Mr. Shane O'Sullivan:

With the help of some slides I wish to address the progress and work that we have already undertaken to manage mortgage arrears and NPLs. I am mindful of the direction of Deputy McGrath and so I will abbreviate the script as we go along.

I wish to draw the eyes of committee members to the first slide. As Mr. Masding said, in conjunction with the troika-mandated 2012 objective of arrears management the bank has reduced in absolute terms the value of NPLs by 42%, down from €9.1 billion in 2013 to €5.3 billion at the end of 2017.

That is nearly €4 billion less in non-performing loans, NPLs, over a four-year period. We need to remember other banks had NAMA as an exit for their most difficult NPLs whereas Permanent TSB did not

Despite that good progress, the slide also shows that the ratio of NPLs on our balance sheet has remained stubbornly high at 26% at the end of 2017, which is just one percentage point lower than was the case in 2013. A contributory factor is that our overall loan book has fallen from €33.5 billion to €20.6 billion in the period.

Of course, a large part of that reduction was as a result of the sale of loans in Ireland, and particularly in the UK, which was required by the EU as part of the group’s approved restructuring plan. That followed the state aid that Permanent TSB received in its rescue by the State. Finally, we have the European Banking Authority, EBA, Single Supervisory Mechanism, SSM, and capital context given by Mr. Masding in his opening remarks.

The next slide focuses on arrears management and covers the progress we have made on this crucial issue in recent years. Permanent TSB has reduced early arrears - loans in arrears for less than 90 days - from 4.8% of its loan book in 2013 to 2.9% last year. That is lower than the latest available industry average, which is at 3.1%. For late arrears - loans in arrears over 90 days - we have reduced the percentage of such loans from 15.1% in 2013 to 7.6% at the end of 2017. Again this is lower than the latest available industry average of 8.2%. That is a 54% reduction in the percentage of late arrears in home loans and a 56% reduction in respect of buy-to-let loans. This represents significant progress, all told.

I propose to skip the next slide. I ask members to move to page 11 of the script, which summarises the slide above. We are pointing out that the figures are on a property basis and relate to home loans. In the case of 13,800 of those properties, the loans are now cured and are performing or have been repaid in full. That is as a result of the very significant efforts and focus on behalf of our customers in very difficult circumstances and on behalf of the bank. A further 10,200 loans are treated and 10,400 properties are untreated and non-performing.

I will go into further detail on the untreated numbers. The figure of 10,400 is made up of 4,900 properties where the account holders did not meet the terms of the treatment offered by the bank, 1,700 where the account holders refused the treatment offered by the bank, 1,100 where there was no sustainable treatment that we could identify despite trying to find one and 2,700 properties where the account holders have simply not engaged with the bank.

This slide also gives a pen picture of the average untreated home loan NPL, which is €30,000 in arrears and three years in arrears. In 23% of these cases, the customer has paid nothing in respect of the mortgage in the calendar year 2017.

That brings Permanent TSB to this inflection point. Our arrears management strategy has paid dividends over the past five years. Thankfully for account holders and for the bank, thousands of accounts have been cured. Thousands more have been treated but will remain in NPL status until cured or removed from the bank’s balance sheet. The overarching role of management in these cases, as with all other segments, is to review all options in order to achieve the best outcome for all Irish taxpayers while ensuring that customer protections are maintained throughout.

Of course thousands of loans remain in a more conventional non-performing status and we have to deal with them, again in a manner which ensures that their existing protections are maintained.

This brings us to this proposed loan sale, which is a necessary step given the bank’s capital position - we were not capitalised in 2011 for scale write-off - and given the regulatory context and the urgent priority which has been set for all regulated banks in the eurozone to reduce their NPLs significantly within a tight timescale. We would be happy to take members' questions.