Company Announcements

25 October 2023                                                                                                                             

Permanent TSB Group Holdings plc ('the Bank')

Comment by Eamonn Crowley, Chief Executive:

'The Bank continued its positive business and financial performance in the third quarter of the year and so remains in a strong position to continue to support our customers, the Irish economy and our shareholders. Central to this performance has been our strong capital and liquidity positions, growth in the customer deposit base and increased income. Asset quality remains robust and we continue to take a measured approach with respect to the impact to our customers of ECB interest rate rises.

Our investment into our recently announced new brand name, PTSB, visual identity and customer promise, 'Altogether More Human', represents our intentions to differentiate ourselves as a full service bank and our commitment to bring the best of technology and the best of our people together, putting customer needs at the heart of what we do and ultimately deliver a better banking experience for all.'

Key Points:

·   The Bank maintains a strong capital position; fully loaded CET1 capital ratio of 13.8%; regulatory CET1 capital ratio 14.1%

·   New lending to September of €2.2 billion across all product lines[1]; 9% higher YoY

·   New business mortgage market share of 20.7%[2] compares to 16.9% at September 2022

·   Net Interest Income 93% higher YoY due to changed interest rate environment, loan book growth and the migration of the Ulster Bank loans

·   Net Interest Margin (NIM) of 2.31%, 92 bps higher YoY

·   Operating expenses remain in line with management expectations, with the cost income ratio of 64[3]%, 25% lower YoY

·   Customer deposits of €22.7 billion, an increase of c. 5% (€1.0 billion) since December 2022 and c. 9% (€1.9 billion) since September 2022

·   Non-performing loans (NPLs) of €0.7 billion and the NPL ratio of 3.3% at September 2023 are in line with December 2022

·   New brand name launched together with new visual identity and customer promise in mid-October 2023

PTSB Brand Repositioning

On 14 October 2023, the Bank announced a major overhaul of its brand and business, reflecting our position as a full-service, customer-focused personal and business bank. The move reflects the much larger scale and business diversification of the bank, our customer focus and growth ambitions for the coming decade.

Key elements of the change include a new brand name, PTSB, and visual identity, together with the introduction of a new customer promise, Altogether More Human, which represents the bank's commitment to putting customer needs at the centre of how we plan, design and deliver for them. An initial investment of €5m has been made into customer research, the development and roll-out of a new visual identity, together with a customer promise and a national advertising campaign. Further investment is planned to modernise PTSB locations, including the Bank's nationwide branch network, over the next 18 months.

The Bank has also invested in improving its customer experience and has put in place a number of initiatives to further support customers, including the introduction of a host role in all 98 branches and the establishment of a vulnerable customer support team, as well as partnering with O'Cualann Co-housing Alliance to enable the development of social and affordable homes across the country.

Most recently we have introduced 'PTSB Protect', a new feature to our banking app which will help prevent customers falling victim to fraudulent scams.

Business Performance

The Bank has continued its strong performance with total new lending growing 9% year-on-year. New mortgage lending of €1.8bn grew 11% year-on-year while the mortgage market was down 10% over the same period. This growth is supported by the strength in our mortgage proposition, together with mortgage switching activity which continued in the market into Q1'23 as customers sought rate certainty. While new mortgage lending across fixed products continues to be c.  97% of YTD total new mortgage lending, with fixed rate Green mortgage lending accounting for 27%, we have observed a change in customer behaviour, where some customers maturing from a fixed rate are now opting for a variable rate for the first time in a number of years.

Market share of mortgage drawdowns reached 20.7% in September 2023, which was 3.8 ppts higher than the September 2022 market share (16.9%).  Notwithstanding this growth, the switcher portion of the mortgage has reduced materially since end Q1'23, which will lead to lower year-on-year growth in new mortgage lending than that observed in FY 2022. The mortgage market in Ireland is estimated to reduce by c. 11% from €14.1 billion in 2022 to c. €12.6 billion[4] in 2023.

Income

Net interest income has increased by 93% year-on-year; with gross interest income increasing by 115% year-on-year due to organic loan book growth, the migration of the remaining Ulster Bank Mortgages, Micro-SME and Asset Finance portfolios, and the changed interest rate environment. The net interest margin of 2.31% has increased by 92bps year-on-year; benefitting from the changed interest rate environment and increased loan book volumes. Net fees and commission income performance remains strong, in line with prior year, as we continue to support our higher customer base.

Costs

Operating Expenses at September 2023 remain in line with expectations as we support a larger number of colleagues with cost of living challenges, absorb higher levels of depreciation from prior year investments, and complete key investment initiatives, while making underlying savings to support the cost base.

Balance Sheet

Customer deposits of €22.7 billion at 30 September 2023 are €1.0 billion higher than 31 December 2022, primarily due to a c. 6% increase in current account balances to €9.5 billion, retail deposits have grown by 4% to €12.1bn. Despite the elevated cost of inflation and the higher interest rate environment the overall deposit market has grown by 2.6%[5] in 2023. However, this is down from 4% over the same period in 2022 indicating that the pace of growth is slowing.

Approximately 71% of the Bank's total customer deposits at 30 September 2023 are covered under the Deposit Guarantee Scheme ('DGS'), in line with balances at 31 December 2022. The loan to deposit ratio of 94% and liquidity coverage ratio of 206% at the end of September 2023 provides the Bank with a strong liquidity position and a secure funding source for future growth in lending volumes.

The total performing loan book of €20.9 billion at 30 September 2023 is c. €1.8 billion higher than the total performing loan book at 31 December 2022, as a result of the former Ulster Bank Micro-SME migration in February 2023 (€0.2bn), additional Mortgage migration in May 2023 (€0.9bn), Asset Finance migration in July 2023 (€0.5bn), and new mortgage lending exceeding repayments and redemptions (€0.2bn). Asset Quality remains strong with Non-Performing Loans of €0.7 billion at 30 September 2023, in line with balances at 31 December 2022. While the global macroeconomic environment remains volatile, the Irish economy continues to record strong growth levels with no notable deterioration in the asset quality of the Bank's loan book evident to date.

Capital

The Bank's Common Equity Tier 1 (CET1) ratio at 30 September 2023, on a fully loaded basis, remains strong at 13.8%, 140 bps lower than 31 December 2022 of 15.2%, reflecting the higher Risk Weighted Assets following the migration of the Ulster Bank Micro-SME, the remaining Mortgages and Asset Finance portfolios during the year.

The CET1 ratio on a transitional basis of 14.1% at 30 September 2023, reduced by 210 bps from 16.2% at 31 December 2022. This reduction is primarily driven by the annual transitional phase-in of prudential filters in addition to the migration of Ulster Bank loans. The minimum regulatory requirement for CET1 on a transitional basis is currently 9.44%[7].

The Total Capital ratio on a transitional basis was 19.8% at 30 September 2023. The minimum regulatory requirement for Total Capital on a transitional basis is currently 14.45%.

The Bank's Leverage ratio on a fully loaded basis at 30 September 2023 was 7.0%, down from 7.7% at December 2022.  

2023 Outlook

The Bank remains in a strong position to continue to support our customers, the Irish economy and our shareholders, with the guidance on key performance indicators for FY23 remaining broadly in line with prior market communications. Changes in mortgage customer rate choice plus a lower level of market growth than previously expected in retail deposits are factored into our FY23 expectations.  Asset quality continues to perform well and capital remains strong, having assessed a range of scenarios, the CET1 ratio will remain above the Bank's minimum regulatory requirements.

The Bank will provide updated guidance for the medium term at its FY23 Annual Results.

- Ends -

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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.