Sunday 25 June 2017

IL&P targeting 2012 recovery

Bowler sees advantages in the forthcoming 'viability plan'

Some analysts believe IL&P has been left at a distinct disadvantage for not having ploughed into property development lending in the boom years. Photo: Bloomberg News
Some analysts believe IL&P has been left at a distinct disadvantage for not having ploughed into property development lending in the boom years. Photo: Bloomberg News

Joe Brennan

Irish Life & Permanent (IL&P) chairman Gillian Bowler has said it is likely to be 2012 before the bancassurer and the broader economy are back to "normality".

In a wide-ranging interview with the Irish Independent, one of the country's best-known businesswomen also said she was confident that the group's banking arm, Permanent TSB, will play a leading role in industry consolidation.

"I believe 2012 will be a real turning point," said Ms Bowler. "This year cannot be a good time for a lot of businesses, even as there are growing signs that the economy is stabilising. But if you start to see a change in 2011, it will carry through to people in 2012."

She suggested a new requirement for the group to file a viability plan with Brussels by the end of the summer could play to the bancassurer's advantage as it seeks to engineer a transformational deal. "It would free up the EU to make more informed decisions," she said.

Some analysts believe IL&P has been left at a distinct disadvantage for not having ploughed into property development lending in the boom years, as the Government oversees solutions for banks and building societies that did.

Under pressure

The group is under market pressure to find a solution for Permanent TSB, which had been overly reliant on the wholesale markets during the boom years. While the bank's loan-to-deposit ratio fell to 246pc last December from a peak of 309pc during the year, regulators and financial markets are demanding that banks globally lower this key ratio to 100-125pc.

IL&P chief executive Kevin Murphy told analysts in March that he plans to improve the group's level of "stable funding" -- including retail deposits and long-term funding -- to 70pc by 2012, from 50pc last year.

It is likely IL&P will use its EU submission to highlight various restructuring options, including possible merger deals that it would like to pursue to speed up the overhaul of its funding profile.

Mr Murphy also signalled three weeks ago he would be interested in the ICS Building Society unit which Bank of Ireland is being forced by the European Commission to sell. The society has €4bn of deposits and BoI is only required to sell €2bn of its €7bn mortgage book.

Analysts also believe IL&P would be interested in parts of Irish Nationwide, which will be left sitting on a €5.3bn deposit book and only €2.4bn of loans after the NAMA process.

"People always come up with the same combinations," Ms Bowler said.

"You couldn't call it right -- there are so many options."

She added: "That whole 'Third Force' phrase may be a bit tired at this stage. But I've absolutely no doubt that we'll find opportunities."

IL&P has previously indicated it would need to raise up to €900m from shareholder by the end of the year to bolster Permanent TSB's reserves before taking part in a deal.

The Financial Regulator has carried out thorough assessments of the capital requirements of Allied Irish Banks, Bank of Ireland and EBS on both likely and stress-test scenarios over the next three years, to determine how much equity they need to raise.

Permanent TSB will be subjected to the same so-called Prudential Capital Assessment Review in the autumn, Ms Bowler said. In the meantime, the bank is cushioned by the broader group's 9.2pc Tier 1 capital ratio.

Irish Independent

Promoted articles

Also in Business