Written answers

Thursday, 23 June 2016

Photo of Marc MacSharryMarc MacSharry (Sligo-Leitrim, Fianna Fail)
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50. To ask the Minister for Finance his plans for the future development role of Permanent TSB in the personal and consumer banking sectors; and if he will make a statement on the matter. [17535/16]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Our strategy envisages Permanent TSB ("PTSB") playing an important role in the future of Irish retail banking ( including personal and consumer banking) as a retail bank bringing competition to the marketplace which has consolidated significantly since 2008.  PTSB is an important bank in a highly concentrated Irish market lending approximately €460 million in 2015. 

PTSB has fundamentally de-risked its balance sheet under the intensive oversight of various authorities since 2011 through deleverage, improved funding profile and increased capital levels (fully loaded CET1 of 15.4% at Q1, 2016). It has made positive progress on arrears reductions, with great than 90 day arrears in Homeloans c. 46% below peak levels in 2013.  PTSB returned to underlying profitability in 2015 for the first time since 2007 and it announced that it was profitable and capital generative in Q1, 2016 (€39m Profit Before Tax). 

This year the bank has launched a new brand proposition ("Keep Going"), a new mortgage product (the 3-in-1 mortgage) and a new current account ("Explore"), all are innovative and the two product initiatives are competitive and indications to date suggest the campaigns are being well received. 

The current account product in particular represents an entirely new way of operating a current account in Ireland and features cash back for card usage (where other banks charge for card transactions), discounts from partners and rewards each week based on the actual patterns of account usage shown by the individual customers.

The bank has also launched a consumer finance campaign and has indicated that it is developing plans in the digital space for the coming months.

Permanent TSB is also in the midst of writing again to its existing residential mortgage customers to encourage them to move to the bank's new Managed Variable Rate products, c.15,000 customers have taken up this offer since last September and they are availing of reductions on their variable rate mortgages of a minimum of 0.20% and a max of 0.80%.  

On the 21 December 2015 permanent tsb launched a new business banking offering which has been specially designed for small businesses of fewer than 50 employees and with a turnover of less than €10 million.  This is the first comprehensive suite of business banking products launched by the bank since the financial crisis and reflects its strategy of focussing on the smaller end of the business banking market where there is considerable overlap between personal and small business accounts. 

Notwithstanding the positive progress made PTSB in many areas there are various challenges facing PTSB, including, but not limited to, the lower interest rate environment, the delayed disposal of CHL due to the UK referendum, increasing regulatory costs, the Central Bank tracker mortgage review, extension of the Bank Levy and higher provisions and lower growth in new lending than the market anticipated.

I am of the view that the best way to protect the value of the State's shareholding is to ensure PTSB continues the progress it has made with a view to reaching sustainable operating profitability and an adequate Return on Equity (ROE) as soon as possible while striving to meet the terms of the European Commission restructuring plan.

While I am strongly supportive of Permanent TSB in the delivery of their strategy I cannot discount the possibility that a strategic transaction could arise opportunistically at any time involving PTSB which could be in the best interests of the State.  As part of their day-to-day role officials in the Shareholding Management Unit will consider all credible proposals and develop strategic options relating to our banking investments and will also consider from time to time whether the sale of shares by way of placing would be beneficial for the State. Having said that I have no current plans to sell shares in PTSB, notwithstanding the flexibility to do so within the Programme for Government.

As I have stated previously I would like to see more competition in the domestic banking system to provide the lending required for our growing economy and this could be achieved through new entrants or the continued growth of our domestic banks.

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