin (NIM) of 2.32%, 78 bps higher YoY

·   Underlying Operating Expenses 3  have increased YoY to €495 million,
+25% YoY in line with management expectations, with the cost income ratio 4 
of 66%, 18 ppts lower YoY

·   Customer deposits of €23 billion, an increase of c. 6% (€1.3
billion) YoY

·   Robust asset quality, Non-performing loans (NPLs) of €0.7 billion and
NPL ratio of 3.3% at December 2023 are in line with December 2022

·   Following the 2023 Supervisory Review and Evaluation Process ('SREP'),
effective from 15(th) December 2023, PTSB is no longer prohibited from paying
out dividends to shareholders and has been identified as an Other Systemically
Important Institution ('O-SII')

·   As a result of this identification, an O-SII buffer of 50 basis points
is to be held in the form of CET1 capital from 1(st) January 2025

Income

Net interest income in 2023 has increased by 71% YoY, with the net interest
margin increasing by 78bps YoY to 2.32%; benefitting from the changed interest
rate environment, increased loan book volumes and a managed cost of funds. Net
fees and commission income performance remains strong and in line with prior
year, as we continue to support our larger customer base.

Costs & Investments

The Bank continues to closely manage its cost base. Reported total costs in
2023 of €504 million increased by 28% when compared to the prior year
reflecting the impacts of the acquisition, the higher inflationary
environment, together with a €9 million once-off non-recurring fee for the
Deposit Guarantee Scheme, while also continuing to invest in the Bank for its
future. Excluding the once-off fee for the Deposit Guarantee Scheme, the
underlying operating expenses of €495 million increased by 25% YoY, in line
with management expectations. The Cost Income Ratio(4) reduced by 18ppts from
2022, to 66%.

The Bank increased headcount 5  to 3,206 by December 2023 (2,488 at December
2022) as 330 colleagues joined from Ulster Bank together with additional
headcount ensuring the safe execution of the large scale transaction while
maintaining service levels for both new and existing customers nationwide. The
Bank also invested in a refreshed brand promise for the first time in more
than 20 years which will further support the Bank in driving long-term
success. This move is a major statement of intent, reflecting the much larger
scale and business diversification of the Bank, its customer focus and growing
ambitions for the coming decade.

Through the Bank's multi-year digital transformation programme, several
enhancements to the PTSB mobile app and desktop services have been delivered,
including the introduction of Webchat service in-app. In a global-banking
first, in late 2023 the Bank also launched 'PTSB Protect', a new feature to
its banking app which will help prevent customers falling victim to fraudulent
scams.

The Bank continues to invest in further improving its customer experience
reflected in an improvement in Relationship Net Promoter Score 6  from +10pts
in December 2022 to +20pts in December 2023.

Balance Sheet & Business Performance

Customer deposits of €23.0 billion at 31 December 2023 are €1.3 billion
higher than at 31 December 2022, with a c. 4% increase in current account
balances to €9.3 billion, and c. 7% increase in other retail deposits to
€12.4 billion. The Bank has completed seven personal deposit rate increases
since November 2022, offering customers a range of competitive deposit
products. Despite the elevated cost of inflation and the higher interest rate
environment, the overall deposit market has grown by 2.5% in 2023 7 , however
this growth is lower versus the same period in 2022 indicating that the pace
of deposit growth is slowing.

Approximately 70% of the Bank's total customer deposits at 31 December 2023
are covered under the Deposit Guarantee Scheme ('DGS'), broadly in line with
balances at 31 December 2022. The loan to deposit ratio of 93% and liquidity
coverage ratio of 220% at the end of December 2023 provides the Bank with a
strong liquidity position and a secure funding source for future growth in
lending volumes.

The total performing loan book of €20.9 billion at 31 December 2023 is c.
€1.8 billion higher than the total performing loan book at 31 December 2022,
as a result of the former Ulster Bank Micro-SME migration in February 2023
(€0.2 billion), additional mortgage migration in May 2023 (€0.9 billion),
Asset Finance migration in July 2023 (€0.5 billion), and new mortgage
lending outpacing repayments and redemptions (€0.2 billion).

The Bank continues to support its customers with total new lending of €2.8
billion broadly in line YoY. New mortgage lending of €2.3 billion was 11%
lower YoY, however, the mortgage market in Ireland reduced by c. 14% due to a
material contraction in the switcher portion of the market. The mortgage
market was €12.1 billion in 2023 8 , down from €14.1 billion in 2022. New
mortgage lending across fixed rate products was 94% of total new mortgage
lending, with fixed rate Green mortgage lending accounting for 30% (+10% YoY)
as we support customers in their transition to a low carbon economy. Market
share of mortgage drawdowns reached 19.2% in 2023, which was 70 bps higher
than the 2022 market share (18.5%).

Business lending of €167 million in 2023, an increase of 11% YoY, reflects
our stated ambition to offer a meaningful alternative to business customers
seeking a new banking relationship. Live applications and approved business
lending pipeline represents further opportunities for growth in 2024. PTSB
Asset Finance new lending of €223 million in 2023 is 7% higher than that of
the prior year. Since its launch in July 2023, the PTSB Asset Finance business
has allowed us to diversify our product offerings and to broaden our customer
base. The successful migrations of the Ulster Bank SME and Asset Finance
portfolios, coupled with new lending growth, has resulted in the Bank's
Business Banking book reaching over €1 billion in December 2023. This
represents growth which is three times the December 2022 book of c. €0.3
billion.

New consumer term lending pay-outs of €117 million increased by 22% YoY.
Digital adoption continues to be a key enabler for this product with c. 80% of
new term lending drawdowns through our direct channels. 9 

Incorporating Sustainability into our business practices remains a key
priority for the Bank, with steady progress being made across the four pillars
of PTSB's Sustainability Strategy. The Bank will also expand its green
customer propositions in 2024, including participation in the SBCI Retrofit
Scheme.

In July, the Bank issued its first Task Force on Climate-related Financial
Disclosures Report (TCFD) Report to the market. The Bank also completed a
review of its carbon impact across Scope 1, 2 and 3 emissions with a
commitment to set Science Based Targets in 2024.

The Bank's progress in continuing to evolve its culture has also been
recognised internally with a Culture Index score of 81% and a Trust score of
82% being reported through the Bank's annual colleague engagement survey.

Progress was also recognised externally with the Irish Centre for Diversity
awarding PTSB with Investors in Diversity Gold accreditation in September.

Asset Quality

Asset Quality remains strong with Non-Performing Loans of €0.7 billion at 31
December 2023, and in line with balances at 31 December 2022. While the global
macroeconomic environment remains uncertain, the Irish economy continues to
perform well with no notable deterioration in the asset quality of the Bank's
loan book evident to date.

The income statement reports an impairment release of €2 million, reflecting
the current macro-economic conditions which the Bank is currently operating
in. The Bank also reports a capital deduction of €13 million for the NPL
backstop. Notwithstanding the challenges of the higher inflation and interest
rate environment on our customers, and the potential for second order impacts
from ongoing geopolitical tensions in the Ukraine and Middle East, the Bank
believes it is adequately provided for having assessed a range of scenarios.
The Bank has no exposure to Commercial Real Estate.

Capital

The Bank's Common Equity Tier 1 (CET1) ratio at 31 December 2023, on a fully
loaded basis remains strong at 14.0%, 120 bps lower than 31 December 2022 of
15.2%, reflecting the increase to Risk Weighted Assets following the migration
of the Ulster Bank Micro-SME, the remaining Mortgages and Asset Finance
portfolios, together with organic growth during the year.

 Capital Ratios (%)            December  December

                               2023      2022
 CET1 (Fully Loaded)           14.0%     15.2%
 CET1 (Transitional)           14.3%     16.2%
 Total Capital (Fully Loaded)  19.7%     21.3%
 Total Capital (Transitional)  20.0%     22.3%

The CET1 ratio on a transitional basis of 14.3% at 31 December 2023, reduced
by 190 bps from 16.2% at 31 December 2022. This reduction is primarily driven
by the annual transitional phase-in of prudential filters in addition to the
migration of Ulster Bank loans. The minimum regulatory requirement for CET1 on
a transitional basis is currently 9.83% 10  and has increased by 39bps since
Q3'23 following the continued phase in of the Counter-cyclical buffer ('CCyB')
in Q4'23 of +50bps, partially offset by a reduction in the Pillar 2
Requirement ('P2R') of 11bps 11 .

The Total Capital ratio on a transitional basis was 20.0% at 31 December 2023.
The minimum regulatory requirement for Total Capital on a transitional basis
is currently 14.75% and has increased by 30bps since Q3'23 following the
continued phase in of the CCyB in Q4'23 of +50bps, partially offset by a
reduction in the P2R of 20bps.

 

2024 Outlook

The Bank remains in a strong position to continue to support our customers,
the Irish economy and our shareholders.  Net Interest Income will be broadly
in line with FY23 as rising lending yields due to loan book repricing are
offset with a higher cost of funds as a higher proportion of customers' avail
of higher yielding deposit accounts.

 

Following the very successful and safe acquisition of the Ulster Bank
portfolio; the transfer of employees; opening 25 new branches; together with
on-boarding additional headcount to safely acquire and serve a significant
growth in customer numbers; the Bank is focused on further improving
operational efficiencies through prudent cost management with the ambition to
operate with a cost base of c. €500m p.a. in the medium term while we
continue to invest in the Bank.

 

The Bank expects a mid-single digit increase in 2024 operating costs as we
continue to manage the impacts of inflation, business growth and required
investment for the future. This will partially be offset by efficiencies as we
continuously review our operating environment.

 

Asset quality remains strong and is benefitting from the strict underwriting
criteria in place over the last decade. Furthermore, Irish macroeconomic
conditions remain supportive of continued growth over the coming years, as
such the cost of risk is expected to be c. 10bps in FY'24.

 

Capital remains strong and having assessed a range of scenarios, the CET1
ratio will remain well above the Bank's minimum regulatory requirement. The
Bank will announce a distribution policy in H2'24.

 

 

 

- Ends -

For Further Information Please Contact:

 Denis McGoldrick                                                       Leontia Fannin

 Investor Relations                                                     Head of Corporate Affairs and Communications

 Email: denis.mcgoldrick@ptsb.ie (mailto:denis.mcgoldrick@ptsb.ie)      Email: Leontia.Fannin@ptsb.ie (mailto:Leontia.Fannin@ptsb.ie)

 Phone: +353 87 928 5645                                                Phone: +353 87 973 3143

 

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  Underlying Profit Before Tax is the Profit before Exceptional Items and
Tax

 2  Based on BPFI data as at 31 December 2023

 3  Underlying Operating Expenses are Total Operating Expenses excluding a
non-recurring Deposit Guarantee Scheme fee of €9m in FY23

 4  Cost Income ratio is calculated as Operating Expenses (excl. all
Regulatory Charges/Fees and Exceptional Items) divided by Total Income

 5  Excludes staff on long-term absence, career breaks and maternity leave

 6  Relationship Net Promoter Score (NPS) - an index (-100 to +100) measuring
the willingness of customers to recommend a company's products / service, as
at Dec'23

 

 7  CBI Summary Irish Private Sector Credit and Deposits (Dec'23)

 8  BPFI data as at 31 December 2023

 9  Direct channels include Desktop, App and Voice through Open24

 10  Regulatory requirements for both CET1 and Total Capital on a transitional
basis excludes P2G

 11  56.25% of P2R must be made up of CET1 therefore the proportion of the
20bps P2R reduction realised at a CET1 level is -0.11%.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  STRUPUBAWUPCPPQ