Permanent TSB has dampened hopes of a quick conclusion to its talks with NatWest over acquiring Ulster Bank’s personal and SME banking businesses.
CEO Eamonn Crowley said today that the negotiation process is “unlikely to conclude before the end of the year” and “there could be a lot of pitfalls along the way”.
PTSB has had only high level discussions with the Department of Finance over a possible deal, as the bank has “nothing to present to them at this moment”, he said.
Mr Crowley said PTSB was embarking on a multi-year engagement over Ulster Bank and that he did not yet have a business case or a proposition that he could put to the board or the Minister for Finance, Paschal Donohoe, who controls a 75pc stake in the bank.
"It’s too early to answer the Ulster Bank question. We don’t have a proposition yet. We are exploring options and have to make sense of it.”
Nonetheless Mr Crowley made it clear he has ambitions to acquire significant assets from Ulster Bank to leverage PTSB’s existing infrastructure and grow its franchise.
"We’re already in that business [retail and SME banking]. The infrastructure is in place. It's about how we scale and manage that so it doesn’t add complexity or additional challenges.”
He said he believed the current poor business environment for banking would improve in the next few years, allowing PTSB to benefit from adding Ulster Bank’s underperforming business lines to its own offering.
Permanent TSB reported a loss before tax of €166m for 2020, mainly due to the negative impact of the pandemic on its loan book.
The bank has set aside €155m of an impairment charge to deal with potential losses from related to Covid-19.
PTSB said its non-performing loans (NPL) of €1.1bn increased by about €80m year on year, with the NPL ratio increasing by about 120 basis points to 7.6pc. The increase in the NPL ratio is primarily as a result of the reduction in gross loans due to the performing loan sale transaction Glenbeigh II.
Total new lending of around €1.4bn was 15pc lower last year compared to 2019, according to annual results from the group.
A “strong” lending performance, particularly in the second half of the year, led to a 43pc increase in new mortgage drawdowns compared to the first half of 2020.
Mortgage applications also increased significantly in the second half of 2020, it added. The bank said its market share of new mortgage lending was 15.3pc.
Net interest income – a key measure of bank’s performance – was 4pc lower when compared to the same period in the prior year.
Operating costs of €329m at the bank, including €5m of Covid-19 costs, are €1m lower year-on-year.
“Despite the challenges that 2020 brought, I am confident that the bank is in a strong position to make the most of the opportunities that will arise in the post-pandemic recovery phase" said Mr Crowley.”
“While 2020 was a loss making year for the bank, the second half of the year saw the bank increase its new lending volumes and transactional activity as the economy began to reopen. Our active mortgage offer pipeline is at a strong level and positions us well to continue our strong performance into 2021.”
Las year PTSB incurred €31m in restricting costs, which it said were associated with its “Enterprise Transformation programme.” This programme will focus on organisational structure, digital ways of working, and a review of its property footprint.