TIDMIL0A TIDM73HR
RNS Number : 0674G
Permanent TSB Group Holdings PLC
11 November 2022
11 Nov 2022
Permanent TSB Group Holdings plc ('the Bank')
Interim Management Statement - Q3 2022 Update
Comment by Eamonn Crowley, Chief Executive:
'Earlier this week, the Bank announced the material completion
of the acquisition of the performing non-tracker residential
mortgage business of Ulster Bank Ireland DAC. This is a step-change
for the Bank as we grow our mortgage book by approximately 40%. Our
imminent acquisitions of Ulster Bank's SME and Asset Finance
businesses and 25 of its branches, will support the Bank in
generating greater scale with more customers and becoming a much
stronger competitive force in Irish retail banking.
The Bank has delivered a very strong business and financial
performance year-to-date with significant momentum heading into the
final quarter of the year. New lending volumes have increased 33%
year-on-year to EUR1.8 billion, driven by a very popular Green
mortgage offering which is now accounting for approximately 25% of
mortgage drawdowns, and we have a strong pipeline of activity
across all of our key product lines. Whilst the macroeconomic
environment remains uncertain, the Irish economy continues to
out-perform in terms of growth and employment levels.
We are pleased to report that the Bank has opened more than
100,000 new current accounts and 35,000 new deposit accounts so far
in 2022 - a 250 per cent and 80 per cent increase, respectively, on
the same period last year - as we welcome new customers from KBC
Bank and Ulster Bank. 70% of new current account openings are now
taking place through the Bank's award-winning digital current
account opening process, which allows customers open an account in
less than 15 minutes via the Permanent TSB app. Alternatively,
customers can make an appointment in one of Permanent TSB's
existing 75 branches nationwide or in our mobile branches .
Key Points:
-- The Bank maintains a strong capital position; fully loaded
pro forma[1] CET1 capital ratio of 14.9%; regulatory pro forma CET1
capital ratio 16.5%
-- Strong new lending of EUR1.8 billion YTD; +33% year-on-year
-- New business mortgage market share of 16.9% ([2]) (versus 17.5% in September 2021)
-- Net interest income is ahead of expectations due to higher
new lending and a changed interest rate environment
-- Net Interest Margin (NIM) of 1.39%, lower than prior year of
1.49% as a result of the costs incurred on holding excess liquidity
YTD. The outlook for NIM is favourable as costs associated with the
low interest rate environment reduce (see further comment
below)
-- Operating costs of EUR271m, 13% higher year-on-year (YoY), in
line with management expectations
-- Customer deposits of EUR20.8 billion, an increase of 9% (EUR1.7 billion) since Dec 2021
-- Non-performing loans (NPLs) of EUR0.7 billion at September
2022 are EUR0.1bn lower than balances reported at December 2021;
the NPL Ratio is 4.8% vs 5.5% at December 2021
Business Performance
New mortgage lending of EUR1.6 billion grew by 31% YoY. Market
share of mortgage drawdowns was strong at 16.9%, although slightly
lower than the September 2021 market share (17.5%) with significant
momentum moving into quarter four. The mortgage market in Ireland
is estimated to grow 32% from EUR10.5 billion in 2021 to c. EUR13.9
billion[3] in 2022, while remaining highly competitive. Our Green
mortgage product, launched earlier this year, is performing
extremely well and comprised c. 25% of total mortgage drawdowns
over the last three months. We continue to manage our offering
carefully, by maintaining price discipline and credit underwriting
standards.
Income
Net interest income is up 3% YoY; with gross interest income 4%
higher YoY due to higher new lending volumes and the changed
interest rate environment. The rates applying to Tracker Mortgages
have changed in line with their terms and conditions. Interest
income is also increasing from excess liquidity placed with the
Central Bank, with the Bank beginning to record positive earnings
on this excess liquidity since August after a prolonged period in
which this represented a cost. The net interest margin YTD of 1.39%
is impacted by a c. EUR9m cost of holding excess liquidity.
Excluding this cost, the Underlying NIM is 1.74%. As the interest
rate environment changes and the first tranche of Ulster Bank
assets is consolidated from Q4 2022, the Bank expects a NIM of c.
1.50% in 2022 (an increase from the previous guidance of c. 1.40%).
Fees and commission income performance is strong YTD, 28% higher
when compared to the prior year, due to higher transactional
activity.
Costs
In line with management expectations, Operating Expenses are
trending higher than prior year, with the outlook in 2022
projecting total costs to be c. 15% higher YoY, as we work to
complete key investment programmes and the acquisition of the
Ulster Bank portfolios, whilst catering for rising levels of
inflation.
Balance Sheet
Customer deposits of EUR20.8 billion at 30 September 2022 are
EUR1.7 billion higher than 31 December 2021, reflecting an increase
in current account balances to EUR8.5 billion. The loan to deposit
ratio of 67% at the end of September 2022 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 EUR13.7 billion at 30
September 2022 is EUR0.3bn lower than the total performing loan
book at 31 December 2021, primarily as a result of the most recent
portfolio sale, Glenbeigh IV, which was a c. EUR0.8bn predominantly
performing buy-to-let loan sale. Excluding the effect of loan
sales, the performing loan book is growing, with new mortgage
lending YTD exceeding repayments and redemptions by c. EUR0.3bn.
Non-performing loans of EUR0.7 billion at 30 September 2022 are
EUR0.1bn lower than balances at 31 December 2021 through a
combination of net cures and the impact of the loan sale.
The macroeconomic outlook continues to be volatile in an
environment of higher interest rates and higher inflation. The Bank
remains adequately provisioned to cater for a slowdown in economic
growth and Management's guidance remains that there will be a small
impairment release for FY2022.
Capital
The pro forma[4] Common Equity Tier 1 (CET 1) ratio on a fully
loaded basis reduced by 20 basis points to 14.9% at 30 September
2022 compared to the pro forma CET1 ratio of 15.1% at December
2021. The pro forma CET1 ratio on a transitional basis was 16.5% at
30 September 2022, a reduction of 90 basis points from 17.4% at
December 2021, primarily due to the inclusion of transitional
filters. The regulatory minimum for CET1 on a transitional basis is
currently 8.94%[5]. The pro forma Total Capital ratio on a
transitional basis was 24.7% at the end of September 2022. The
regulatory minimum for Total Capital on a transitional basis is
currently 13.95%. During October, the Bank issued a EUR250m AT1
instrument which results in a c. +3% increase to the Total Capital
ratios. The impact is included in the (Pro forma) September 2022
ratios outlined below.
Capital Ratios (%) (Pro Forma)(4) (Reported) (Pro Forma)
September September December
2022 2022 2021
CET1 (Fully Loaded) 14.9% 13.7% 15.1%
--------------- ----------- ------------
CET1 (Transitional) 16.5% 15.2% 17.4%
--------------- ----------- ------------
Total Capital (Fully
Loaded) 22.9% 18.4% 20.1%
--------------- ----------- ------------
Total Capital (Transitional) 24.6% 19.9% 22.4%
--------------- ----------- ------------
Outlook
Following a strong performance in the first three quarters of
2022, based on current business performance expectations and
macroeconomic assumptions, the Bank's outlook for this year is
forecast to be more favourable than previously guided. Latest
guidance for the 2022 out-turn is as follows:
-- Net Interest Income will increase year-on-year by c.13% with
the Exit NIM expected to be c. 150bps
-- Operating Costs are expected to be c.15% higher than 2021 as
we continue to invest in the business, completing key technology
programmes and supporting the growing business
-- We continue to expect a small Impairment release as we remain
prudent with provisioning levels given the inflationary
environment
-- Exceptional Items will show a net gain of greater than
EUR200m as we recognise the accounting gains associated with the
Principle Completion of the Ulster Bank DAC residential mortgage
portfolio; this will be partially offset by transaction costs and
other costs associated with deleveraging activity
-- FY2022 NPL is expected to reduce to c. 4% following the
material completion of the acquisition of the performing
non-tracker residential mortgage business of Ulster Bank Ireland
DAC
-- Capital remains strong and, having assessed a range of
scenarios, the CET1 ratio will remain above the Bank's minimum
regulatory requirements.
-- As a result of the acquisition of the Ulster Bank DAC assets,
the Bank expects in 2023 an additional c. EUR180m Gross interest
income (excluding discount unwind), c. EUR40m Funding Costs and c.
EUR50m Operating expenses.
- Ends -
For Further Information Please Contact:
Denis McGoldrick Leontia Fannin
Investor Relations Manager Head of Corporate Affairs and
Communications
Email: Denis.McGoldrick@permanenttsb.ie Email: Leontia.Fannin@Permanenttsb.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] Pro forma Capital ratios include the most recent AT1
issuance and 'Glenbeigh IV' disposal
[2] Based on BPFI data as at 30 September 2022
[3] Source: Goodbody
[4] September Pro forma Capital ratios include the most recent
AT1 issuance and 'Glenbeigh IV' disposal
[5] Regulatory requirements for both CET1 and Total Capital on a
transitional basis exclude P2G.
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END
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