TIDMIL0A TIDM73HR
RNS Number : 4211R
Permanent TSB Group Holdings PLC
01 March 2023
01 March 2023
Permanent TSB Group Holdings plc ('the Bank')
Annual results for year ended 31 December 2022
"2022 was a transformational year for Permanent TSB, as we
combined the once-in-a-generation opportunity of acquiring certain
elements of Ulster Bank's retail, SME and asset finance businesses
in the Republic of Ireland with an outstanding business
performance.
We have become a bigger bank, with an expanded branch presence
throughout Ireland following our recent acquisition of 25 new
branch locations; an even stronger competitor, with many more
personal and SME customers; a larger employer, with the addition of
more than 250 former Ulster Bank employees to date; and an
organisation that is well positioned to build on the exceptional
momentum we have generated.
Our underlying profit improved significantly as we attracted new
customers and did more business with existing customers.
We were successful in growing our mortgage market share to 18.5%
by supporting mortgage customers with EUR2.6bn of new lending - an
increase of 40%. We also completed the transfer of c. EUR5.2bn in
Ulster Bank mortgage loans, with the remainder scheduled to
transfer in the coming months.
In an unprecedented era of switching activity, we opened over
160,000 new accounts in 2022, with our award winning digital
current account offering, our customer-friendly app and our
availability in-person and through our digital and mobile channels
making it easier for customers to navigate the transition.
And we made major progress in scaling up our SME offering
through a mixture of organic growth and the Ulster Bank
acquisition, as we make our plan for EUR1bn in new SME lending over
3 years a reality.
Despite a challenging economic backdrop, we approach the
remainder of the year and beyond with confidence. We are committed
to supporting our customers in the face of cost of living
pressures. We see immense opportunity in the Irish retail and SME
market and will continue to bring real competition to the market in
the years ahead."
Eamonn Crowley, Chief Executive
Key Highlights FY 2022
-- The Bank maintains a strong Capital position; regulatory CET1
ratio 16.2%, fully loaded CET1 capital ratio of 15.2% (+10bps
YoY)
-- Profit Before Tax of EUR267 million (FY'21: -EUR21 million),
of which EUR222 million arose from Exceptional Items
-- Underlying Profit Before Tax[1] of EUR45 million (FY'21:
EUR17 million)
-- Strong new lending of EUR2.8 billion; c.40% higher compared
to prior year
-- New mortgage market share of 18.5%[2] , compared to 17.8% at
December 2021
-- Total Income 13% higher year on year (YoY); Net Interest
Margin (NIM) of 1.54%, 3bps higher than prior year; Q4'22 NIM% of
1.92%
-- Underlying Operating Expenses[3] of EUR344 million, EUR49
million or 16% higher YoY as we accelerate our investment in
customer services, product offerings and take on new businesses
-- Non-Performing Loans have reduced by EUR167 million to EUR650
million, or 3.3% of gross loans
-- Completed an ESG Risk Rating through Sustainalytics and
received a 'Low' Risk Rating
Business Performance
2022 was a transformational year for the Bank, with growth
across key product lines, significant increases in new customers
and the principal completion of the Ulster Bank transaction.
Total new lending of EUR2.8 billion is c. 40% higher YoY, while
market share of mortgage drawdowns grew to 18.5%. The second half
of 2022 saw a sharp increase in new mortgage drawdowns as growth in
the switcher market intensified. The changed interest rate
environment has encouraged customers to seek rate certainty, with
c. 40% of new lending into 5-year fixed rate products. In
particular, there has been a strong performance of our inaugural
Green mortgage product, the 5-year fixed rate which offers
discounts of 0.2% for both new and existing mortgages on homes with
a Building Energy Rating of A1 to B3, c.20% of new lending, c.
EUR500m in 2022.
SME Lending of EUR150 million in 2022, an increase of 53% YoY,
reflects our stated ambition to offer a meaningful alternative to
business customers seeking a new banking relationship. Our
partnerships with the Irish Government's Strategic Banking
Corporation of Ireland (SBCI) and other providers of support
services to SMEs, have allowed further expansion in Business
Banking and support to small business in communities throughout
Ireland. Live applications and sanctioned SME pipeline represent
further opportunities for growth in 2023.
New consumer term lending pay-outs of EUR96 million increased by
3% YoY. Digital adoption continues to grow with 80% of new term
lending drawdowns through our direct channels[4].
We continue to enhance our customer servicing journey which are
delivered through a combination of digital and in person support.
Customer loyalty, trust and digital innovation is a key strategic
priority and has enabled the Bank to maintain its Relationship Net
Promoter Score (RNPS) at +10.[5]
Ulster Bank Transaction & Customer Switching Activity and
Supports
Q4'22 marked the principal completion of the Ulster Bank
transaction, with the transfer of c. EUR5.2 billion Ulster Bank
performing non-tracker mortgages. In February, we completed the
migration of the performing Micro-SME portfolio of c. EUR165m and
c. 3,200 customer relationships. The Bank continues to work with
NatWest and Ulster Bank DAC towards the acquisition of the
remaining Mortgage and Asset Finance portfolios in H1'23.
As part of this transaction we have also expanded our nationwide
footprint to many new communities with the acquisition of 25 new
branches, allowing the Bank to build relationships and reinforce
our commitment to supporting customers across the country. To date,
we have welcomed over 250 new colleagues from Ulster Bank who will
help us to move forward together as we deliver on our ambition of
being Ireland's best personal and small business bank.
The exit of two competitors from the Irish retail banking market
has provided an opportunity for the Bank to fulfil its purpose of
serving the community, with the opening of 113k new personal
current accounts (+217% YoY) and 43k personal deposit accounts
(+85% YoY) and 6k new business current accounts (+147% YoY).
This growth has been supported by the launch in 2021 of our
Digital Current Account, and more recently Digital Joint Current
Account, which enables new customers to open a new current account
through our app in less than ten minutes. Greater than 50% of new
Current Account openings are now taking place through the Bank's
award-winning Digital Current Account.
Sustainability
We have made progress on integrating Sustainability into our
business model. We launched a Sustainability Strategy for the Bank
aligned to the Sustainable Development Goals, as well as ensuring
strong governance with the establishment of a Sustainability
Committee. We also increased our focus on Climate Risk with the
development of a Climate-related and Environmental Risk
Implementation Plan and we disclosed our carbon impact across Scope
1, 2 and 3 with a commitment to set Science Based Targets (SBTs) by
2024. Following a comprehensive assessment, we received a 'Low' ESG
Risk Rating from Sustainalytics, placing the Bank in the second
position amongst Irish banks.
The Bank's Green Mortgage is performing strongly, with further
green products planned to support customers in the transition to a
low carbon economy. We also became a founding member of the
International Sustainable Finance Centre of Excellence, a key
output of Ireland's Sustainable Finance Roadmap.
Financial Performance
The Bank delivered an Operating Profit of EUR14 million (FY'21:
Operating Profit EUR16 million) and a Profit before Tax, inclusive
of Exceptional Items, of EUR267 million (FY'21: Loss before Tax of
EUR21 million).
Net Interest Income of EUR362 million has increased by 16%
year-on-year, driven primarily by the changed interest rate
environment, improved returns from treasury balances, and the
migration of c. EUR5.2 billion Ulster Bank Performing Loans. The
FY'22 exit NIM of 1.54% has improved by 3 basis points from 1.51%
at Dec'21. However, the Q4'22 NIM of 1.92% more accurately reflects
the upward trajectory as it takes into account the initial impacts
from interest rate rises and acquisition of Ulster Bank DAC
assets.
Fees and Commission Income of EUR42 million was 20% higher than
the prior year, with strong transactional activity and increased
Current Account volumes.
Underlying Operating Expenses of EUR344 million are 16% higher
than the prior year, as we accelerate our investment in customer
services, higher staff numbers as we grow our business, wage
inflation and increased Depreciation costs drives higher expenses
including a higher depreciation charge of EUR52 million, +10% YoY
as we pay for investment in the business.
A EUR20 million Net Impairment release reflects the continued
growth in house prices YTD whilst maintaining a prudent level of
provisions in light of high levels of inflation. Net Impairment
release reflects P&L release of EUR31 million, minus a Capital
Deduction for NPL Backstop of EUR11 million.
The Bank reports an Exceptional Item Gain of EUR222 million at
31 December 2022, driven primarily by the Gain on Bargain Purchase
of the retail and SME businesses from Ulster Bank DAC. Exceptional
Items are shown net of transaction costs associated with the Ulster
Bank transaction together with some additional restructuring costs
and provision for non-Core items.
Growing Balance Sheet with strong capital, funding and liquidity
levels
The Bank's funding position remains strong, with all funding and
liquidity metrics well above regulatory requirements. Total
Customer Deposits of EUR21.7 billion at 31 December 2022 are EUR2.6
billion higher than at 31 December 2021, reflecting a 26% increase
in current account balances to EUR9.0 billion. The loan to deposit
ratio of 90% at 31 December 2022 reflects the Bank's strong new
lending.
The Total Performing Loan Book of EUR19.2 billion at 31 December
2022 is EUR5.3 billion higher than the Total Performing Loan Book
at 31 December 2021, following the migration of the first cohort of
Ulster Bank performing non-tracker mortgage loans in November, and
strong new lending performance throughout the year.
Non-Performing Loans of EUR650 million at 31 December 2022 are
EUR167 million or 20% lower when compared to the balance at 31
December 2021, driven by a combination of deleveraging activity and
net organic cures. The FY'22 Non-Performing Loan Ratio of 3.3% has
reduced from 5.5% at December 2021, also due to the migration of
EUR5.2bn of mortgage assets from Ulster Bank DAC.
Capital
The Bank's Common Equity Tier 1 (CET1) ratio on a fully loaded
basis remains strong at 15.2% at 31 December 2022, an increase of
10bps when compared with the CET1 Pro forma ratio on a fully loaded
basis at 31 December 2021, primarily reflecting the YTD Income
Statement profit; partially offset by the Balance Sheet growth.
The CET1 ratio on a transitional basis of 16.2% at 31 December
2022 reduced by 120 bps compared to the CET1 Pro forma ratio on a
transitional basis of 17.4% at 31 December 2021, due to the annual
phase-in of transitional filters; regulatory requirement for CET1
on a transitional basis is currently 8.94%[6].
The Total Capital ratio on a transitional basis was 22.3% at 31
December 2022; regulatory requirement for Total Capital on a
transitional basis is currently 13.95%.
The table below details the Bank's capital ratios at 31 December
2022 and compares them to the capital ratios at 31 December
2021.
Capital Ratios (Reported) (Pro Forma) (Reported)
(%) December December December
2022 2021 2021
CET1 (Fully Loaded) 15.2% 15.1% 14.7%
----------- ------------ -----------
CET1 (Transitional) 16.2% 17.4% 16.9%
----------- ------------ -----------
Total Capital (Transitional) 22.3% 22.4% 21.8%
----------- ------------ -----------
Total Capital (Fully
Loaded) 21.3% 20.1% 19.5%
----------- ------------ -----------
2023 Outlook
Notwithstanding uncertainty in the macroeconomic backdrop, the
Bank's core business markets remain strong and are expected to
continue to grow during 2023.
The mortgage market is forecast to grow from EUR14.1 billion in
2022 to c. EUR14.5 billion [7] in 2023 supported by an active, but
slowing Switcher market and house price growth of c. 4%. The
performing loan book is expected to continue growing at a similar
pace to 2022.
Net Interest Income is on course to continue growing due to loan
book growth, the changed interest rate environment and from the
elimination of costs associated with carrying excess liquidity when
yields were negative. The EUR6.7bn of Ulster Bank DAC assets are
expected to generate c. EUR170 million in gross interest income
(excluding discount unwind) in FY'23. The micro-SME (c. EUR0.2bn)
assets migrated in February 2023 and the final asset migrations are
expected before the end of H1'23. The aforementioned items will
also see the Bank's Net Interest Margin increase to c. 2.25%.
Total Operating Costs in 2023 are expected to be c. 15% higher
than 2022 as we fully complete the Ulster Bank transaction,
transfer of employees, and absorb the previously guided higher
depreciation charges and invest in key strategic and regulatory
initiatives which will support the growing business. The Bank
remains committed to continuing to rigorously manage costs over the
medium term in order to remain efficient and we expect a material
reduction in the Bank's cost to income ratio as a result.
Asset quality remains robust, despite the ongoing cost of living
challenges for customers. Subject to there being no material
deterioration in the operating environment, the cost of risk for
2023 is expected to be not more than ten basis points.
Capital remains strong and having assessed a range of scenarios,
the CET1 ratio will remain well above the Bank's minimum regulatory
requirement
- 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] Underlying Profit or Loss before Tax is the Profit or Loss
before Exceptional Items and Tax
[2] Based on BPFI data as at 31 December 2022
[3] Underlying Operating Expenses are Total Operating Costs per
the financial statements less a provision for legal, compliance and
other costs shown in Exceptional Items for ease of comparison (see
further details in the Financial Performance)
[4] Direct channels include Desktop, App and Voice through
Open24
[5] A Relationship Net Promoter Score (RNPS) is a measure of
customer advocacy towards a brand and indicates the willingness of
a customer to recommend a company's products or services to others.
The question asks customers how likely they are to recommend their
bank to friends or family on the basis of their own experience. The
range for the scoring is -100 to +100.
[6] Regulatory requirements for both CET1 and Total Capital on a
transitional basis excludes P2G
[7] Source: Davy
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END
STRUWVAROKUUUUR
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March 01, 2023 02:00 ET (07:00 GMT)
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