TIDMPTSB
RNS Number : 9854H
Permanent TSB Group Holdings PLC
02 August 2023
02 August 2023
Permanent TSB Group Holdings plc ('the Bank')
Interim results for half year ended 30 June 2023
"We are very pleased to have successfully completed our
transformational acquisition of approximately EUR6.75bn of the
Ulster Bank Retail, SME, and Asset Finance business in the Republic
of Ireland. The final migration of the c. EUR0.5bn asset finance
business took place in mid-July and I want to once again warmly
welcome the approximately 88,000 new mortgage and business
customers and over 330 new colleagues who have joined us from
Ulster Bank over the course of this acquisition.
The Bank has made enormous progress over the past two years -
with greater scale and diversification, an enhanced digital
offering, a larger branch network, a bigger team of highly skilled
and committed colleagues, and many more customers than before.
Our first half performance shows real momentum in our business
as we return to sustainable profitability, evidenced by our
underlying profit before tax of EUR86 million. We continued to
support our customers with new lending of EUR1.4bn; an increase of
36% year-on-year ('YoY').
Despite a challenging economic backdrop, we look forward to the
remainder of the year with confidence. We are committed to
supporting our customers in the face of cost of living pressures.
We are and we will deliver on our ambition to provide real
competition in the Irish retail and SME banking market."
Eamonn Crowley, Chief Executive
Key Highlights H1 2023
-- The Bank maintains a strong Capital position; regulatory CET1
ratio of 14.7%
-- Profit Before Tax of EUR26 million, Underlying Profit Before
Tax[1] of EUR86 million
-- Total Gross Loan book of EUR21.1bn; +42% YoY and +7% YTD
-- Total Customer Deposits of EUR22.6bn; +13% YoY and +4%
YTD
-- Strong new lending of EUR1.4 billion; 36% higher compared to
prior year
-- New mortgage market share of 23.1%[2] , compares to 16.3% at
June 2022
-- Total Income 81% higher year on year (YoY); Net Interest
Margin (NIM) of 2.29%
-- Cost/Income ratio[3] of 63%, 29% lower YoY; Underlying
Operating Expenses[4] of EUR204 million, 24% higher YoY as we take
on new businesses, new staff and accelerate our investment in
customer services and product offerings
-- Successfully issued two MREL eligible senior debt bonds
totalling EUR1.15bn; FY23 issuance schedule completed
-- The Irish State and NatWest sold a 10% shareholding bringing
the free float shareholding to 31%
Business Performance
The Bank reports strong business performance for the first half
of the year, with total new mortgage lending of EUR1.3 billion, 41%
higher YoY, with market share of mortgage drawdowns growing to
23.1%. We are continuing to support a more sustainable economy with
28% of drawdowns into our Green mortgage products which were
launched in Q2'22.
New SME Lending of EUR60 million in the first half of 2023 was
14% lower YoY, however, there is a strong pipeline of SME activity
as we move into the second half of the year. Supported by the
migration of the Ulster Bank micro-SME book in February, the total
SME loan book grew by EUR0.2 billion to EUR0.5 billion at 30 June
2023. With the migration of the Asset Finance business in July
2023, the total SME book is now c. EUR1bn.
New Consumer Term Lending pay-outs of EUR60 million increased by
20% YoY, supported by our recent marketing campaign which focuses
on our attractive car and home improvement loan propositions.
Digital adoption continues to grow with 80% of new term lending
drawdowns through our direct channels[5].
Sustainability
Sustainability is a strategic priority for our business and
during the first half of 2023, we have continued to make progress
across the four pillars of our Sustainability Strategy. We are
continuing to support our customers in navigating the transition to
a low carbon economy with c. EUR365 million in green lending drawn
down through the Bank's Green Mortgage offering during H1,
accounting for 28% of new Mortgage lending.
We conducted our first ESG Risk Rating with Sustainalytics and
were awarded a 'Low' risk rating, recognising the progress we have
made in recent years. In addition, we completed a programme of work
to understand our carbon impact across Scope 1, 2 and 3 (including
our financed emissions). We are committed to disclosing
transparently and in early July, we were pleased to issue our first
Task Force on Climate-related Financial Disclosures Report (TCFD)
to the market, demonstrating the progress we are making on
integrating consideration for climate-related and environmental
risk into all areas of our business.
Financial Performance
The Bank delivered a strong Underlying Profit of EUR86 million
(H1'22: Underlying Loss EUR2 million) and a Profit before Tax of
EUR26 million (H1'22: Loss before Tax of EUR36 million).
Net Interest Income of EUR298 million has increased by 92%
year-on-year, driven primarily by; higher average customer loan
volumes due to the acquisition of the Ulster Bank's assets a strong
underlying business performance, by improved returns from excess
liquidity which had been a cost until recently, and by the changed
interest rate environment. NIM% of 2.29%, has increased by 88bps
year-on-year, and 75bps from FY'22 exit NIM of 1.54%.
Fees and Commission Income of EUR23 million was 21% higher than
the prior year, as a result of a larger customer base with strong
transactional activity and increased Current Account volumes.
Total Operating Expenses of EUR228 million are 21% higher than
the prior year, as we operate a larger business with more staff,
and a larger distribution capability. We are also serving a larger
customer base while we continue to invest in the business, as we
manage inflationary pressures. We are revising our full year
guidance regarding Operating Expenses to take account of an
improved Cost/Income Ratio despite an increase in costs;
expectations are now that total Operating Expenses will be c. 25%
higher YoY while the Cost/Income ratio will be <65%.
Credit quality remains robust despite the backdrop of inflation
and higher interest rates. There was a net impairment charge of
EUR9 million which reflects the slight reduction in the House Price
Index observed during the first half of the year.
The Bank reports an Exceptional Item charge of EUR60 million at
30 June 2023 which is driven by the Ulster Bank transaction costs
together with the accounting treatment of expected credit losses on
acquired assets.
Balance Sheet
The Bank's funding position remains strong, with all funding and
liquidity metrics well above regulatory requirements. Customer
Deposits of EUR22.6 billion at 30 June 2023 are EUR0.9 billion
higher than at 31 December 2022, reflecting a 6% increase in
current account balances to EUR9.5 billion. The loan to deposit
ratio of 92% at 30 June 2023 will allow the Bank to continue to
support customers through new lending. 71% of all customer deposits
are insured. The Bank continues to have strong funding and
liquidity ratios with an LCR of 186% and NSFR of 159% at H1 2023.
The majority of excess liquidity of EUR2.7bn is deposited with the
Central Bank of Ireland.
The Performing Loan Book of EUR20.4 billion at 30 June 2023 is
EUR1.3 billion higher than the Total Performing Loan Book at 31
December 2022, following the migration of the SME Ulster Bank in
February 2023 together with the migration of the second cohort of
performing non-tracker mortgage loans in May 2023, and strong new
lending performance in the first half of the year.
Non-Performing Loans of EUR0.7bn with an NPL ratio of 3.3% at 30
June 2023 in line with December 2022.
Capital
The Bank's Risk Weighted Assets ('RWAs') have increased by
EUR0.6 billion from December 2022, driven by the Ulster Bank SME
and Mortgage asset migrations in H1'23 and organic loan book
growth. The CET1 ratio on a transitional basis of 14.7% at 30 June
2023 reduced by c. 150 bps compared to the CET1 of 16.2% at 31
December 2022. The regulatory requirement for CET1 on a
transitional basis is currently 9.44% [6] , +50bps compared to
December 2022 due to the initial phase-in of the Counter Cyclical
Buffer (CCyB).
The Bank's Common Equity Tier 1 (CET1) ratio on a fully loaded
basis remains strong at 14.4% at 30 June 2023, a decrease of 80 bps
since 31 December 2022, primarily reflecting the impact of Ulster
Bank SME and Mortgage asset migrations in H1'23.
The Total Capital ratio on a transitional basis was 20.6% at 30
June 2023. Regulatory requirement for Total Capital on a
transitional basis is currently 14.45%, +50bps compared to December
2022 due to the initial phase-in of the Counter Cyclical Buffer
(CCyB).
On a Pro forma basis, including the EUR0.5bn Asset Finance book
which migrated in July 2023, together with the day one expected
credit loss, the Bank's CET1% on a fully loaded basis is c. 13.8%,
see table of Capital ratios below.
Capital Ratios (Reported) (Pro Forma)[7] (Reported)
(%) June June December
2023 2023 2022
CET1 (Transitional) 14.7% 14.0% 16.2%
----------- --------------- -----------
CET1 (Fully Loaded) 14.4% 13.8% 15.2%
----------- --------------- -----------
Total Capital (Transitional) 20.6% 19.7% 22.3%
----------- --------------- -----------
Total Capital (Fully
Loaded) 20.3% 19.4% 21.3%
----------- --------------- -----------
Leverage Ratio (Fully
Loaded)[8] 7.0% 6.8% 7.7%
----------- --------------- -----------
2023 Outlook
The Bank is in a strong position as we move into the second half
of the year with good momentum in our core product lines.
The mortgage market is undergoing a significant adjustment as
switching activity reduces materially. Latest expectations are that
the 2023 market size could be c. EUR12.5bn, a reduction of c. 11%
YoY. However, the underlying market (excluding switcher proportion)
is expected to grow by c. 10% YoY.
Total Income is now expected to be c. EUR680m in FY23, c. 65%
higher than the prior year and c. 5% higher than the previous
guidance of c. EUR650m as the interest rate trajectory moves higher
than previously assumed; ECB deposit rate of 3.75% assumed at
December 2023.
The Cost/Income ratio is expected to improve to <65% from the
previously guided <70% for the full year. The Bank remains
committed to rigorously managing the cost base to ensure a
continued reduction in the Cost/Income ratio over the medium
term.
Total Operating Costs in 2023 are expected to be c. 25% higher
than 2022, as we operate new businesses, absorb the previously
guided higher depreciation charges and invest in key strategic and
regulatory initiatives which will support the growing business.
We continue to monitor asset quality closely, particularly in
light of the higher interest rate environment and '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, in line with
previous guidance.
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 Senior 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 before Tax is the Profit before
Exceptional and other non-recurring Items and Tax
[2] Based on BPFI data as at 30 June 2023
[3] Cost Income ratio calculated as Operating Expenses (excl.
Regulatory Charges and Exceptional Items) divided by Total
Operating Income
[4] Underlying Operating Expenses are Total Operating Costs per
the financial statements less regulatory charges and a provision
for legal, compliance and other costs shown in Exceptional Items
for ease of comparison (see further details in the Financial
Performance)
[5] Direct channels include Desktop, App and Voice through
Open24
[6] Regulatory requirements for both CET1 and Total Capital on a
transitional basis excludes P2G
[7] Pro forma capital ratios include the impact from the Ulster
Bank Asset Finance migration, completed in July 2023
[8] The Leverage ratio is calculated by dividing Tier 1 capital
by gross balance sheet exposures (total assets and off balance
sheet exposures)
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END
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