Analysts say cash-back offer will boost PTSB in market
The move by Permanent TSB to pay cash "rewards" to new customers for making mortgage payments should see the bank increasing its mortgage market share, analysts said.
The move will also force a reaction from other banks, the analysts said.
The offer will see 2pc of the value of the monthly repayment paid back in cash for those who also have a PTSB current account. It could see a family with a €300,000 mortgage get €360 back a year.
PTSB is the first bank to offer such an incentive.
It will continue to pay cash back when new mortgages are drawn down, in addition to the new offer of cash to those who pay regularly.
Eamonn Hughes, a banking analyst at Goodbody Stockbrokers, said the incentive is likely to help Permanent TSB increase its mortgage market share, with other lenders set to offer something similar.
Permanent TSB, led by Jeremy Masding, has a mortgage market share of around 11.7pc, the bank said.
Mr Hughes said in a note to investors: "Our forecasts see PTSB trending to a 12pc share of the flow of new mortgage lending in FY19 [financial year 2019].
"Cash-back incentives have become the norm in the Irish mortgage market, however, it will be interesting to monitor the reaction from other lenders."
Investec's Philip O'Sullivan estimated that the cash-back offer is equivalent to a mortgage rate cut of around 0.10pc.
He said that as the product is only available to new customers who open up an Explore current account it should not have any significant adverse impact on the net interest margin.
"It will also help in PTSB's stated goal of growing its share of current account balances," Mr O'Sullivan said. He added that most banks had a strategy over the last year of competing on innovation rather than on headline interest rates.
The exceptions to this were Ulster Bank and KBC, he said. They have been more willing to compete on pricing, especially via teaser rate products.
Davy's Emer Lang said the offer would help the overall mortgage market more than double to €12.9bn by 2020.
PTSB shares closed up 1.4pc at €1.846 yesterday.