The chief executive of majority State-owned lender Permanent TSB has refused to rule out repossessing the homes of mortgage defaulters and warned that a payout to taxpayers would be delayed if the bank failed to agree a solution to its bad loans problem with the Government.
Jeremy Masding, speaking at the publication of PTSB's annual results yesterday, insisted his "default position" was to avoid repossessions.
His comments underline the challenge ahead for the bank as it attempts to tackle legacy loans and recover its appeal to investors.
He also stressed he had no intention of merging with a larger rival, claiming a sale at this phase in the bank's recovery would leave taxpayers' "money on the table".
Despite notching up an operating profit of €188m in the 2016 financial year, PTSB has yet to reach the key milestone of returning a dividend to its main stakeholder, the Irish taxpayer.
Mr Masding said the bank would have a "clearer view" on how to deal with its non-performing loans, which were whittled down by €700m last year to €5.9bn.
A total of 13,000 mortgages, or €2.6bn, remain in arrears and Mr Masding said around 1,500 borrowers refuse to engage with the bank.
Failure to address bad loans would derail plans for a dividend pencilled in for the 2018/19 financial year and eat into its improving return on equity (REO) - a key measure of a bank's profitability, he said.
The bank notched up an REO of 7pc in 2016, up from 2pc in 2015, even after it incurred a pre-tax loss of €266m.
But, after completing a five-year restructuring plan, PTSB faces a tough battle ahead in its attempts to deal with its remaining distressed borrowers.
Owen Callan, an analyst with Investec, said the bank's options were "limited" and that it may have little option other than to foreclose the mortgages or repossess homes.
But this would be "tricky", socially and politically - as would a second option of selling the loans to vulture funds, he said.
While the bank's non-performing loans represent an obstacle to growth, Mr Masding stressed the cost of regulation was also a hefty burden.
He took a swipe at the bank levy and said he hoped the regulator would apply a "better and fairer calculation" over time.
Shares closed down 2c to €2.74 each yesterday.