8 May 2024
Permanent TSB Group Holdings plc ('the Bank')
Interim Management Statement - Q1 2024 Update
Comment by Eamonn Crowley, Chief Executive:
"PTSB recorded a strong financial performance in respect of key financial metrics in Q1, including an increase in Net Interest Income (+10%), Net Interest Margin (up 5bps) as well as a doubling of business lending. Our mortgage market share during Q1 declined slightly from Q4 2023 and continues to be impacted by the reduced switcher market. We remain committed to bringing competitive propositions to the mortgage market while we continue to diversify our lending to business customers through Business Banking and PTSB Asset Finance.
Our strong capital and liquidity positions, continued growth in our customer deposit base and our refreshed brand positioning support our ability to grow and diversify the business across both Retail and Business Banking through this year and beyond.
Evidence of this is our recent move into the retrofitting market, being the first lender to offer the Government backed Home Energy Upgrade Loan scheme and offer low-cost funding to customers to enable them to retrofit their homes. In addition, the Bank also recently announced its participation in the SBCI Growth and Sustainability loan scheme further supporting Business Banking customers grow and transition to a low carbon economy.
We have confidence that the acquisitions and investments we have made are putting us in a strong position to continue to further grow and diversify our business and deliver sustainable returns for our shareholders over time."
Key Financial Figures:
· The Bank maintains a strong capital position; CET1 capital ratio of 14.3%[1]
· Net Interest Income 10% higher year-on-year ('YoY')
· Net Interest Margin (NIM) of 2.31%, 5bps higher YoY
· Total Operating Income 9% higher year on year to €167 million
· Operating expenses are in line with management expectations - cost income ratio[2] of 73%
· Asset quality remains robust; NPL ratio in line with December 2023 position at 3.3%
Other highlights:
· Customer deposits of €23.3 billion at March 2024, an increase of 5% (€1.0 billion) since March 2023 and 1% (€0.3 billion) since December 2023
· Net Loans & Advances (NLA) to customers of €21.3 billion at March 2024 an increase of 7.5% YoY. NLA have reduced by c. 1% in the first quarter of 2024 following a slower pace of new lending and contractual repayments and redemptions
· New business mortgage market share[3] of 13.4% compares to 15.4% in Q4'23, impacted by reduced switcher market
· Permanent TSB Group Holdings plc was upgraded to Investment Grade status by Fitch Ratings agency
· The bank successfully issued €500 million MREL eligible Green senior debt in April 2024, with order book larger than any previous issuance and ~4 x over-subscribed
Business Performance
Business Banking & Asset Finance:
Lending across term and business banking remains strong, while the addition of the asset finance business line further diversifies our product offering and gives customers more choice. Business Banking[4] lending of €80m in quarter one was more than double that of the prior year due to the acquisition of the asset finance business in July 2023.
Mortgages:
The mortgage market is estimated to increase by c. 6% from €12.1 billion in 2023 to c. €12.8 billion in 2024[5]. We are committed to providing competitive offerings across our mortgage products, while meeting the needs of our customers and the wider economy.
Our performance in the quarter followed the broad trajectory of the second half of last year with a noticeably reduced market for switchers in which the Bank had over-performed (c. 40% market share) during H1 2023 and intense competition for First Time Buyers.
As a result, the Bank's market share of new mortgage drawdowns in Q1 2024 (typically reflecting applications made in late 2023) was 13.4%, which was 2 percentage points lower than Q4 2023 (15.4%). 73% of new mortgage drawdowns in Q1 were to fixed rate products. Meanwhile the Bank's Green product offering accounted for 32% of total new mortgage drawdowns.
Financial Performance
Income
Net interest income has increased by 10% year-on-year; with gross interest income increasing by 37% due to higher interest rates and the growth in average interest earning assets, partly offset by a higher cost of funds due to the growth in deposit volumes, primarily in higher interest bearing retail deposits. The net interest margin of 2.31% has increased by 5bps year-on-year. Net fees and commission income performance is in line with prior year, as we continue to support a larger customer base.
Costs
Operating expenses are performing in line with expectations and the guidance remains for a mid-single digit increase YoY. The Bank is focussed on making underlying savings in order to offset the higher costs associated with depreciation and headcount, whilst making the necessary investments required to achieve our strategic ambition. The Bank will recognise its c. €24 million share of the Bank Levy in the first half of the year, a change to prior years where it was recognised when paid in quarter four.
Balance Sheet
The total performing loan book of €20.8 billion on 31 March 2024 is 1% lower than December 2023, as new lending volumes are outpaced by contractual repayments and redemptions. Asset quality remains strong with Non-Performing Loans of €0.7 billion on 31 March 2024, in line with balances on 31 December 2023.
Customer deposits of €23.3 billion on 31 March 2024 are €0.3 billion higher than 31 December 2023, primarily due to a c. 2% increase in retail deposit balances to €12.6 billion. Current accounts have also grown, by 1% to €9.4 billion. Interest bearing deposits[6] grew by €0.5 billion or 11% since 31 December 2023 while non-interest-bearing deposits reduced by €0.2 billion or 1%.
The loan to deposit ratio of 92% and liquidity coverage ratio of 244% at the end of March 2024 provides the Bank with a strong liquidity position and a secure funding source for future growth in lending volumes.
Capital
| Capital Ratios (%) | March 2024 | December 2023 |
| CET1 | 14.3% | 14.0% |
| Total Capital | 20.1% | 19.7% |
From 1 January 2024, the Bank's transitional and fully loaded capital ratios have fully converged. The 31 December 2023 capital ratios in the table above refer to the fully loaded position at that point in time.
The Bank's Common Equity Tier 1 (CET1) ratio on 31 March 2024 remains strong at 14.3%, 30bps higher than 31 December 2023. The CET1 overall capital requirement is currently 9.83%[7].
The Total Capital ratio was 20.1% on 31 March 2024, 40bps higher than 31 December 2023. The Total Capital overall capital requirement is currently 14.75%.
2024 Outlook
The Bank is in a good position to deliver on its ambition to be the best personal and business bank through exceptional customer experiences. Supported by the positive domestic economy and operating environment, the guidance for FY24 remains in line with prior market communications.
Capital remains strong and having assessed a range of scenarios, the CET1 ratio will remain well above the Bank's minimum regulatory requirement. The Bank will announce a distribution policy in H2'24.
- Ends -
For Further Information Please Contact:
| Denis McGoldrick Investor Relations Email: denis.mcgoldrick@ptsb.ie Phone: +353 87 928 5645 | Leontia Fannin Head of Corporate Affairs and Communications Email: Leontia.Fannin@ptsb.ie Phone: +353 87 973 3143 |
Note on Forward-Looking Information:
This announcement contains forward-looking statements, which are subject to risks and uncertainties because they relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Bank or the industry in which it operates, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements referred to in this paragraph speak only as at the date of this announcement. The Bank undertakes no obligation to release publicly any revision or updates to these forward-looking statements to reflect future events, circumstances, unanticipated events, new information or otherwise except as required by law or by any appropriate regulatory authority.
[1] In line with regulatory requirements, the Bank does not recognise YTD profits in its quarterly capital ratios
[2] Cost Income ratio is calculated as Operating Expenses (excl. all Regulatory Charges/Fees and Exceptional Items) divided by Total Income
[3] Based on BPFI data in March 2024
[4] Business Banking refers to SME and Asset Finance lending
[5] Source: Goodbody
[6] Interest bearing deposits refer to Notice, Term and Corporate Deposits with the remainder classified as non-interest bearing
[7] Regulatory requirements for both CET1 and Total Capital excludes P2G
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