May 14, 2020 / 6:55 AM / 24 days ago

Ireland's PTSB says 10,000 loan breaks to trigger 50 million euro impairment

DUBLIN (Reuters) - Ireland’s permanent tsb (PTSB) (IL0A.I) expects to set aside 50 million euros in the second quarter to cover expected loan losses from the 10,000 coronavirus-related repayment breaks approved to date, the mortgage lender said on Thursday.

Ireland plans to gradually ease weeks of stay-home measures to slow the spread of the virus on Monday. The shutting down of all but essential services has forced the country’s two dominant banks, Allied Irish Banks (AIBG.I) and Bank of Ireland (BIRG.I), to grant around 140,000 loan breaks in Ireland and Britain.

PTSB, the smallest of the three domestically-owned banks that survived Ireland’s financial crash a decade ago, said its initial three-month breaks equated to around 1.5 billion euros ($1.6 billion) or 9% of total gross loans.

The bank, which made a 42 million euro profit in 2019, said its previous guidance for 2020 was no longer appropriate as a result, predicting new lending could collapse to around 40% to 50% of 2019 volumes.

It said achieving cost reductions in the current economic environment would prove challenging but the bank retained its outlook that operating costs would remain stable and that it would continue to deliver cost savings in the medium term.

Its share of the Irish mortgage market slipped to 14.7% at the end of March, from 15.5% at the end of December, while total new lending was up 1% year on year in the first quarter before housing transactions ground to a halt from mid-March.

The 75% state-owned lender, whose non-performing loan (NPL) ratio fell to 6.4% last year from a 2017 high of 26% after a series of loan sales and securitisation deals, said its NPLs remained broadly in line with balances at the end of last year.

Its fully loaded core tier 1 capital ratio (CET1 ratio) - a key measure of financial strength - inched up to 15.2% from 15.0% three months earlier, making PTSB the only of the three domestic lenders to boost its capital in the first quarter.

Like Bank of Ireland and AIB, PTSB said it had assessed that its CET1 ratio would remain above minimum regulatory requirements across a range of scenarios, in PTSB’s case a mark of 8.94% following some easing of regulatory guidance.

“Following significant progress made over the last number of years, the bank is currently in a strong position to deal with a significant economic downturn,” outgoing Chief Executive Jeremy Masding said in a statement.

($1 = 0.9252 euros)

Reporting by Padraic Halpin; Editing by Edmund Blair

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