Permanent TSB 'has to be profitable' and will not cut mortgage rate
Permanent TSB will not cut its 4.5pc variable mortgage rate because it needs the money from hard-pressed mortgage holders to prop up other parts of the business.
Variable rates here are twice the eurozone average, and banks have been coming under sustained pressure to give homeowners some relief.
But Permanent TSB chief executive Jeremy Masding said the bank was constrained by the fact that it was still making a loss.
"This is a loss-making institution. Any product that we put on the shelf has to be profitable," Mr Masding said.
He said it would be "inappropriate" to put a timeline on when a reduction might come, but said the bank does want to share the benefits of a future return to profitability with customers.
Finance Minister Michael Noonan met Central Bank Governor Patrick Honohan to discuss Ireland's high variable rates last week, but Mr Masding said Mr Noonan hadn't asked him to reduce the Permanent TSB rate.
"The minister doesn't intervene in the commercial running of the business, I need to make that absolutely clear," Mr Masding said.
The Permanent TSB boss was speaking after the company's AGM yesterday, at which the bank's management was repeatedly heckled by angry shareholders.
Chairman Alan Cook pleaded with attendees to be quiet on a number of occasions. Variable rates for new bank customers are lower than for existing customers. Consumer advocate Brendan Burgess said the bank was making money "on the backs of a very small number of long-established customers and a few new customers". Fianna Fáil finance spokesperson Michael McGrath said the bank's position was "an affront" to its variable mortgage holders.
"The message today from the chairman of PTSB was that the bank will continue to charge standard variable rate customers what it can get away with because of losses the bank is incurring elsewhere.
"This is grossly unfair on the bank's standard variable rate customers who are paying way over the odds."
Mr Cook said Permanent TSB wanted to be able to provide competition in the market. "We need to drive down the cost of funds, the cost of risk and the cost of capital, and we are doing that.
"What we're keen to do is share the reduction in the cost of operating the business with our customers. This is not the work of moments, I feel that we're making progress, but we're not a profitable bank yet. We're nearly a profitable bank, and we're working on those particular costs."
Piotr Skoczylas, a former director of the bank who leads a shareholder group that has taken a court case over the decision to take Permanent TSB into public ownership, was particularly vocal at yesterday's meeting.
The group's case is moving through the European Court of Justice. Mr Skoczylas told the Irish Independent that he was confident the group would win. "There is no doubt in my mind about it. The European Court of Justice already asked us to make written submissions; they will be made by the middle of May. Then there will be oral submissions."
Mr Noonan has said he is confident the court will rule in the Government's favour.
The bank is looking to raise €525m from private investors to begin its return to private ownership.