DUBLIN, Aug 29 (Reuters) - Irish state-owned mortgage lender Permanent TSB posted a slightly narrower first-half operating loss and said its restructuring plan was on track, as lower impairments and improving margins offset a rise in home loan arrears.
Permanent TSB (PTSB), the smallest of Ireland’s three remaining domestically-owned lenders, is seeking approval from European authorities to split itself up and carve out a viable entity by moving bad assets off its balance sheet.
Expensively funded, loss-making tracker mortgages which follow the European Central Bank’s low interest rate and make up two thirds of its loan book are currently causing a significant drag on the bank’s profitability.
Chief executive Jeremy Masding said on Thursday the core ‘Good Bank’ that could emerge was on track to be profitable in the next 12 months and that PTSB was “back in business” having returned to the lending market with 120 million euros worth of new mortgages approvals so far this year.
“Our financial performance is firmly in line with our restructuring plan,” Masding said. “There has been a modest improvement in our like-for-like operating performance despite an ongoing prudent approach to impairment provisions.”
PTSB, split from its more profitable life insurance arm last year, made an operating loss of 449 million euros in the six months to June against a 457 million loss the same time in 2012.
Bad debt provisions dipped to 430 million euros from 437 million, while its net interest margin - measuring the profitability of its lending - rose to 0.82 percent from 0.72 percent at the end of December.
That was still the lowest in the industry, however, and less than half the level of rival Bank of Ireland.
PTSB also said the proportion of its owner-occupier loans in arrears for more than 90 days rose to 15.1 percent from 13.7 percent at the end of 2012, with troubled loans in Ireland at 16.6 percent versus an industry average of 12.7 percent.
The bank said 18.8 percent of its buy-to-let book was three months or more in arrears, versus 21 percent in December.
PTSB, then known as Irish Life & Permanent, received 4 billion euros of state aid in 2011. A revised restructuring plan for the bank was submitted to the European Commission earlier this month and a decision is expected by November or December, Masding told a news conference.
The updated plan laid out options for separating the bank’s good and bad assets, and showed how its loans would perform if the economy worsened, a source familiar with the plan told Reuters last month.