REG - Permanent TSB Group - Trading Statement

Permanent TSB groupAnnouncement

29/10/2024 07:00

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RNS Number : 9316J  Permanent TSB Group Holdings PLC  29 October 2024

 

 

29th October
2024
 

Permanent TSB Group Holdings plc ('the Bank')

Trading Statement - Q3 2024 Update

 

Comment by Eamonn Crowley, Chief Executive:

"The Bank continued to deliver a robust business and financial performance in
the third quarter, with strong momentum in our new lending pipeline. Both new
and existing customers are responding positively to our attractive and
competitive product offering, as our share of the new mortgage lending market
grew to 16.3%. We are also demonstrating good progress as we grow and
diversify our business with new SME lending within business banking increasing
25% year on year.

We had a step change in scale and profitability last year and as we continue
embedding our new business lines, we remain focused on creating efficiencies
that will ensure we deliver for our colleagues, customers and shareholders in
the most optimal, sustainable and cost-effective way. The Irish market remains
extremely attractive and with strong capital and liquidity positions, we are
well positioned to achieve our ambition of being Ireland's best personal and
business bank through exceptional customer experiences."

 

Key highlights:

·     Total operating income for the first nine months up c. 3% year on
year (YoY)

·     Net Interest Income c. 1% higher YoY

·     Net Interest Margin (NIM) of 2.23% for the first nine months, 8 bps
lower YoY

·     Total and underlying 1  operating expenses grew by c. 17% YoY, down
from 20% in H1 and in line with management expectations

·     Total gross loans rose to €21.5 billion at end September up from
€21.4 billion at end June

·     New business mortgage market share of 16.3% 2  in Q3 compares to
13.5% for the six months to June

·     Customer deposits of €23.8 billion at end September, an increase
of c. 3% (€0.8 billion) since end December 2023 and c. 5% YoY

·      The Bank maintains a strong capital position with a CET1 capital
ratio of 14.8% on a pro-forma 3  basis

Business Performance

The Bank's share of new mortgage lending increased in the third quarter to
16.3% as customers responded to the significant rate reductions announced by
the bank. There is also a strong pipeline of new business which suggests this
will continue into year end. We remain focused on customer retention and
offering borrowers a competitive suite of products as their fixed rate terms
come to an end. This includes the extension of our competitive three-year
Green mortgage product to existing customers. As a result, retention rates are
running above 93% over the first nine months of the year. New mortgage lending
across the market in Ireland is likely to be flat YoY in 2024 at c. €12.2
billion 4 .

We are seeing strong momentum in our Business Banking area with new SME
lending up c. 25% YoY, and new lending in our asset finance business also
doing well and slightly ahead of plan.

The Bank's focus on acquiring and retaining customer deposits continues with
growth of €0.8 billion since December 2023 and c. 5% YoY. Over 90% of flows
into term deposits are now in our one-year fixed-term products as customers
respond positively to our competitive interest rates and our innovative
Interest First product offering.

Our Explore current account continues to gain traction in the market as it is
the only current account in Ireland currently rewarding customers with
cashback on debit card usage, utility bill payments, and customers can also
save on fuel purchases. Additionally, new and existing PTSB mortgage customers
who pay their monthly mortgage through an Explore account can benefit from 2%
cashback rewards on their monthly PTSB mortgage repayments.

Income

Net Interest Income for the first nine months is c. 1% higher YoY as higher
average earning assets offset some margin erosion. Liquid assets are higher
this year while average loans incorporate a full nine months of the Ulster
Bank asset finance business that was acquired in July 2023.

 

The Net Interest Margin (NIM) was 2.23% for the first nine months, which is 8
bps lower than the equivalent period last year and compares with 2.27% in the
first half of 2024. This reflects higher term deposit costs and a reduction in
our fixed mortgage rates announced in May.

Net fees and commissions in the first nine months are running well ahead of
the same period last year (+24%). This in part reflects momentum in underlying
activity but also a fee increase to our current account offering introduced in
April, the first by the bank in many years.

Costs

Both total and underlying operating expenses grew by c. 17% in the first nine
months, down from 20% in the first half.  As previously guided, total
operating expenses are on track to grow by a mid-single digit percentage for
the year. Factors contributing to the projected slowdown in the fourth quarter
are  lower regulatory charges and the recognition of the bank levy earlier in
the year.

 

However, the pace of underlying expense growth is also slowing considerably
and is expected to be down to low single digits in the second half of the year
and management remain committed to reducing costs in absolute terms over the
coming years. The cost income ratio on an underlying basis was c. 73% in the
first nine months of the year.

Asset quality

Economic conditions in Ireland are very supportive of our business and asset
quality remains strong. As a result, the Bank recorded another small
write-back in Q3 and we continue to expect the full year cost of risk to be
-10bps. As previously indicated, a review is taking place of our IFRS9 models
which will capture the recent experience of our loan book. Following the Glas
III transaction, which is on track for completion in Q4, our non-performing
loans have fallen to less than €0.4 billion or 1.7% of loans which is below
the European average 5 .

Balance Sheet

Customer deposits of €23.8 billion at end September are €0.8
billion or c. 3% higher than end December 2023 and c. 5% YoY. This is largely
due to retail term deposits as customers locked in higher rates.
Notwithstanding the increased appetite for term deposits, current account
balances are stable as the bank successfully acquires new customers with our
innovative Explore Current Account.

 

Total gross loans on the balance sheet rose to €21.5 billion at end
September from €21.4 billion at end June and compare with €22.0 6  billion
at end December 2023.

The loan to deposit ratio of 89% and liquidity coverage ratio of 248% at the
end September provides the Bank with a strong liquidity position and a secure
funding source for future growth in lending volumes. The Bank was further
upgraded by Moody's in September, recognising the progress that has been made
across the board and cementing its Investment Grade status.

Capital

The Bank's Common Equity Tier 1 (CET1) ratio at end September on a pro-forma
basis remains strong at 14.8%, compared with 14.0% at end December 2023 and is
above our regulatory minimum.

The Bank's Leverage ratio at end September was 7.1% on a pro-forma basis,
compared with 7.2% at December 2023 and remains very strong for a bank with
our residential mortgage exposure.

Sustainability

Sustainability continues to be a key strategic priority for the Bank and in
August, the new role of Chief Sustainability & Corporate Affairs Officer
came into effect to reflect the Bank's commitment to sustainability as a key
driver of its corporate strategy. The Bank's focus on supporting both business
and personal customers transition to a low-carbon economy is evident through
its participation in the SBCI Home Energy Upgrade Loan Scheme and Growth &
Sustainability loan scheme. Additionally, green lending has accounted for 41%
of the Bank's total new mortgage lending year to date, and the Bank has also
extended its competitive three-year green mortgage product to existing
customers.

From a social strategy perspective, and reflecting the importance of
inclusivity, the Bank recently announced a multi-year partnership with
Ireland's Autism Charity, AsIAm, as we became the first bank in Ireland to
receive autism-friendly branch accreditation. Under the terms of this
three-year partnership, PTSB will provide funding to AsIAm to scale and grow
the supports that the charity offers throughout Ireland.

We are also well progressed for the implementation of the Corporate
Sustainability Reporting Directive (CSRD). The Bank's first disclosure aligned
to guidance set out within the CSRD will issue as part of our full-year 2024
financial results.

Outlook

Reflecting the strength of the Irish economy, overall business levels remain
encouraging and the bank expects new lending to increase further in the fourth
quarter reflecting our strong pipeline of applications. As previously
signalled, margins in the second half of 2024 will be below the first half
reflecting price changes on both sides of the balance sheet and the change in
deposit mix. Our latest guidance for the 2024 outturn is as follows:

·     Total income broadly unchanged YoY

·     NIM c. 220bps for the year

·     Total operating costs are expected to rise by a mid single digit
percentage

·     We continue to expect a cost of risk of -10bps for the full year
reflecting the benign credit environment in Ireland

Looking out beyond 2024, in view of the change in the likely path of interest
rates, as part of the annual budgeting process the bank is reviewing what
measures it can take to continue to protect and grow shareholder returns.

The transition to Basel IV will take place on 1 Jan 2025. We currently
estimate that the impact would be to reduce total risk weighted assets by up
to 5%. Further clarity will be provided in our full year results. Meanwhile
work continues on our IRB modelling project as previously outlined.

- Ends -

 

For Further Information Please Contact:

 Scott Rankin                                                      Triona Carroll

 Head of Investor Relations                                        Senior Manager Corporate Affairs & Communications

 Email: scott.rankin@p (mailto:scott.rankin@ptsb.ie) tsb           Email: triona.carroll@p (mailto:triona.carroll@ptsb.ie) tsb
 (mailto:scott.rankin@ptsb.ie) .ie (mailto:scott.rankin@ptsb.ie)   (mailto:triona.carroll@ptsb.ie) .ie (mailto:triona.carroll@ptsb.ie)

 Phone: +353 87 001 0504                                           Phone: +353 87 069 6348

 

 
 

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 operating expenses and cost income ratio excludes regulatory
costs and bank levy

 2  Based on BPFI for Q3 2024

 3  Adjusted for Glas III and including Q3 retentions

 4  Source Davy

 5  EBA risk dashboard Q2 2024

 6  Glas III loans were included in loans at end 2023 but subsequently moved
to held for sale (€0.3bn gross in June 2024 and disclosed separately)

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