Michael McGrath (Cork South Central, Fianna Fail)
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70. To ask the Minister for Finance his plans for the future of a bank (details supplied) in view of the fact that he is the majority stakeholder; and if he will make a statement on the matter. [4526/18]

Michael McGrath (Cork South Central, Fianna Fail)
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The question relates to Permanent TSB, in which the Minister is the majority shareholder, owning 75% of the bank. The purpose of the question is to establish what is his policy in respect of the future of the bank. It is an important retail bank in our country but it is facing significant challenges. However, I believe there are opportunities as well to which I will refer shortly. I am seeking to ascertain Government policy on the future of the bank.

Paschal Donohoe (Dublin Central, Fine Gael)
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Permanent TSB is playing an important role in providing much needed finance to our housing market. While the management and board of the bank have further work to do in addressing legacy issues, the bank is making good progress and has a strong franchise that can prosper in a growing economy.

The good progress made is demonstrated by the bank’s trading performance in 2017 with key highlights including a recorded profit in the first half of the year, the first since the onset of the financial crisis. In addition, the market expects the bank to record a profit for the full year of 2017. In its third quarter trading statement, the bank reported continued momentum in new lending which increased by 64% year-on-year. This has translated into an increase in the bank’s residential mortgage share to 11.9% at the end of September. This is up from a market share of just over 9% across the full year of 2016. Other key highlights in the bank’s third quarter trading statement included the opening of over 30,000 current accounts, an increase of 16% year-on-year; and an increase in capital ratios with a fully loaded common equity tier 1, CET1, ratio of 15.3% compared to 14.9% at the end of 2016.

The Deputy is aware that the Government does not see itself as a long-term investor in the banking sector. Accordingly, the Government’s policy is to return fully each of the banks in which the State has a shareholding to private ownership. Officials in my Department monitor the performance of Permanent TSB, its share price and equity markets more generally on an ongoing basis to determine the next sensible opportunity to realise value from this investment.

It is important to point out that exiting our investment in Permanent TSB in a sensible measured way which will optimise value for our citizens could take a number of years. I do not propose to set out a rigid timeline for disposal.

Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Minister for his reply. Permanent TSB has high levels of capital. I too have read the financial results and trading statement. Residential lending is its core business. It has a market share of 11.9% in respect of mortgage drawdown. It must also be said, however, that it has a very high level of non-performing loans at 28%. There is considerable pressure from the European Central Bank to reduce that to single digit figures. The most likely way to achieve that is through a sell-off of Permanent TSB's loan portfolio. I have been critical of how the bank treats some existing customers, particularly with regard to mortgage pricing. For example, some of those who have now been offered a fixed rate are not offered the same rate as new customers. I put it to the Minister that he should be open to proposals or offers from major international players that might look to the Irish market and see Permanent TSB as a potential entry point and platform. The Minister should be open to at least considering such approaches and, indeed, he should actively seek them out.

Paschal Donohoe (Dublin Central, Fine Gael)
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As I said a moment ago it is not my objective to be the long-term owner of Permanent TSB on behalf of the Irish taxpayer. In the first instance, it is a matter for the board to adjudicate on whether any potential purchaser is in the best long-term interests of the company. The objective I want to pursue from a banking policy point of view is the strengthening of competition within the market. Permanent TSB is already making very strong progress with regard to competition, lending and investment, as indicated by the third quarter trading statement. I will continue to support it in its work, as appropriate.

Michael McGrath (Cork South Central, Fianna Fail)
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I respect what the Minister is saying. It is of course important that the bank be supported. The State and our economy have a direct financial interest in Permanent TSB and its performance. However, I argue, as I have done before, about how certain customers are treated. If one takes the bank's managed variable mortgage rate for example, customers are only allowed to revise their rate once, even if their loan-to-value ratios have fallen very significantly. That is out of line with other banks. Similarly, Permanent TSB discriminates between existing customers and new customers in respect of its fixed rate offerings. In my view, that is not acceptable and should not be allowed. The bank also has a very high level of non-performing loans. I certainly want to see a long-term viable future for Permanent TSB, but the bank has significant challenges. It does not currently appear to be offering much competition in the marketplace. If the right approach was made with a view to Permanent TSB being acquired and used as a platform to introduce significant new competition to the Irish market, that approach should be considered.

Paschal Donohoe (Dublin Central, Fine Gael)
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I agree with the Deputy. I also want a long-term viable future for Permanent TSB. I believe it is on the path to achieving such a future. Its recent trading performance indicates that very clearly. As the Minister who represents the shareholding the Irish taxpayer has in the bank, which as I said a moment ago is still valued at €800 million, it is not appropriate for me to give an indication regarding whether another company or investor should seek to acquire that share. My objective over time is to realise the best return possible for the Irish taxpayer and to put in place the right kinds of supports within Permanent TSB to ensure that it has a successful and viable future ahead of it. This is a matter which is well understood by the chief executive and the board. We support them in their work.