Wednesday 15 August 2018

Investors in PTSB nurse €280m loss since float

Permanent TSB. Photo: Collins
Permanent TSB. Photo: Collins

Gretchen Friemann

Permanent TSB's declining share price has left investors with paper losses of close to €280m since the State backed-lender was partially floated in 2015.

Hopes of a sharp reversal in PTSB's valuation are receding even as it posts its first profit in a decade and prepares to cut a swathe through its high stack of non-performing loans.

Three years ago public market investors snapped up shares in the bank at €4.50 apiece.

The stock is now trading 55pc lower, underscoring the depth of the organisation's problems, eight years after the banking crisis. Investec analyst Owen Callan, blames the stock's decline on the uncertainty and projected hit to the balance sheet from the looming €3.7bn Project Glas sale and the bank's relatively high cost base and low margin growth prospects.

In a note titled 'Two steps forward, two steps back', Mr Callan highlighted "it is rare that a company can report its first profit in a decade, a 21pc increase in lending margins, a 71pc increase in new lending volumes, a 38pc increase in market share, and a 10pc decrease in problem assets, and yet still see its share price under pressure in the aftermath."

Mr Callan argued the stock's lacklustre performance was unlikely to improve until "at least the back end of 2018" and claimed there was little chance of a re-rate in the shares without a "significant restructuring of the core business model and operating base of the bank".

Investec has cut its price target from €1.85 to €1.55. However, the shares were up 2.4pc to €2 in late trading yesterday.

The latest bearish assessment on PTSB follows a bruising encounter with the Oireachtas Finance Committee last month, when politicians took management to task for the launch of a colossal sale of soured home loans, and attacked executives for a perceived sluggishness in restructuring non-performing exposures.

Much of the heat was focused on the inclusion in Project Glas, of €900m worth of split mortgages, which may be recategorised as performing by the SSM, the ECB's enforcement wing.

Yet even if this transpired, Mr Callan argues it would still be preferable for PTSB to offload the loans given the comparatively poor profile of the borrowers and the relatively high operating costs entailed by such assets.

At the finance committee, Mr Masding said it was in the interests of "all taxpayers" for the bank to rid itself of problem loans. The Government retains a 75pc stake in the lender, which is now worth close to €700m, based on the current share price.

Indo Business

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