August 29, 2018 / 8:38 AM / 2 months ago

Profits increase at Ireland's PTSB as lending volumes soar

DUBLIN (Reuters) - Irish financial services firm Permanent TSB (PTSB) reported on Wednesday a 33 percent jump in first-half pretax profit to 57 million euros (£51.68 million), driven by a jump in lending.

New lending volumes at the bank, which is 75 percent state-owned, grew by 50 percent to 585 million euros, with mortgage lending up by 51 percent and consumer lending up 42 percent.

Bailed out like other major Irish banks during last decade’s financial crisis, PTSB has been trying to reduce its exposure to non-performing loans (NPL) and focus on providing services for consumers and small and medium-sized enterprises (SME).

It has been helped by a robust recovery in the Irish economy, which has been Europe’s fastest growing economy for five years in a row.

PTSB said the sale of a portfolio of NPLs to Lone Star Fund’s Start Mortgages for 1.3 billion euros, agreed in July, was expected to close in the fourth quarter.

The gross balance sheet value of the loans is around 2.1 billion euros, and the sale and will reduce the bank’s NPL ratio to 16 percent from 25 percent.

“We are very close to completing the rebuilding of the bank so that we can focus solely on competing in retail and SME markets,” said Chief Executive Jeremy Masding in a statement.

“We have increased or market share in mortgage lending while maintaining price discipline. This has been achieved against the backdrop of an increasingly competitive market.”

The bank said the European Central Bank’s bilateral Targeted Review of Internal Models (TRIM) exercise would lead to an increase of around 1.7 billion euros in its risk weighted assets in the second half, against which it has to set aside capital. That brings the total impact from TRIM to approximately 2.4 billion euros in 2018.

The NPL sale and the TRIM exercise will lower its common equity Tier 1 (CET1) capital ratio - a key measure of financial strength - by 50 basis points in the second half to 2.9 percent.

As of June 30, the fully loaded CET1 was 13.4 percent.

Net interest margin (NIM) decreased by 4 basis points to 1.77 percent in the first half year-on-year. The decrease was primarily due to the maturity of higher yielding treasury assets during the second half of 2017, partly offset by a reduction in interest expense on customer accounts.

Reporting by Graham Fahy; Editing by Jason Neely and Mark Potter

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