Mr. Eamonn Crowley:

I thank the committee for the invitation. I am joined by my colleague Patrick Farrell, our director of retail banking.

In my last appearance before the committee last year, I set out the bank’s five main priorities: to safely integrate more than €7.6 billion of home loan mortgages, business loans and credit facilities into our business following the acquisition of assets from Ulster Bank; supporting a very substantial number of customers in transferring their banking relationship to Permanent TSB in as smooth and straightforward a manner as possible; preserving jobs and welcoming more than 330 new Ulster Bank colleagues to Permanent TSB; maintaining our support for local communities by enhancing our branch presence in 25 communities across the country, which increases our presence to close to 100 locations nationwide; and continuing to serve and support hundreds of thousands of existing customers and the provision of home loan mortgages and small business finance into the economy.

I am pleased to say that, following our completion of the final elements of the Ulster Bank acquisition earlier this year, we have been successful in achieving all these objectives. This leaves us in a strong position to build on the platform for growth we have created as a bigger bank with many more customers, many more branches and an even stronger competitive proposition. Irish retail banking needs competition more than ever and we plan to play a big role in driving that competition for personal and business customers.

The committee's invitation set out three specific topics that members wish to discuss, namely, interest rates, inflation and the defective block redress scheme. I will make brief comments on each of these.

Regarding interest rates, it is clear we are in a new, higher rate environment and the era of record low rates has come to an end. This has consequences for borrowers and savers. For borrowers, we never lose sight of the fact that higher rates can cause challenges and stresses. We are extremely mindful of the duty we have to our customers to support them when they need it. We showed this during the Covid pandemic, when the industry as a whole worked closely and quickly to put in place effective, workable and sustainable solutions for customers who were suffering as a result of the pandemic. We will continue to support customers who find themselves in difficulty in today’s environment.

I am conscious that higher rates have resulted in higher borrowing costs for customers on variable or tracker rates, for those who may be at the end of a fixed rate term and for those taking out a mortgage for the first time. I think all banks have shown over the past 12 months that, contrary to what some commentators expected, ECB rate increases have not resulted in automatic mortgage rate increases across the board. Members will not need me to tell them that ECB rates have increased ten times, with a cumulative increase of 4.5% since the middle of last year. Our fixed rates for new business have increased by a weighted average of approximately 2.2% over the same period, our standard variable rate has increased by 35 basis points and our managed variable rates have increased by between 5 basis points and 40 basis points.

Prior to the cycle of rate increases, many of our existing customers took advantage of the low interest rate environment to lock in fixed rates for extended periods of up to seven years. This has given them significant certainty and a valuable cushion against the impact of rising rates.

Over 95% of our new mortgage business was written at fixed rates over the past three years. Now that rates have increased, we are seeing a trend towards fixed and variable rates converging. From past experience, this tends to influence customer behaviour as many customers re-evaluate the relative attractiveness of fixed rates compared with variable and vice versa. Some will decide, for example, that opting for a variable rate, even if it is higher than a fixed rate, gives them the possibility of benefiting from falling rates in the future. By contrast, others will favour the certainty that fixed rates can offer. They may choose to forgo the possibility of gaining from future falls in interest rates because being protected from the risk of rates going up is more important to them.

We see our job as offering customers the choice so they can decide what is best suited to their circumstances and needs, backed up by independent financial and legal advice. That is why we need to be competitive on fixed rates and on variable rates and keep our pricing under constant review.

Turning to our deposit customers, I have said it before and I will say it again. Deposit customers have always been and will continue to be very important to our business. Permanent TSB has roots going back more than 200 years as the Trustee Savings Bank. We have a heritage that is firmly rooted in earning the trust of customers who want a safe and stable institution where they can invest their money and earn a reward that is attractive and competitive. That is why we did not charge negative rates for savers when the ECB was offering banks negative interest to hold deposits. In addition, that is why we have made five separate announcements since last November in which we have introduced new and better rates for our deposit customers. They need to be rewarded and see some benefit from that higher interest rate environment. The changes we have announced mean it is now possible for our deposit customers to earn up to 3% on their lump sum fixed term deposits and 2.5% from our regular savings products. Given that we have fixed term mortgage customers who locked in low borrowing rates for long terms, we now have a situation where some of our mortgage borrowers are borrowing at lower rates than we are paying savers on their money. As always, we will keep our deposit rates under review.

Regarding inflation, there are primarily two ways we think about inflation in terms of how we run our business: how it affects our customers and how it affects our colleagues. For our customers, we do not distinguish between people who are experiencing financial difficulty as a result of higher interest rates and people for whom the cost-of-living increase of the past 18 months have been the main driver of the pressure on their finances. We approach each customer in a spirit of working constructively and sympathetically to ensure we can put in place a sustainable arrangement that gives them the breathing space they need until their circumstances improve.

It is important, however, that we also acknowledge the range of support measures the Government introduced to help alleviate the pressures that have arisen over 2022 and 2023. These have been generally very effective in cushioning households from the most extreme effects of higher energy and fuel bills and in helping to protect people’s disposable income.

For our colleagues, we have recognised the difficulties they face as a result of the higher cost of living with selective interventions. In doing so, we make every effort to get the balance right between supporting our colleagues and managing our cost base in a manner that is aligned with our business requirements and our duty to deploy the capital that belongs to the State and other shareholders in the right way.

Turning to the defective block redress scheme, I will conclude with some comments on the difficulties being faced by the people in certain parts of the country whose homes have been compromised by defective building materials. These people are experiencing what can only be described as a nightmare. We are aware of a small number of Permanent TSB customers who have informed us they are in this position, and I state at the outset that we want to treat these people sympathetically and sensitively. They are in an awful situation through no fault of their own. I assure the committee we are fully committed to working with the Government and BPFI on addressing the difficulties they face. I can think of few things that would erode someone’s peace of mind and sense of security in such a devastating manner.

Our job is first and foremost to make sure we do nothing that would add to the considerable levels of distress these people are experiencing. Our intention after that is to be part of an industry-wide solution, taking account of the wider mechanisms the Government is putting in place to achieve a resolution that will be satisfactory to all stakeholders.

I am conscious that I am just one of a number of people who have been invited to address the committee today. Members will want sufficient time for questions and answers and wider discussion, so I will conclude my remarks at that. I thank the committee for listening.