TIDMIL0A TIDM73HR
RNS Number : 8382M
Permanent TSB Group Holdings PLC
14 May 2020
14 May 2020
Permanent TSB Group Holdings plc ('the Bank')
Trading Update For The First Quarter Ended 31 March 2020
(Unaudited)
'Business and financial performance remained stable in Q1,
albeit with a decline in new lending towards the end of the quarter
as the Covid-19 situation unfolded. The pandemic is having an
unprecedented social impact on people and businesses in Ireland,
and across the world. The resultant economic impact and outlook is
challenging with the long term consequences of Covid-19 largely
dependent on its severity and, the ensuing timeline over which
business activity and employment levels begin to recover.
Throughout this period of uncertainty, we will continue to work
closely with the Government, Regulators and other authorities to
continue to provide support to our customers whilst protecting the
long-term business franchise. In this regard, we will use the
strength built up in the Bank's balance sheet and business model to
ensure we continue to play our part in supporting our customers and
the Irish economy.
The Bank's business model, with its focus on secured lending,
gives some protection against an impairment shock. That said, we
will continue to monitor closely both the macro-economic
environment and quality of the loan book, to ensure we maintain
prudent levels of coverage.
In summary, following significant progress made over the last
number of years through increasing new lending; reducing Non
Performing Loans (NPLs); maintaining profitability; and,
strengthening capital, the Bank is currently in a strong position
to deal with a significant economic downturn.'
Jeremy Masding, Chief Executive
Covid-19 Response
-- Payment breaks for both Mortgage and Term Loan customers;
approving c. 10k payment breaks, equating to c. EUR1.5bn or c. 9%
of total gross loans.
-- Priority banking in branch and over the phone for our elderly and vulnerable customers.
-- An increase in contactless payment limits up to EUR50.
-- Unlimited 10c cashback payments on debit card transactions
for Explore Current Account customers, throughout April and
May.
-- EUR5 reward for customers using the GoRewards programme when
EUR30 is spent in any supermarket during April.
-- Social distancing and increased hygiene measures in our branches nationwide.
-- Redeployment of over one hundred staff to our contact centres
to support in answering customer queries.
-- Operationally resilient with over 1200 colleagues working remotely.
-- All 76 branches remain open to meet our customer needs.
Key Points
-- Business and financial performance in Q1 2020 was stable
prior to the challenges presented by Covid-19.
-- Net interest margin of 1.80% remained in line with full year 2019.
-- The Bank maintains strong capital and liquidity positions:
Fully Loaded CET1 ratio of 15.2%(1) , an increase of 20 basis
points on December 2019 pro-forma CET1 ratio of 15.0%; Liquidity
Coverage Ratio of 188%.
-- Total new lending volumes of EUR0.35 billion increased by 1%
year-on-year (YoY) compared to Q1 2019. Market share of new
mortgage lending of 14.7%(2) , down from 15.1% in Q1 2019.
-- Non-performing loans at 31 March 2020 remained broadly in
line with the balances at December 2019.
-- In Q1 2020, the Bank did not experience loan loss outcomes
related to Covid-19 and, as such, asset quality remained stable
with no material movement in the staging of assets.
-- In light of the current economic outlook, the Bank expects
the net impairment charge on its loan book to increase in the 2nd
quarter; guidance of a net impairment charge of c. EUR50m
(equivalent to c. 60 basis points annualised cost of risk) is
deemed more appropriate for H1 2020, a position which we will keep
under constant review and where we will update the market further
at the Half Year results.
Balance Sheet
Capital
-- The Bank's Common Equity Tier 1 (CET 1) ratio on a fully
loaded basis is 15.2%(1) at 31 March 2020; the CET1 ratio on a
transitional basis is 17.7%(1) ; and, the Total Capital ratio on a
transitional basis is 19.2%(1) with all ratios remaining relatively
in line with those reported at 31 December 2019 (pro-forma CET1
fully loaded 15.0%; CET1 transitional basis 18.1%; Total Capital
transitional basis 19.6%).
-- Based on the most recent regulatory guidance, allowing for
the easing of the Counter Cyclical Buffer of 1.0% and a change in
the composition of the Bank's P2R, the Bank's CET1 regulatory
requirement is 8.94% and the Total Capital regulatory requirement
is 13.95%, both on a transitional basis.
Regulatory Capital Requirements
CET1 Ratio Total Capital
% Ratio %
Transitional Basis FY 2020 FY 2020 FY 2020 FY 2020
Prior Current Prior Current
-------- --------- -------- ---------
Pillar 1 4.50% 4.50% 8.00% 8.00%
-------- --------- -------- ---------
Pillar 2 Requirement
(P2R) 3.45% 1.94% 3.45% 3.45%
-------- --------- -------- ---------
Capital Conservation
Buffer (CCB) 2.50% 2.50% 2.50% 2.50%
-------- --------- -------- ---------
Counter Cyclical Buffer
(CCyB) 1.00% 0.00% 1.00% 0.00%
-------- --------- -------- ---------
Total Requirement 11.45% 8.94% 14.95% 13.95%
-------- --------- -------- ---------
(1) Includes profits earned in Q1 2020, which are subject to
regulatory approval
2 Source: Mortgage drawdowns YTD to end March 2020, BPFI
Funding
-- The Bank's funding position remains strong. All funding and
liquidity metrics are above regulatory requirements with the
Liquidity Coverage Ratio (LCR) at 188%.
-- On 28 April 2020, S&P revised downward their outlook of
Industry risk for all banks in Ireland due to the expected impact
of Covid-19. As a result, the outlook for PTSB PLC and PTSB Group
Holdings PLC has been moved to negative from stable, with our
ratings being affirmed.
Customer Balances
-- Customer deposits of EUR17.3 billion at 31 March 2020 are
EUR0.1 billion higher than 31 December 2019, with current account
balances up 5% from December 2019. The loan to deposit ratio was
90% at the end of March 2020.
-- The total performing loan book is EUR15.2bn at 31 March 2020,
slightly lower than the total performing loan book at 31 December
2019 as the pace of repayments exceeded that of new business.
-- Total new lending of EUR0.35bn grew by 1% YoY; new mortgage
lending of EUR0.3bn grew by 4% YoY while market growth was 6%(2) .
As a result, Q1 2020 market share of mortgage drawdowns was
14.7%(2) down from 15.1% at Q1 2019. The Bank continues to manage
its offering carefully by maintaining price discipline and credit
underwriting standards.
-- Non-performing loans at 31 March 2020 remain broadly in line
with the balances at December 2019, where organic cures were offset
by new defaults.
-- As a result of the economic outlook and the impact of
Covid-19, the Bank's expected credit loss will increase in the
2(nd) quarter. The impact of Covid-19 is uncertain and thereby
challenging to forecast; however, the Bank is guiding that a net
impairment charge of c. EUR50m (equivalent to c. 60 basis points
annualised cost of risk) is more appropriate for H1 2020, a
position which we will keep under constant review and where we will
update the market further at the Half Year results.
Financial Performance - Q1 2020
-- Net interest income from our performing loan book was stable
in Q1 2020 supported by the active management of the Bank's cost of
funds, partly offset by reduced income from non-performing loans
(NPLs) due to loan sales in H2 2019. YTD Net Interest Margin (NIM)
of 1.80% is in line with full year 2019.
-- Fees and commissions remain in line with the prior year while
net other income has reduced due to lower gains from the sale of
properties in possession in Q1 2020 compared to Q1 2019. The stock
of properties in possession has reduced by c. 60% YoY to 360
properties at the end of March 2020.
-- Operating costs remain in line with management expectations
as we continue to deliver on cost saving initiatives to allow for
the continuation of planned investments.
-- The full year bank levy and regulatory charges are expected
to be in line with the prior year.
(1) Includes profits earned in Q1 2020, which are subject to
regulatory approval
2 Source: Mortgage drawdowns YTD to end March 2020, BPFI
Outlook
Given the significant change in the operating environment and
economic expectations, some of the Bank's previous guidance for
2020 is no longer appropriate.
-- Business activity will be lower, impacting gross new lending
volumes and the Bank's ability to grow Non Interest Income. 2020
new lending could reduce by c. 40 - 50% of 2019 volumes
(EUR1.7bn).
-- As previously indicated, NIM is expected to decline from
current 180 basis points to mid-170 basis points, reflecting the
low interest rate environment and growth in liquid assets.
-- Achieving cost reductions in the current economic environment
will prove challenging; however, the Bank retains its outlook that
operating costs will remain stable and it will continue to deliver
cost savings in the medium term.
-- 97% of total performing assets are secured residential
mortgages; as such, the full year loan loss experience will be
directly linked to a mix of: the payment breaks issued in H1 2020;
the resultant timeline over which business activity and employment
levels begin to recover from the Covid-19 pandemic; and, the
macro-economic impact on the House Price Index (HPI).
-- Capital remains strong, the outlook on profitability is
challenging; however, having assessed a range of scenarios, the
CET1 ratio will remain above the Bank's minimum regulatory
requirements.
(1) Includes profits earned in Q1 2020, which are subject to
regulatory approval
2 Source: Mortgage drawdowns YTD to end March 2020, BPFI
Ends
For Further Information Please Contact:
Eamonn Crowley | Chief Financial Officer |
Eamonn.Crowley@Permanenttsb.ie | +353 1 669 5354
Nicola O'Brien | Head of External Reporting and Investor
Relations | Nicola.O'Brien@permanenttsb.ie | +353 1 6695283
Leontia Fannin | Head of Corporate Affairs and Communications |
Leontia.Fannin@permanenttsb.ie | +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.
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 or visit www.rns.com.
END
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