TIDMIL0A TIDM73HR
RNS Number : 9396Q
Permanent TSB Group Holdings PLC
03 March 2021
03 March 2021
PERMANENT TSB GROUP HOLDINGS PLC (the "Bank")
FULL YEAR RESULTS FOR THE TWELVE MONTHSED 31 DECEMBER 2020
Permanent TSB Group Holdings plc ("PTSB", "the Bank") today
reports its full year results for 2020
'Despite the challenges that 2020 brought, I am confident that
the Bank is in a strong position to make the most of the
opportunities that will arise in the post-pandemic recovery
phase.
I have made it the organisation's priority to continue to build
trust with our customers and re-connect with the Bank's community
heritage. We will keep an unrelenting focus on making Permanent TSB
the best bank it can possibly be, continuing to grow, continuing to
support our customers and continuing to find new and better ways to
serve them and the communities in which we operate.
While 2020 was a loss making year for the Bank, the second half
of the year saw the Bank increase its new lending volumes and
transactional activity as the economy began to reopen. Our active
mortgage offer pipeline is at a strong level and positions us well
to continue our strong performance into 2021.
I can assure you of the commitment that my colleagues and I
share to combine the best of our digital offering with that of our
long history of personal service, as we continue to rebuild trust,
build a sustainable bank for the future, and fulfil our ambition of
being Ireland's best personal and small business bank.
And finally, we have ambitious plans to grow our position in the
Retail and SME markets in Ireland and support customers and
communities across the country. In line with that ambition, the
Bank is in early discussions with NatWest in relation to acquiring
certain elements of the Ulster Bank businesses in the Republic of
Ireland. This includes certain Retail and SME assets, liabilities
and operations. Until an acquisition is finally concluded there can
be no certainty that an acquisition will occur or on what terms.
Any such transaction would be subject to normal shareholder and
regulatory approvals.'
Eamonn Crowley, Chief Executive
Key Points:
-- Loss before tax of EUR166m.
-- Capital position remains strong; fully loaded CET1 capital
ratio at 31 December 2020 of 15.1%.
-- Total new lending of c. EUR1.4 billion; 15% lower compared to
prior year. Market share of new mortgage lending of 15.3[1]%. A
strong lending performance, particularly in the second half of the
year, led to a 43% increase in new mortgage drawdowns compared to
the first half of 2020.
-- Mortgage applications also increased significantly in the
second half of the year, with full year market share ending at
14.5%. H1'20 market share was 12.4% while H2'20 saw a market share
of 16.2%.
-- Net Interest Income was 4% lower when compared to the same
period in the prior year; Net Interest Margin (NIM) of 1.73%, 7
basis points lower than FY19.
-- A net impairment charge of EUR155 million reflects a prudent
approach to the current macro-economic environment.
-- Exceptional Costs of EUR57m are comprised of EUR26m net
deleveraging costs, and EUR31m restructuring costs, primarily
associated with the Bank's Enterprise Transformation programme.
-- Operating costs of EUR329m, including EUR5m of Covid-19
costs, are EUR1m lower year-on-year (YoY). Continued commitment to
cost efficiency, creating capacity to invest in the business, and
enabling a rapid response to the challenges presented by
Covid-19.
-- Non-performing loans of EUR1.1 billion increased by c. EUR80m
YoY, with the NPL Ratio increasing by c. 120 basis points to c.
7.6%. The increase in the NPL Ratio is primarily as a result of the
reduction in gross loans due to the performing loan sale
transaction (Glenbeigh II).
-- In November 2020, the Bank successfully issued a new EUR125m
AT1 instrument which provides financial flexibility and further
diversifies funding sources and investor base.
-- On the 24th of February 2021, the Bank announced that on 1
April 2021, the Bank will redeem the existing EUR125m AT1
instrument issued in 2015, in compliance with the requirements set
out in CRD IV Regulation.
Supporting Customers and Colleagues through the Pandemic
-- The Bank approved c.10.7k Covid-19 mortgage payment breaks in
2020 to alleviate temporary financial pressures for our customers;
c. EUR1.6bn or 10% of total gross loans.
-- 99% of Covid-19 approved mortgage payment breaks have now
expired, c. EUR19m (103 borrowers) remain on an active payment
break at the end of January 2021.
-- All of our branches and contact centres remained open
ensuring continuity of service, we redeployed over one hundred
staff and mobilised four new regional centres to further support in
answering customer queries, providing an essential service to
customer's right across the country.
-- More than 1,200 colleagues are working from home, supported
by a range of investment in digital equipment and functionality,
ensuring continuous connectivity and enhanced communication from
remote sites.
Business Performance
-- Total new lending of EUR1.4 billion reduced by 15% YoY as
Covid-19 impacted all new lending activity; new mortgage lending of
EUR1.3 billion reduced by 14% YoY.
-- The full year market share of mortgage drawdowns was 15.3%,
broadly in line with the prior year, due to a higher share of
mortgage drawdowns in the second half of the year. Following the
opening up of the economy in quarter three, together with the
introduction of an improved mortgage proposition in July,
application volumes rebounded strongly; H2'20 new mortgage
applications were c. 70% higher than the first half of the
year.
-- The mortgage market has regained steadily in the second half
of the year and remains competitive. We continue to manage our
offering carefully, maintaining price discipline and credit
underwriting standards.
-- In July, the Bank launched competitive 3 and 5 year fixed
rate products, for new high value mortgages (loans greater than or
equal to EUR250k) with LTVs less than 80%, at rates as low as 2.50%
and 2.55% respectively.
-- Significant reductions were also made to both fixed and
variable mortgage rates, for new and existing customers, these rate
reductions go a long way to addressing the discrepancy which
traditionally existed between pricing for new and existing mortgage
customers.
-- SME lending is c. 2% higher YoY, albeit from a low base. In
November, the Bank announced a major expansion of our SME offering
by partnering with the Strategic Banking Corporation of Ireland
(SBCI), providing EUR50m in low-cost loans under the Irish
Government's Future Growth Loan Scheme for SMEs. Customers can
apply on-line, a first in the market for this scheme, and very
helpful to our business customers in the current Covid-19
environment. We are pleased to say that the Bank has received
applications significantly in excess of the EUR50m and we will work
with these customers over the coming months as they proceed to
drawdown.
-- The Bank achieved a Relationship Net Promoter Score (RNPS)[2]
of +12 at the end of January 2021, placing it top two of the main
Retail Banks in Ireland.
Enterprise Transformation Programme
-- In November 2020, a bank wide Enterprise Transformation
programme was announced, focusing on three core areas;
organisational structure, the introduction of smarter and new
digital ways of working, and a review of our property
footprint.
-- As part of this programme, a Voluntary Severance (VS)
programme was launched on the 12th of November. We anticipate that
we will be able to facilitate the reduction of c.300 full time
equivalent staff (FTEs) via voluntary severance. The programme is
now closed for applications and the Bank will communicate with
staff in due course.
-- EUR31m restructuring costs, primarily associated with the
Bank's Enterprise Transformation programme have been accounted for
through Exceptional Items in the year end accounts.
-- Introduction of smarter and new digital ways of working
allows the Bank to look at how we work, adapting processes and the
way we interact with our customers and our colleagues, it also
allows more effective utilisation of workplaces and the
mobilisation of four regional service centres.
-- In addition to the above, the Bank has also made the decision
not to renew the lease in Park Place on Hatch Street. We will exit
Park Place in April of this year.
Financial Performance
-- Net interest income reduced by 4% year-on-year. Our
performing loan book income was broadly stable in 2020 supported by
the active management of the Bank's cost of funds. The deleveraging
of non-performing loans (NPLs) in H2 2019 and lower income from the
maturities of higher yielding treasury assets were the main drivers
of the reduction in the year.
-- NIM of 1.73% is 7 basis points lower than NIM at FY19 (1.80%).
-- Fees and commissions have reduced by EUR9m when compared to
the prior year as Covid-19 had a material impact on transactional
activity in 2020.
-- Net other income has reduced due to lower gains from the sale
of properties in possession in 2020 compared to 2019. The stock of
properties in possession has reduced by c. 50% YoY to 295
properties at the end of December 2020, of which 59 are sale
agreed.
-- Underlying operating expenses (excluding regulatory charges
and Covid-19 related costs) of EUR275m were EUR8m (c.2%) lower YoY
and within management expectations. We continue to focus on
delivering cost saving initiatives to allow for the investment
required, deliver on the Bank's Enterprise Transformation
programme, ensuring delivery of both business efficiencies and
digital transformation.
-- Regulatory charges amounted to EUR49m, an increase of EUR2m
YoY. The Bank levy of c. EUR24 million was paid in October
2020.
-- The Bank incurred EUR5m of Covid-19 costs in 2020, in its
direct response to ensuring continuity of service, for both
customers and colleagues, in a safe and secure way.
-- Credit quality overall remained strong, the Expected Credit
Loss of EUR155m in 2020 reflects changes in the forward looking
macro-economic scenarios driven by Covid-19, including post model
adjustments of c. EUR110m as we continue our cautious and prudent
approach to risks, as visibility of outcomes remains limited.
Customer Balances
-- Customer deposits of EUR18.0 billion at 31 December 2020 are
EUR0.9 billion higher than 31 December 2019, with Current Account
balances up 24% from December 2019, further enhancing the strength
of the franchise.
-- The Loan to Deposit ratio was 79% at the end of December
2020, providing a strong liquidity position and significant
potential to lend to customers.
-- The total Performing Loan Book is EUR13.7bn at 31 December
2020, EUR1.6bn lower than the total Performing Loan Book at 31
December 2019, primarily due to the loan portfolio sale (Glenbeigh
II) completed during the year. The Performing Home Loan book grew
marginally in the year by c. EUR40m.
-- Non-performing loans of EUR1.1 billion at 31 December 2020
increased by EUR80m when compared to December 2019, primarily as a
result of new defaults from payment breaks.
Payment Breaks
-- The table below reflects the Covid-19 mortgage payment break
population at the end of January 2021:
Mortgage Payment Breaks EURm Volume
Total Granted in 2020 1,610 10,650
----------------- ------------------
Active at end Jan 2021 19 103
----------------- ------------------
Expired at end Jan 2021 1,591 10,547
----------------- ------------------
* Of which further forbearance approved 70 350
----------------- ------------------
* Of which likely to require further forbearance 110 650
----------------- ------------------
-- The Bank continues to support and engage with all customers
who require assistance as a result of the Covid-19 pandemic.
Capital
-- The Bank's Common Equity Tier 1 (CET1) ratio on a fully
loaded basis remains strong at 15.1% at 31 December 2020, an
increase of 10 basis points on the Pro-Forma CET1 ratio on a fully
loaded basis at 31 December 2019 (15.0%). The CET1 ratio on a
transitional basis of 18.1% remains in line with the pro-forma CET1
ratio on a transitional basis at 31 December 2019.
-- The table below details the Bank's capital ratios at 31
December 2020 and compares them to the pro-forma capital ratios at
31 December 2019:
Regulatory Capital Ratios (Pro-Forma)
December December
2019 2020
CET1 (Transitional) 18.1% 18.1%
----------------------- --------------------
CET1 (Fully Loaded) 15.0% 15.1%
----------------------- --------------------
Total Capital (Transitional) 19.6% 21.0%
----------------------- --------------------
Total Capital (Fully Loaded) 16.7% 18.2%
----------------------- --------------------
Funding
-- The Bank's funding position remains strong. All funding and
liquidity metrics are above regulatory requirements with the
Liquidity Coverage Ratio (LCR) at 276%.
-- Similar to other banks, management of excess liquidity
continues to be a priority. The average balance of excess liquidity
in 2020, which attracted a negative interest rate, was c. EUR0.5bn.
However, the current balance is c. EUR1.7bn, following the receipt
of proceeds from the performing loan sale transaction (Glenbeigh
II), along with growing deposit balances as a result of the
continued Covid-19 restrictions.
-- The Bank's current MREL target becomes binding on 30 June
2021 and the Bank expects to be compliant in advance of this date.
The Bank awaits confirmation of a new MREL decision based on the
Bank Resolution and Recovery Directive 2 (BRRD2) framework.
-- In November 2020, the Bank successfully issued a EUR125m AT1
instrument which provides financial flexibility and further
diversifies funding sources and investor base.
-- On the 24th of February 2021, the Bank announced that on 1
April 2021, the Bank will redeem the existing EUR125m AT1
instrument issued in 2015, in compliance with the requirements set
out in CRD IV Regulation.
-- When we factor in the impact on Total Capital of the
redemption of the existing AT1 Instrument issued in 2015, the
pro-forma Total Capital Ratio at 31 December 2020, is 20.0% on a
transitional basis and 17.1% on a fully loaded basis. The impact of
redeeming the AT1 instrument, reduces the Total Capital Ratio on a
transitional basis by 100 basis points and reduces the Total
Capital Ratio on a fully loaded basis by 110 basis points.
Digital Transformation Continues to Enhance the Customer
Journey
-- The Bank's Digital Transformation Programme continues to
progress and has met some key milestones;
-- Term Lending, Credit Cards and Overdraft all available for
application through the App;
-- Online portal to facilitate Mortgage and Term Loan payment
breaks, with document upload facility which also allows customers
to complete the Standard Financial Statement (SFS);
-- SBCI Future Growth Loan Scheme online application
process;
-- Email communication to all personal customers;
-- Video Banking, the first of its kind in Ireland;
-- Launch of online secure customer authentication, together
with a simplified Customer Log In process in App, with PIN
management available in App. Giving customers peace of mind;
-- The pandemic has accelerated a shift towards digital for
every day banking needs. It is now very clear that customers want
the ability to interact with the Bank at a time and place that
works for them, and through a channel of their choosing. In 2020 we
saw;
-- 72% of customers choose to bank using online channels;
-- 400k customers actively using the mobile App (+15% YoY)
-- 100m successful log-ins on both Open 24 and the Mobile App
(+22% YoY);
-- 92m Contactless Payments (+40% YoY); and
-- 81% of Term Loan Applications are now completed online (+5%
YoY);
-- In November 2020, the Bank launched Apple Pay for personal
debit and credit cards, and business debit cards. Approximately 94k
customers have signed up to use the service which has so far
resulted in 1.2 million transactions since launch. Android Pay is
due to launch in the next six months.
-- The Digital Current Account, with the ability to open a
current account in just six minutes, will also launch in the coming
months.
Sustainable and Responsible Business
-- Achievement of the Business Working Responsibly Mark from
Business in the Community Ireland (BITCI) - an external
accreditation recognising best in class Responsible Business
Programmes in Ireland.
-- A five year partnership with Social Entrepreneurs Ireland,
supporting the work of hundreds of social entrepreneurs across the
country.
-- A 3 year partnership with Ó Cualann Cohousing Alliance to
support the development of 1,800 affordable homes across the
country.
-- EUR700k in financial contributions provided to Irish
community organisations in 2020 via the Permanent TSB Community
Fund and a range of community partnerships.
-- 10% reduction in Carbon Emission Intensity in 2020 (55% reduction since 2009).
-- 3 year partnership with Work Equal to promote gender equality in workplaces across Ireland.
-- Partnership with LIFT Ireland to develop personal leadership
qualities for Permanent TSB colleagues. To date, 600 Colleagues
have participated in the programme.
-- Employee Engagement at 71% in 2020, which compares favourably against industry standards.
-- Winner of the Employee Empowerment and Trust Award at the 2021 CIPD HR Awards.
Outlook
Looking ahead, the outlook continues to remain uncertain with
recovery being dictated by the success of the Government led
vaccination programme and the overall suppression of the Covid-19
virus. In terms of business performance the Bank has started the
year with a strong performance in new mortgage lending. However, in
light of the third lockdown, household spending has been curtailed,
resulting in a continued build-up of deposits and a reduction in
fee income due to lower transactional activity.
-- Business activity was strong in Quarter 4 2020 both in terms
of drawdowns and applications, positioning the Bank well at the
start of 2021. We expect new lending volumes for this year will be
ahead of 2020.
-- NIM is expected to reduce to below 170 basis points,
reflecting the cost of holding excess liquidity, the lower
reinvestment rate on treasury assets and continued price
competition in the mortgage market.
-- Achieving cost reductions in the current economic environment
will prove challenging; however, the Bank retains its outlook that
operating costs will remain stable in 2021; the Bank is committed
to delivering cost savings in the medium term while paying for
investment.
-- 97% of total performing assets are secured residential
mortgages; as such, the full year loan loss experience will be
directly linked to the emerging macro-economic indicators and the
length and severity of Covid-19 restrictions.
-- The successful reopening of the economy along with the number
of house completions will be key indicators with respect to the
lending market during the year. The Bank will keep the ECL under
constant review throughout the year.
-- Capital remains strong and having assessed a range of
scenarios, the CET1 ratio will remain well above the Bank's minimum
regulatory requirements.
-- In line with the Bank's ambition to grow our position in the
Retail and SME markets in Ireland and continue to be a force for
competition, we are in early discussions with NatWest in relation
to acquiring certain elements of the Ulster Bank businesses in the
Republic of Ireland. This includes certain Retail and SME assets,
liabilities and operations. Until an acquisition is finally
concluded there can be no certainty that an acquisition will occur
or on what terms. Any such transaction would be subject to normal
shareholder and regulatory approvals.
- Ends -
For Further Information Please Contact:
Nicola O'Brien, Head of Investor Relations |
Nicola.obrien@permanenttsb.ie | +353 87 148 2275
Leontia Fannin, Head of Corporate Affairs and Communications |
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.
[1] BPFI data as at 31 December 2020
[2] Kantar Survey, based on six months rolling data to January
2021
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