THE head of Permanent TSB has signalled the bank won’t be following AIB in cutting the interest rate for mortgage customers on its standard variable rate.
Experts have predicted that other banks will be forced to cut rates, after State-owned AIB dropped its interest rate by 0.25pc.
But PTSB chief executive Jeremy Masding told TDs and Senators that he couldn’t give any guarantee as to when its rate could be reduced, partly because of the bank’s cost of funding.
“I’m absolutely conscious that we must be competitive,” Mr Masding said.
“We’ll continue to monitor rates closely and do all we can to reduce our cost of funds and increase our net interest margin and run an efficient business.
“And then ultimately if I’m able to do that, we’ll be able to reduce our variable rates were possible, but today I can’t give any guarantee of when that will happen.”
The Oireachtas Finance Committee heard the bank has 79,000 standard variable customers, but Mr Masding said the bank must look at the cost of funding, the cost of running the bank, the cost of risk and the cost of capital before any decision can be taken.
PTSB announced in April that it would be hiking its variable rate from June, but the bank pointed out yesterday that over the course of the last two years the bank has cut its standard variable rate.
Meanwhile, Mr Masding said the number of customers who are in arrears of more than 90 days at the end of August was down over 21pc since the start of this year.
The bank also confirmed that for customers in arrears who are forced to sell their homes, they will have to pay 20pc of the shortfall of what they owe, and then they would qualify for a write-down of the balance.
Permanent TSB was the only Irish bank to fail an element of the recent European-wide stress tests carried out by the European Central Bank. Mr Masding said the bank must raise between €100m and €150m on the markets to plug the funding shortfall and he said he has already been on an investor roadshow in London, New York and Boston and that there was “real interest in the PTSB story”.
He said he doesn’t expect the outline of the capital raising deal will be revealed until the end of March next year.
He said that even though the state is the majority shareholder, it is important that it’s the company and board that leads the shaping of the deal.
“It’s very important that I keep Mr [Finance Minister Michael] Noonan at arms length because I don’t want to compromise him,” he said.
“I will bring a deal to him and then he is objective.”
Mr Masding agreed with Sinn Fein’s Finance spokesman Pearse Doherty that, hypothetically, the entire bank could be sold into private hands, and not just a portion.
Mr Masding also said he believes PTSB could be profitable “at the back end of 2016”. That’s fractionally earlier than its recent forecast for a return to profitability by 2017.
The bank chief said PTSB’s revised restructuring plan would be submitted to the European Commission in the next couple of weeks and that he has a “higher level of confidence” that the plan will be approved.