TIDMIL0A TIDM73HR
RNS Number : 9666J
Permanent TSB Group Holdings PLC
03 May 2022
03 May 2022
Permanent TSB Group Holdings plc ('the Bank')
Trading Statement - Q1 2022 Update
'Business and financial performance remained strong through the
first three months of this year. New lending volumes and
transactional banking income were both higher than the same period
last year, with a strong pipeline of activity. Although the
economic consequences of the devastating events in Ukraine have
tempered the post-pandemic recovery, the fundamentals of the Irish
economy remain robust and the Bank's outlook remains promising.
We are making good progress in our preparation to transform the
Bank with the migration of Ulster Bank DAC Non-Tracker Mortgages,
SME Loans and the Lombard Asset Finance business that form part of
our legally binding agreement with NatWest Group Plc ("the
Transaction") signed in December 2021. The timelines for completion
of the Transaction remain as per previous announcements, subject to
regulatory and shareholder approval.
We remain focussed on our ambition of becoming Ireland's best
personal and small business bank. As an Irish brand with people and
community at the heart of our approach, we are very confident in
our ability to continue to grow and provide real choice and value
for customers in the Irish market. The Bank is delighted to have
recently become the title sponsor for both the Irish Olympic and
Irish Paralympic teams for the Paris 2024 Olympic and Paralympic
Games, reflecting the Bank's rich heritage in Irish
communities.'
Eamonn Crowley, Chief Executive
Key Points:
-- The Bank maintains a strong capital position; fully loaded
CET1 capital ratio of 15.3%; regulatory CET1 capital ratio
16.7%
-- Strong new lending of EUR0.5 billion YTD; 11% higher compared to Q1'21
-- New business mortgage market share of 17%[1], compares to 17.9% at March 2021
-- Net interest income is in line with expectations
-- Underlying Net Interest Margin (NIM) of 1.76%[2], in line
with prior year (see further comment)
-- Operating costs of EUR83m, 12% higher year-on-year (YoY), in line with management expectations
-- Customer deposits of EUR19.4 billion, an increase of 2%
(EUR0.3 billion) in the first quarter of 2022
-- Non-performing loans (NPLs) of EUR0.8 billion at 31 March
2022 remain in line with balances reported at December 2021; the
NPL Ratio remains at 5.5%
Business Performance
New mortgage lending of EUR0.4 billion grew by 11% YoY. Market
share of mortgage drawdowns was strong at 17%, slightly below the
March 2021 market share (17.9%). The mortgage market in Ireland is
estimated to grow 15% from EUR10.5 billion in 2021 to c. EUR12.1
billion[3] in 2022, and it remains highly competitive. We continue
to manage our offering carefully, by maintaining price discipline
and credit underwriting standards.
The Bank has recently announced two key enhancements to its
mortgage offering; the first of these is a 0.2% rate reduction to
its four year fixed rate products, which offer new customers a
wider choice of mortgage products to suit their specific
preferences. The second mortgage offering builds on the launch of
the Bank's Sustainability Strategy, a new green mortgage product
which will offer discounts of 0.2% on five year fixed rates for
both new and existing mortgages, on homes with a Building Energy
Rating of A1 to B3. Five-year fixed rates start at 2.35% where the
Loan to Value (LTV) is less than or equal to 80% and the value of
the mortgage is equal to or more than EUR250,000.
Digital transformation initiatives continue to progress well
with the latest roll-out being a digital mortgage journey for
customers which is now complete, enabling customers to submit a
full mortgage application online. The Digital Current Account
launched in the second half of 2021, which allows new customers to
open a Current Account in less than ten minutes, is proving to be
extremely popular. The Bank is facilitating new account openings
through the digital current account opening process and in branch,
and we are very pleased with the increase in the number of new
current account openings in the first quarter, increasing more than
170% compared to this time last year and 67% higher than the last
three months of 2021.
Income
Net interest income is broadly in line YoY; gross interest
income was slightly lower post the non-performing loan sale
transaction (Glenbeigh III) in Q4'21 together with incurring costs
on holding higher levels of excess liquidity, while the cost of
deposits reduced YoY. The Q1 net interest margin of 1.44% includes
a 32 basis points cost related to higher levels of excess liquidity
due to proceeds received from recent deleveraging activity and
continued growth in customer deposits. The underlying NIM excluding
the cost of excess liquidity is 1.76%. The Bank expects a NIM of
c.1.50% in 2022, as we continue to lend and complete the
acquisition of retail and SME businesses from Ulster Bank, reducing
the Bank's excess liquidity levels. Fees and commission income
performance is strong YTD, 25% higher when compared to the prior
year, as transactional activity has recovered to pre-Covid
levels.
Costs
Operating expenses are trending higher than prior year, which is
in line with management expectations, with outlook for costs in
2022 projected to be c. 12% higher YoY, as we deliver on
income-generating initiatives, digital enhancements and invest to
proactively attract and support the on-boarding of customers from
banks who are exiting the Irish market.
The Bank has also agreed a new pay and benefits deal with our
colleagues' representative bodies. In order to provide certainty to
colleagues, the Bank has agreed a 2 year pay deal based on a 6.5%
pay increase, together with a progressive Employee Value
Proposition that supports colleagues at all stages of the employee
life cycle. We believe that this deal is competitive and will be
effective in attracting, retaining and motivating talented
colleagues to enable us honour our commitments to customers and all
other stakeholders as we build a sustainable bank into the future.
The Bank continues to manage its cost base tightly while investing
in our people and infrastructure to ensure we are adequately
prepared to meet the needs of our rapidly growing customer
base.
Balance Sheet
Customer deposits of EUR19.4 billion at 31 March 2022 are EUR0.3
billion higher than 31 December 2021, reflecting an increase in
current accounts to EUR7.4 billion. The loan to deposit ratio of
74% at the end of March 2022 provides the Bank with a strong
liquidity position and significant potential to lend as it expands
its franchise.
The total performing loan book of EUR13.9 billion at 31 March
2022, is broadly in line with the total performing loan book at 31
December 2021, with new business being offset by repayments and
redemptions. Non-performing loans of EUR0.8 billion at 31 March
2022 remains in line with balances at 31 December 2021. The
macroeconomic outlook remains somewhat uncertain as strong domestic
growth is countered by increasing inflation and the impact this
could have on consumer sentiment, with supply chain disruption and
rising commodity prices driven by events in Ukraine. We continue to
maintain post model adjusted ECL allowances to help mitigate this
uncertainty and will review all macroeconomic assumptions impacting
credit impairment in quarter two as part of the Interim Results
process.
Capital
The Common Equity Tier 1 (CET 1) ratio on a fully loaded basis
increased by 20 basis points to 15.3% at 31 March 2022 compared to
a pro forma CET1 ratio of 15.1% at 31 December 2021. The increase
reflects movements in non-credit related risk weighted assets. The
CET1 ratio on a transitional basis of 16.7% at 31 March 2022
reduced 70 basis points from 17.4% at 31 December 2021; regulatory
requirement for CET1 on a transitional basis is currently 8.94%[4].
The Total Capital ratio on a transitional basis was 21.8% at the
end of March 2022; regulatory requirement for Total Capital on a
transitional basis is currently 13.95%(4) .
Outlook
Following a good performance in the first quarter of 2022, based
on current business performance expectations and macroeconomic
assumptions, the Bank's outlook for this year remains in line with
prior market communications. Net Interest Income is expected to
grow, however NIM is expected to remain in the low 150 basis points
range due to retaining higher levels of excess liquidity with
negative yields until Q4'22. Operating Costs are expected to be
c.12% higher than 2021 as we continue to invest in the business,
and the cost of risk is expected to remain low. On the expectation
that the acquisition of Ulster Bank DAC retail and SME business
completes in Q4 2022, the Bank will have exceptional accounting
gains which will increase the overall profitability of the Bank and
positively contribute to the Bank's capital position. We will
continue to invest in capabilities to aid the transfer of customers
from banks exiting the Irish market. Capital remains strong and
having assessed a range of scenarios, the CET1 ratio will remain
above the Bank's minimum regulatory requirements.
- Ends -
For Further Information Please Contact:
Denis McGoldrick Leontia Fannin
Investor Relations Manager Head of Corporate Affairs and
Communications
Email: Denis.McGoldrick@permanenttsb.ie Email: Leontia.Fannin@Permanenttsb.ie
Phone: +353 87 928 5645 Phone: +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.
[1] Based on BPFI data as at 31 March 2022
[2] Underlying Net Interest Margin (NIM) refers to the Bank's
NIM before the 32bps cost of holding excess liquidity at negative
yields
[3] Source Davy
[4] Regulatory requirements for both CET1 and Total Capital on a transitional basis exclude P2G.
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