TIDMIL0A TIDM73HR
RNS Number : 0029V
Permanent TSB Group Holdings PLC
04 August 2020
04 August 2020
PERMANENT TSB GROUP HOLDINGS PLC (the "Bank")
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2020
Permanent TSB Group Holdings plc ("PTSB", "the Bank") today
reports its half year results for 2020.
'In my first six weeks as CEO of Permanent TSB, I have set out a
new purpose for the organisation which is centred on building trust
with our customers and connecting with the Bank's community
heritage. We have put that purpose into action and put in place a
range of supports, including; c.10.5k mortgage payment breaks; term
loan payment breaks; temporary overdraft and credit card limit
increases; and over EUR1m in incentives and rewards back to
customers. In addition, we have kept all of our 76 branches open to
serve our customers, we are supporting valuable societal and
citizenship projects, such as our recent partnership with Ó Cualann
Cohousing Alliance and in recent days, the Bank has announced
significant reductions to our Fixed and Variable mortgage rates for
both new and existing customers, rewarding our customers and
allowing us to compete effectively in the market.
The first quarter saw a positive start to the year, while the
second quarter has been dominated by the impact of Covid-19. As
customers embraced the Government imposed lockdown, the Bank saw
new business volumes and transactional banking activities reduced
to levels lower than the Bank has seen in recent years, but we are
pleased to say that volumes have increased again as the phased
approach to opening up the Irish economy emerges. As guided in the
Bank's most recent trading update, the second quarter has been led
by the macro-economic environment and the impact this has had on
credit provisioning models. In this regard the Bank reports, in its
Interim results, provisions for expected credit losses totalling
EUR75 million reflecting a prudent estimate ahead of what remains
an uncertain macro-economic outlook. At the same time, the Bank's
capital ratios and liquidity levels with a CET1 ratio (fully
loaded) of 13.9% and a liquidity coverage ratio of 208%
respectively, remain above management and regulatory minimums.
The severity and duration of the Covid-19 pandemic and its
impact on the economy remains unpredictable. However, I am
confident of the Bank's ability to remain resilient, to continue to
support our customers, colleagues and communities building on our
well established franchise in the Irish market.'
Eamonn Crowley, Chief Executive
Key Points:
-- Loss before tax of EUR57m
-- Operating profit before impairment and exceptional items of EUR23m
-- Net Interest Margin (NIM) of 1.75%
-- Total new lending volumes of EUR0.6 billion; decreased by 16% year-on-year (YoY)
-- Market share of new mortgage lending at 15.2% (1) , up from 14.7% at June 2019
-- A net impairment charge of EUR75 million
-- Operating cost of EUR142m; 2% lower YoY; Regulatory Charges of EUR20m
-- NPL Ratio of 6.8%
-- The Bank maintains strong capital and liquidity positions:
CET1 ratio (fully loaded) of 13.9%, and Liquidity Coverage Ratio of
208%.
-- The Bank approved c.10.5k mortgage payment breaks; c.
EUR1.6bn or 10% of total gross loans. The most recent data shows
that c.50%(2) no longer require a payment break. The maximum
Covid-19 payment break is for up to six months, on all applications
approved before the 30th of September 2020.
(1) BPFI as at 30 June 2020
(2) Data as at the 29(th) of July 2020
Business Performance
-- The Bank has announced significant reductions to both fixed
and variable mortgage rates for new and existing customers, where
they can now avail of fixed rates for terms between 3 and 7 years,
with rates as low as 2.95% for a 3 year fixed product.
-- The headline SVR (Standard Variable Rate) will fall by 0.55%
(over half a percent) from 4.50% to 3.95%. The MVR (Managed
Variable Rate) for existing customers will also reduce by up to
0.35%.
-- These rate reductions go a long way to addressing the
discrepancy which traditionally existed between pricing for new and
existing mortgage customers.
-- The Bank has also announced a three-year partnership with the
O'Cualann Cohousing Alliance, supporting the agency's work
developing affordable housing schemes across the country. The
partnership will see the Bank donate EUR350k to O'Cualann, which
will be used to accelerate its plans to develop 1,800 affordable
houses over the next three years.
-- Digital customers continue to grow with more than 650k active
customers online, an increase of c.10% on 2019.
-- The Bank has made significant gains in its Relationship NPS,
increasing from +3 at Dec 2019 to +14 at June 2020, placing the
Bank first in the market.
Balance Sheet
Capital
-- The Bank's Common Equity Tier 1 (CET 1) ratio on a fully
loaded basis is 13.9% at 30 June 2020; the CET1 ratio on a
transitional basis is 16.5%; and, the Total Capital ratio on a
transitional basis is 17.9%.
-- All ratios are lower than those reported at 31 December 2019
(pro-forma CET1 fully loaded 15.0%; CET1 transitional basis 18.1%;
Total Capital transitional basis 19.6%) primarily due to the loss
in the period and the increase in the Bank's risk weighted assets
due to the Payment Break population, which remain classified as
performing in the period.
-- Based on the most recent regulatory guidance, reducing the
Counter Cyclical Buffer from 1.0% to 0% and a reduction in the
Bank's P2R as a result of the introduction of the CRDV Regulatory
amendments, the Bank's CET1 regulatory requirement has reduced from
11.45% to 8.94%, Total Capital regulatory requirement has reduced
from 14.95% to 13.95%, both on a transitional basis.
Regulatory Capital Requirements
CET1 Ratio % Total Capital Ratio
%
Transitional Basis 01 Jan 2020 30 Jun 01 Jan 30 Jun
2020 2020 2020
------------ ------- ---------- ----------
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%
------------ ------- ---------- ----------
Funding
-- The Bank's funding position remains strong. All funding and
liquidity metrics are above regulatory requirements with the
Liquidity Coverage Ratio (LCR) at 208%.
-- 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.
-- The Bank has received confirmation of revised MREL
requirements, reflecting the reduction in the Counter Cyclical
Buffer (CCyB) from 1% to 0%, and has been given an extended
transitional period of six months to 30 June 2021 to comply with
this requirement. The Bank awaits confirmation of a new MREL
decision by early 2021 based on the Bank Resolution and Recovery
Directive 2 (BRRD2) framework.
Customer Balances
-- Customer deposits of EUR17.8 billion at 30 June 2020 are
EUR0.6 billion higher than 31 December 2019, with current account
balances up 15% from December 2019. The loan to deposit ratio was
87% at the end of June 2020.
-- The total performing loan book is EUR15.1bn at 30 June 2020,
slightly lower than the total performing loan book at 31 December
2019 as the pace of repayments exceeds that of new business.
-- Total new lending of EUR0.6bn reduced by 16% YoY as Covid-19
impacted all new lending activity; new mortgage lending of EUR0.5bn
reduced by 14% YoY while the new lending market reduced by 16%. As
a result, H1 2020 market share of mortgage drawdowns was 15.2%(1) ,
up from 14.7% at H1'19.
-- Non-performing loans of EUR1.1 billion at 30 June 2020 remain
broadly in line with the balances at December 2019, where organic
cures were offset by new defaults.
-- The Bank approved c.10.5k mortgage payment breaks; c.
EUR1.6bn or 10% of total gross loans. Current records show that
c.50%(2) no longer require a payment break. The maximum Covid-19
payment break is for a period of up to six months, for all
applications approved before 30 September 2020.
(1) BPFI as at 30 June 2020
(2) Data as at the 29(th) of July 2020
Financial Performance - H1 2020
-- YTD NIM of 1.75% is in line with revised guidance provided in
the Q1 2020 Trading Update. Net interest income from our performing
loan book was stable in H1 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 and lower
income from the maturities of higher yielding treasury assets.
-- Fees and commissions have reduced by EUR1m vs the prior year
as Covid-19 had a material impact on transactional activity in
April and May 2020 together with an increase in the payment of
rewards to customers. Net other income has reduced due to lower
gains from the sale of properties in possession in H1 2020 compared
to H1 2019. The stock of properties in possession has reduced by c.
21% YoY to 343 properties at the end of June 2020.
-- Underlying operating expenses (excluding regulatory charges
and costs associated with Covid 19) of EUR142m were EUR3m (2%)
lower year on year and within management expectations. We continue
to focus on delivering cost saving initiatives to allow for the
investment required to deliver both business efficiencies and drive
digital transformation.
-- The Bank incurred EUR4m of Covid 19 costs in its immediate
response to ensuring continuity of service, in a safe and secure
way, as the country embraced the Government imposed lock down.
-- Regulatory charges amounted to EUR20m, an increase of EUR2m
YoY. The Bank levy of c. EUR24 million is due to be paid in the
second half of the year.
-- The deterioration in economic conditions has led to a total
Expected Credit Loss (ECL) of EUR75m for H1'20, which compares to a
EUR5m charge at H1'19. The impact of Covid-19 remains uncertain and
therefore the Bank is maintaining a prudent approach to the loan
portfolio including the future impact from Payment Breaks.
Outlook
Looking ahead, the outlook remains uncertain, recovery being
dictated by the containment of the Covid-19 virus and the
Government led phases of reopening of the economy. March and April
2020 saw a sharp decline in activity, but since then there has been
a stabilisation, and in recent weeks a recovery in transactional
activity. Household spending has been curtailed, resulting in
substantial build-up of deposits and a reduction in demand for
credit. As previously indicated;
-- Lower business activity in quarter two has impacted gross
lending volumes; however July has shown more positive signs of
recovery, we anticipate 2020 new lending could be c. 40% lower than
2019 volumes (EUR1.7bn).
-- NIM is expected to decline to low 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 in 2020; the Bank is committed
to delivering 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 the emerging macro-economic indicators and
impact of payment breaks issued in 2020.
-- The reopening of the economy, recent declines in unemployment
data, the resilience of the housing market and a Government
Stimulus Programme now in place, shows more encouraging indicators
than previously anticipated. The Bank will keep the ECL under
constant review throughout the second half of the year.
-- Capital remains strong, having assessed a range of scenarios,
the CET1 ratio will remain well above the Bank's minimum regulatory
requirements.
The Bank's Response to Covid-19
-- Payment Breaks on Mortgage and Term Loan accounts for a period of up to 6 months.
-- An online portal facilitating Payment Breaks for customers.
-- New or additional working capital facilities to SME customers
to help them manage temporary cash flow shortages.
-- Supporting customers; with priority banking in branch and
over the phone for our elderly and vulnerable customers,
contactless payment limits were increased from EUR30 to EUR50 per
transaction, no contactless fees applied, unlimited 10c cashback
payments together with Go Rewards, in quarter two, on debit card
transactions for Explore Current Account customers.
-- Social distancing and increased hygiene measures remains an
important feature in all of our branches nationwide.
-- Redeployment of over one hundred staff to our contact centres
to support in answering customer queries; four new regional centres
opened.
-- All 76 branches remain open to meet our customer and
community needs; the Bank remains operationally resilient with over
1,200 colleagues working remotely.
- Ends -
For Further Information Please Contact:
Eamonn Crowley | Chief Executive Officer |
Eamonn.Crowley@Permanenttsb.ie | +353 1 669 5354
Nicola O'Brien | Head of External Reporting & Investor
Relations | Nicola.obrien@permanenttsb.ie | +353 87 148 2275
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
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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