REG - Permanent TSB Group - Trading Statement - Q3 2023

Permanent TSB groupAnnouncement

25/10/2023 07:00

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RNS Number : 1761R  Permanent TSB Group Holdings PLC  25 October 2023

25 October
2023
 

Permanent TSB Group Holdings plc ('the Bank')

Trading Statement - Q3 2023 Update

Comment by Eamonn Crowley, Chief Executive:

'The Bank continued its positive business and financial performance in the
third quarter of the year and so remains in a strong position to continue to
support our customers, the Irish economy and our shareholders. Central to this
performance has been our strong capital and liquidity positions, growth in the
customer deposit base and increased income. Asset quality remains robust and
we continue to take a measured approach with respect to the impact to our
customers of ECB interest rate rises.

Our investment into our recently announced new brand name, PTSB, visual
identity and customer promise, 'Altogether More Human', represents our
intentions to differentiate ourselves as a full service bank and our
commitment to bring the best of technology and the best of our people
together, putting customer needs at the heart of what we do and ultimately
deliver a better banking experience for all.'

 

Key Points:

·   The Bank maintains a strong capital position; fully loaded CET1 capital
ratio of 13.8%; regulatory CET1 capital ratio 14.1%

·   New lending to September of €2.2 billion across all product lines 1 ;
9% higher YoY

·   New business mortgage market share of 20.7% 2  compares to 16.9% at
September 2022

·   Net Interest Income 93% higher YoY due to changed interest rate
environment, loan book growth and the migration of the Ulster Bank loans

·   Net Interest Margin (NIM) of 2.31%, 92 bps higher YoY

·   Operating expenses remain in line with management expectations, with
the cost income ratio of 64 3 %, 25% lower YoY

·   Customer deposits of €22.7 billion, an increase of c. 5% (€1.0
billion) since December 2022 and c. 9% (€1.9 billion) since September 2022

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

·   New brand name launched together with new visual identity and customer
promise in mid-October 2023

 

PTSB Brand Repositioning

On 14 October 2023, the Bank announced a major overhaul of its brand and
business, reflecting our position as a full-service, customer-focused personal
and business bank. The move reflects the much larger scale and business
diversification of the bank, our customer focus and growth ambitions for the
coming decade.

Key elements of the change include a new brand name, PTSB, and visual
identity, together with the introduction of a new customer promise, Altogether
More Human, which represents the bank's commitment to putting customer needs
at the centre of how we plan, design and deliver for them. An initial
investment of €5m has been made into customer research, the development and
roll-out of a new visual identity, together with a customer promise and a
national advertising campaign. Further investment is planned to modernise PTSB
locations, including the Bank's nationwide branch network, over the next 18
months.

The Bank has also invested in improving its customer experience and has put in
place a number of initiatives to further support customers, including the
introduction of a host role in all 98 branches and the establishment of a
vulnerable customer support team, as well as partnering with O'Cualann
Co-housing Alliance to enable the development of social and affordable homes
across the country.

Most recently we have introduced 'PTSB Protect', a new feature to our banking
app which will help prevent customers falling victim to fraudulent scams.

Business Performance

The Bank has continued its strong performance with total new lending growing
9% year-on-year. New mortgage lending of €1.8bn grew 11% year-on-year while
the mortgage market was down 10% over the same period. This growth is
supported by the strength in our mortgage proposition, together with mortgage
switching activity which continued in the market into Q1'23 as customers
sought rate certainty. While new mortgage lending across fixed products
continues to be c.  97% of YTD total new mortgage lending, with fixed rate
Green mortgage lending accounting for 27%, we have observed a change in
customer behaviour, where some customers maturing from a fixed rate are now
opting for a variable rate for the first time in a number of years.

Market share of mortgage drawdowns reached 20.7% in September 2023, which was
3.8 ppts higher than the September 2022 market share (16.9%).
 Notwithstanding this growth, the switcher portion of the mortgage has
reduced materially since end Q1'23, which will lead to lower year-on-year
growth in new mortgage lending than that observed in FY 2022. The mortgage
market in Ireland is estimated to reduce by c. 11% from €14.1 billion in
2022 to c. €12.6 billion 4  in 2023.

Income

Net interest income has increased by 93% year-on-year; with gross interest
income increasing by 115% year-on-year due to organic loan book growth, the
migration of the remaining Ulster Bank Mortgages, Micro-SME and Asset Finance
portfolios, and the changed interest rate environment. The net interest margin
of 2.31% has increased by 92bps year-on-year; benefitting from the changed
interest rate environment and increased loan book volumes. Net fees and
commission income performance remains strong, in line with prior year, as we
continue to support our higher customer base.

Costs

Operating Expenses at September 2023 remain in line with expectations as we
support a larger number of colleagues with cost of living challenges, absorb
higher levels of depreciation from prior year investments, and complete key
investment initiatives, while making underlying savings to support the cost
base.

Balance Sheet

Customer deposits of €22.7 billion at 30 September 2023 are €1.0 billion
higher than 31 December 2022, primarily due to a c. 6% increase in current
account balances to €9.5 billion, retail deposits have grown by 4% to
€12.1bn. Despite the elevated cost of inflation and the higher interest rate
environment the overall deposit market has grown by 2.6% 5  in 2023. However,
this is down from 4% over the same period in 2022 indicating that the pace of
growth is slowing.

Approximately 71% of the Bank's total customer deposits at 30 September 2023
are covered under the Deposit Guarantee Scheme ('DGS'), in line with balances
at 31 December 2022. The loan to deposit ratio of 94% and liquidity coverage
ratio of 206% at the end of September 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 30 September 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
(€0.2bn), additional Mortgage migration in May 2023 (€0.9bn), Asset
Finance migration in July 2023 (€0.5bn), and new mortgage lending exceeding
repayments and redemptions (€0.2bn). Asset Quality remains strong with
Non-Performing Loans of €0.7 billion at 30 September 2023, in line with
balances at 31 December 2022. While the global macroeconomic environment
remains volatile, the Irish economy continues to record strong growth levels
with no notable deterioration in the asset quality of the Bank's loan book
evident to date.

Capital

 Capital Ratios (%)                September  December

                                   2023       2022
 CET1 (Fully Loaded)               13.8%      15.2%
 CET1 (Transitional)               14.1%      16.2%
 Total Capital (Fully Loaded)      19.5%      21.3%
 Total Capital (Transitional)      19.8%      22.3%
 Leverage Ratio (Fully Loaded) 6   7.0%       7.7%

The Bank's Common Equity Tier 1 (CET1) ratio at 30 September 2023, on a fully
loaded basis, remains strong at 13.8%, 140 bps lower than 31 December 2022 of
15.2%, reflecting the higher Risk Weighted Assets following the migration of
the Ulster Bank Micro-SME, the remaining Mortgages and Asset Finance
portfolios during the year.

The CET1 ratio on a transitional basis of 14.1% at 30 September 2023, reduced
by 210 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 9.44% 7 .

The Total Capital ratio on a transitional basis was 19.8% at 30 September
2023. The minimum regulatory requirement for Total Capital on a transitional
basis is currently 14.45%.

The Bank's Leverage ratio on a fully loaded basis at 30 September 2023 was
7.0%, down from 7.7% at December 2022.

2023 Outlook

The Bank remains in a strong position to continue to support our customers,
the Irish economy and our shareholders, with the guidance on key performance
indicators for FY23 remaining broadly in line with prior market
communications. Changes in mortgage customer rate choice plus a lower level of
market growth than previously expected in retail deposits are factored into
our FY23 expectations.  Asset quality continues to perform well and capital
remains strong, having assessed a range of scenarios, the CET1 ratio will
remain above the Bank's minimum regulatory requirements.

The Bank will provide updated guidance for the medium term at its FY23 Annual
Results.

 

- Ends -

 

For Further Information Please Contact:

 Denis McGoldrick                             Leontia Fannin

 Investor Relations                           Head of Corporate Affairs and Communications

 Email: denis.mcgoldrick@permanenttsb.ie      Email: Leontia.Fannin@Permanenttsb.ie (mailto:Leontia.Fannin@Permanenttsb.ie)
 (mailto:caitriona.gilmore@permanenttsb.ie)

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

 

 

 

 
 

 

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  Includes new lending in PTSB Asset Finance

 2  Based on BPFI data as at 30 September 2023

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

 4  Source: Goodbody

 5  Source: CBI Table A.1 - Summary Irish Private Sector Credit and Deposits
(Aug'23)

 6  The Leverage ratio is calculated by dividing Tier 1 capital by gross
balance sheet exposures (total assets and off balance sheet exposures).

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

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