THE International Monetary Fund (IMF) has warned that Permanent TSB faces "acute challenges" that threaten its survival.
The global finance body dismissed the bank's proposed restructuring plan, which is designed to return the state-owned lender to growth.
It comes a week after the bank reported that pre-tax losses last year doubled to a massive €922m on the back of its money-losing tracker mortgages, where interest is linked to ECB rates. They account for about 60pc of the bank's loan book.
"PTSB still faces more acute challenges that need to be addressed," the IMF says.
The negative comments come as a blow to the bank after its bid to out-do competitors by announcing that it was scrapping current account fees and introducing a low-cost account.
But PTSB loses money on tracker mortgages even as they are being fully paid off because the mortgage rate is lower than the rate the bank pays to borrow on the markets.
Permanent TSB is splitting itself into a "good" bank made up of consumer lending and deposits, and a "bad" bank of non-performing loans and a UK business in an effort to return to a sustainable path.
It is hoped that the plan, which is subject to approval from the troika, will see the "good" business return to profitability by 2016. But the IMF claimed that it hasn't been possible to press ahead with that scheme, at what it sees as a manageable cost of borrowing by the bank.
The international rescue fund also warns that ongoing losses at Bank of Ireland, AIB and Permanent TSB are burning through their bailout money, as the capital buffer declined by 7pc last year. The IMF says that comfort level is expected to reduce further.
Bank profitability is due to improve this year, the report stated. By the end of the last year, the three main banks had closed 61 branches and cut staff by 10pc.
"If BoI and AIB deliver on their current plans, they are forecast to have positive profits (before setting aside cash for bad loans) in the second half of 2013," the report said.