TIDMIL0A TIDM73HR
RNS Number : 0175E
Permanent TSB Group Holdings PLC
03 November 2020
03 November 2020
Permanent TSB Group Holdings plc ('the Bank')
Trading Update For The Third Quarter Ended 30 September 2020
(Unaudited)
As the country continues to deal with the impact of Covid-19, we
have remained focused on our Purpose to build trust with customers,
providing ongoing support to our customers and communities.
While both business and financial performance has been impacted
by the pandemic and the associated challenging economic
environment, I am pleased that the third quarter saw improved
trading conditions compared to quarter two. The Bank's mortgage
applications and approvals in September were the highest so far
this year and the pipeline remains strong in the final quarter.
The Bank continues to deliver digital enhancements for
customers, and quarter three saw further improvements to our App
offerings most notably; the ability to apply for overdrafts,
enhanced secure customer authentication and self-service PIN
management. We will also launch Apple Pay in the coming weeks and
our online current account in quarter one next year.
The recently announced sale of EUR1.4 billion of performing
Buy-to-Let (BTL) originated loan accounts is a significant
transaction for the Bank, which strengthens the Balance Sheet and
increases the capital position, generating an additional 2.1% of
total capital on a transitional basis.
The duration of the Covid-19 pandemic and its impact on the
economy remains unpredictable, the recent government announcement,
placing further restrictions on the country presents continued
uncertainty. However, I am confident of the Bank's ability to
remain resilient, to continue to build trust with our customers and
compete in our core markets of personal mortgages, personal lending
and SME lending.
Eamonn Crowley, Chief Executive
Key Points:
-- Capital position remains strong; fully loaded CET1 capital
ratio at 30 September 2020 of 14.3%(1) .
-- Total new lending of EUR0.9 billion YTD; 23% lower compared
to prior year. Market share of new mortgage lending of 14.9%(2)
YTD, down from 15.2% at H1'20, however strong quarter three lending
performance saw new lending increasing c. 30% quarter on
quarter.
-- Net Interest Income was 6% lower when compared to the same
period in the prior year; Net Interest Margin (NIM) of 1.73%, 2
basis points lower than H1'20.
-- Continued commitment to cost efficiency, creating capacity to
invest in the business and enabling a rapid response to the
challenges presented by the coronavirus pandemic.
-- Non-performing loans of EUR1.1 billion remain broadly in line
with the balances at June 2020, the NPL Ratio increased by c. 0.9%
to c. 7.7%, primarily as a result of the reduction in gross loans
due to the recent BTL loan sale transaction.
-- At the end of October, the majority of Covid-19 approved
mortgage payment breaks have now returned to original payment terms
leaving c. 13% / c. EUR0.2 billion remaining on an active payment
break.
(1) Includes profits earned in Q3 2020
(2) BPFI data as at 30 September 2020
Business Performance
-- Activity levels increased in the third quarter of 2020,
particularly in mortgage applications and consumer spending.
-- Total new lending of EUR0.9 billion reduced by 23%
year-on-year (YoY) as Covid-19 impacted all new lending activity;
new mortgage lending of EUR0.8 billion reduced by 22% YoY while the
market reduced by 16%.
-- The year to date market share of mortgage drawdowns was
14.9%, down from 15.2% at June 2020 due to a lower share of
mortgage applications during quarter one. Following the
introduction of an improved mortgage proposition in July,
application volumes have rebounded strongly; doubling quarter on
quarter, and c. 40% higher than quarter one.
-- Following the opening up of the economy in the third quarter,
the mortgage market has grown steadily and remains competitive. We
continue to manage our offering, carefully maintaining price
discipline and credit underwriting standards.
-- YTD SME lending is c. 8% higher YoY, albeit from a low base.
The Bank will begin to provide funding through the 'SBCI Future
Growth Loan Scheme" in quarter four, with an on-line customer
application process, a first in the market for this scheme and very
helpful to our business customers in the current Covid
environment.
Financial Performance
-- Net Interest Income was 6% lower YoY; the performing loan
book remains stable, despite the lower new lending volumes,
supported by the active management of the Bank's cost of funds,
partly offset by the reduced income from non-performing loans due
to loan sales in H2'19 and lower income from the maturities of
higher yielding treasury assets.
-- YTD NIM of 1.73%, 2 basis points lower than H1'20, reflects
the low interest rate environment and the growth of liquid
assets.
-- Operating expenses remain in line with management
expectations; we continue to focus on delivering cost saving
initiatives to allow for the investment required to deliver both
business efficiencies, digital transformation and paying for the
ongoing Covid-19 related costs, c. EUR4m incurred to date in
2020.
-- The Bank's organisation structure and operating model will
continue to evolve in line with changing customer behaviours,
ensuring that we are set up to deliver our Purpose of building
trust with customers and delivering on our strategic
priorities.
-- Asset quality remains a key focus with 2020 Expected Credit
Loss (ECL) being closely monitored through quarter four. An ECL
charge of EUR17 million was recognised in quarter three, which is
in addition to the EUR75 million ECL reported at H1'20.
Balance Sheet
Customer Balances
-- Customer deposits of EUR17.8 billion at 30 September 2020 are
EUR0.6 billion higher than 31 December 2019, with current account
balances up 17% from December 2019. The loan to deposit ratio was
87% at the end of September 2020.
-- The total performing loan book is EUR15.0 billion at 30
September 2020, slightly lower than the total performing loan book
at 31 December 2019, as the pace of repayments exceeds that of new
business. Post the BTL loan sale transaction, the total performing
loan book is EUR13.6 billion with a total performing home loan
mortgage book of EUR11.6 billion.
-- Non-performing loans of EUR1.1 billion at 30 September 2020
remain broadly in line with the balances at December 2019, where
organic cures were offset by new defaults.
Payment Breaks
-- The Bank approved a total number of c. 10.7k Covid-19
mortgage payment breaks; c. EUR1.6bn or 10% of total gross
loans.
The table below reflects the active number of Covid-19 mortgage
payment breaks at the end of October 2020:
Number of accounts 917
Amount in EURm 161
----------------
% of Total Payment Breaks issued
(by volume) 10%
----------------
% of Total Payment Breaks issued
(by value) 13%
----------------
-- The Bank continues to support and engage with customers on
their payment break journey. A significant majority of those
customers who have come off payment breaks have resumed capital and
interest repayments.
Capital & Funding
The table below details the Bank's capital ratios as at 30
September:
Reported BTL Loan Adjusted
Sale Pro-forma
CET1 (Transitional) 17.3% +1.9% 19.2%
-------------------- -------------------- ----------------------
CET1 (Fully Loaded) 14.3% +1.5% 15.7%
-------------------- -------------------- ----------------------
Total Capital (Transitional) 18.7% +2.1% 20.8%
-------------------- -------------------- ----------------------
Total Capital (Fully
Loaded) 15.8% +1.7% 17.5%
-------------------- -------------------- ----------------------
-- The Bank's funding position remains strong. All funding and
liquidity metrics are above regulatory requirements with the
Liquidity Coverage Ratio (LCR) at 209%.
-- The Bank has received confirmation of revised MREL
requirements and has been given an extended transitional period of
six months to 30 June 2021 to comply with this requirement. The
Bank awaits confirmation of a new MREL decision by early 2021 based
on the Bank Resolution and Recovery Directive 2 (BRRD2) framework.
The BTL loan sale will reduce the Bank's MREL requirements by c.
EUR260 million.
Outlook
-- Third quarter business performance was strong therefore we
anticipate 2020 new lending to be c. 70% of 2019 volumes
(EUR1.7bn). Transactional banking activity has improved in quarter
three however Fees & Commissions will remain lower than prior
year as a result of the quarter two impact.
-- Operating costs will remain stable in 2020 while remaining
committed to delivering cost savings in the medium term.
-- 97% of total performing assets are secured residential
mortgages. The full year loan loss experience will take into
consideration; impacts from changes to macro assumptions, calendar
provisioning, the remaining uncertainty brought by the recent
Covid-19 restrictions in Ireland, active payment breaks and
Brexit.
-- Capital remains strong, having assessed a range of scenarios,
the CET1 ratio will remain well above the Bank's minimum regulatory
requirements.
- Ends -
For Further Information Please Contact:
Nicola O'Brien Leontia Fannin
Head of External Reporting & Head of Corporate Affairs and
Investor Relations Nicola.obrien@permanenttsb.ie Communications
+353 1 669 5283 Leontia.Fannin@permanenttsb.ie
+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.
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