7
March
2024
Permanent TSB Group Holdings plc ('the
Bank')
Annual results for year ended 31 December
2023
Comment by Eamonn Crowley,
Chief Executive:
"Our results demonstrate real momentum through a robust
financial performance, driven by income growth, a strong deposit
franchise and good asset quality.
2023 was a very significant year for PTSB as we supported
customers with new lending of €2.8bn, while also successfully
completing the integration of Ulster Bank businesses,
including: 330 former Ulster Bank
colleagues; over 65,000 mortgage customers; an Asset Finance
Business, a Private Banking Team and a Business Banking
book.
In
October, we announced a major overhaul of our brand and customer
positioning for the first time in over 20 years, with PTSB becoming
the new brand name for the Bank and the introduction of a new
customer promise 'Altogether more human'. This repositioning
reflects our ambitions as a full-service personal and business bank
and our focus on changing customer needs.
Looking to the year ahead, we remain in a strong position to
build on the momentum of 2023 as we continue to grow our business,
invest in our customer, colleague and community experience, while
delivering sustainable returns for our
shareholders."
Key Points:
· Underlying Profit Before Tax[1] of €166 million (FY'22: €45
million)
· Profit Before Tax of €79 million (FY'22: €267 million,
inclusive of negative goodwill on the purchase of the Retail and
Business Banking businesses of the Ulster Bank
transaction)
· Strong capital position; fully loaded CET1 capital ratio of
14.0%; regulatory CET1 capital ratio of 14.3%
· Total new lending of €2.8 billion, in line year on year (YoY),
as growth in business banking and consumer finance loans offset
lower new mortgage lending
· New Mortgage lending of €2.3 billion, 11% lower YoY, with the
overall new mortgage market c. 14% lower YoY. New business mortgage
market share of 19.2%[2] compares to 18.5%
at December 2022
· Net Interest Income 71% higher YoY due to the changed interest
rate environment, loan book growth and the migration of the Ulster
Bank loans
· Net Interest Margin (NIM) of 2.32%, 78 bps higher
YoY
· Underlying Operating Expenses[3] have
increased YoY to €495 million, +25% YoY in line with management
expectations, with the cost income ratio[4]
of 66%, 18 ppts lower YoY
· Customer deposits of €23 billion, an increase of c. 6% (€1.3
billion) YoY
· Robust asset quality, Non-performing loans (NPLs) of €0.7
billion and NPL ratio of 3.3% at December 2023 are in line with
December 2022
· Following the 2023 Supervisory Review and Evaluation Process
('SREP'), effective from 15th December 2023, PTSB is no
longer prohibited from paying out dividends to shareholders and has
been identified as an Other Systemically Important Institution
('O-SII')
· As a result of this identification, an O-SII buffer of 50
basis points is to be held in the form of CET1 capital from
1st January 2025
Income
Net interest income in 2023 has
increased by 71% YoY, with the net interest margin increasing by
78bps YoY to 2.32%; benefitting from the changed interest rate
environment, increased loan book volumes and a managed cost of
funds. Net fees and commission income performance remains strong
and in line with prior year, as we continue to support our larger
customer base.
Costs & Investments
The Bank continues to closely manage
its cost base. Reported total costs in 2023 of €504 million
increased by 28% when compared to the prior year reflecting the
impacts of the acquisition, the higher inflationary environment,
together with a €9 million once-off non-recurring fee for the
Deposit Guarantee Scheme, while also continuing to invest in the
Bank for its future. Excluding the once-off fee for the Deposit
Guarantee Scheme, the underlying operating expenses of €495 million
increased by 25% YoY, in line with management expectations. The
Cost Income Ratio4 reduced by 18ppts from 2022, to
66%.
The Bank increased
headcount[5] to 3,206 by December 2023
(2,488 at December 2022) as 330 colleagues joined from Ulster Bank
together with additional headcount ensuring the safe execution of
the large scale transaction while maintaining service levels for
both new and existing customers nationwide. The Bank also invested
in a refreshed brand promise for the first time in more than 20
years which will further support the Bank in driving long-term
success. This move is a major statement of intent, reflecting the
much larger scale and business diversification of the Bank, its
customer focus and growing ambitions for the coming
decade.
Through the Bank's multi-year
digital transformation programme, several enhancements to the PTSB
mobile app and desktop services have been delivered, including the
introduction of Webchat service in-app. In a global-banking first,
in late 2023 the Bank also launched 'PTSB Protect', a new feature
to its banking app which will help prevent customers falling victim
to fraudulent scams.
The Bank continues to invest in
further improving its customer experience reflected in an
improvement in Relationship Net Promoter Score[6] from +10pts in December 2022 to +20pts in December
2023.
Balance Sheet & Business Performance
Customer deposits of €23.0 billion
at 31 December 2023 are €1.3 billion higher than at 31 December
2022, with a c. 4% increase in current account balances to €9.3
billion, and c. 7% increase in other retail deposits to €12.4
billion. The Bank has completed seven personal deposit rate
increases since November 2022, offering customers a range of
competitive deposit products. Despite the elevated cost of
inflation and the higher interest rate environment, the overall
deposit market has grown by 2.5% in 2023[7], however this growth is lower versus the same
period in 2022 indicating that the pace of deposit growth is
slowing.
Approximately 70% of the Bank's
total customer deposits at 31 December 2023 are covered under the
Deposit Guarantee Scheme ('DGS'), broadly in line with balances at
31 December 2022. The loan to deposit ratio of 93% and liquidity
coverage ratio of 220% at the end of December 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 31 December 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 (€0.2
billion), additional mortgage migration in May 2023 (€0.9 billion),
Asset Finance migration in July 2023 (€0.5 billion), and new
mortgage lending outpacing repayments and redemptions (€0.2
billion).
The Bank continues to support its
customers with total new lending of €2.8 billion broadly in line
YoY. New mortgage lending of €2.3 billion was 11% lower YoY,
however, the mortgage market in Ireland reduced by c. 14% due to a
material contraction in the switcher portion of the market. The
mortgage market was €12.1 billion in 2023[8], down from €14.1 billion in 2022. New mortgage
lending across fixed rate products was 94% of total new mortgage
lending, with fixed rate Green mortgage lending accounting for
30% (+10% YoY) as we support customers in their
transition to a low carbon economy. Market share of mortgage
drawdowns reached 19.2% in 2023, which was 70 bps higher than the
2022 market share (18.5%).
Business lending of €167 million in
2023, an increase of 11% YoY, reflects our stated ambition to offer
a meaningful alternative to business customers seeking a new
banking relationship. Live applications and approved business
lending pipeline represents further opportunities for growth in
2024. PTSB Asset Finance new lending of €223 million in 2023 is 7%
higher than that of the prior year. Since its launch in July 2023,
the PTSB Asset Finance business has allowed us to diversify our
product offerings and to broaden our customer base. The successful
migrations of the Ulster Bank SME and Asset Finance portfolios,
coupled with new lending growth, has resulted in the Bank's
Business Banking book reaching over €1 billion in December 2023.
This represents growth which is three times the December 2022 book
of c. €0.3 billion.
New consumer term lending pay-outs
of €117 million increased by 22% YoY. Digital adoption continues to
be a key enabler for this product with c. 80% of new term lending
drawdowns through our direct channels.[9]
Incorporating Sustainability into
our business practices remains a key priority for the Bank, with
steady progress being made across the four pillars of PTSB's
Sustainability Strategy. The Bank will also expand its green
customer propositions in 2024, including participation in the SBCI
Retrofit Scheme.
In July, the Bank issued its first
Task Force on Climate-related Financial Disclosures Report (TCFD)
Report to the market. The Bank also completed a review of its
carbon impact across Scope 1, 2 and 3 emissions with a commitment
to set Science Based Targets in 2024.
The Bank's progress in continuing to
evolve its culture has also been recognised internally with a
Culture Index score of 81% and a Trust score of 82% being reported
through the Bank's annual colleague engagement survey.
Progress was also recognised
externally with the Irish Centre for Diversity awarding PTSB with
Investors in Diversity Gold accreditation in September.
Asset Quality
Asset Quality remains strong with
Non-Performing Loans of €0.7 billion at 31 December 2023, and in
line with balances at 31 December 2022. While the global
macroeconomic environment remains uncertain, the Irish economy
continues to perform well with no notable deterioration in the
asset quality of the Bank's loan book evident to date.
The income statement reports an
impairment release of €2 million, reflecting the current
macro-economic conditions which the Bank is currently operating in.
The Bank also reports a capital deduction of €13 million for the
NPL backstop. Notwithstanding the challenges of the higher
inflation and interest rate environment on our customers, and the
potential for second order impacts from ongoing geopolitical
tensions in the Ukraine and Middle East, the Bank believes it is
adequately provided for having assessed a range of scenarios. The
Bank has no exposure to Commercial Real Estate.
Capital
The Bank's Common Equity Tier 1
(CET1) ratio at 31 December 2023, on a fully loaded basis remains
strong at 14.0%, 120 bps lower than 31 December 2022 of 15.2%,
reflecting the increase to Risk Weighted Assets following the
migration of the Ulster Bank Micro-SME, the remaining Mortgages and
Asset Finance portfolios, together with organic growth during the
year.
Capital Ratios (%)
|
December
2023
|
December
2022
|
CET1 (Fully Loaded)
|
14.0%
|
15.2%
|
CET1 (Transitional)
|
14.3%
|
16.2%
|
Total Capital (Fully
Loaded)
|
19.7%
|
21.3%
|
Total Capital
(Transitional)
|
20.0%
|
22.3%
|
The CET1 ratio on a transitional
basis of 14.3% at 31 December 2023, reduced by 190 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
9.83%[10] and has increased by 39bps since
Q3'23 following the continued phase in of the Counter-cyclical
buffer ('CCyB') in Q4'23 of +50bps, partially offset by a reduction
in the Pillar 2 Requirement ('P2R') of 11bps[11].
The Total Capital ratio on a
transitional basis was 20.0% at 31 December 2023. The minimum
regulatory requirement for Total Capital on a transitional basis is
currently 14.75% and has increased by 30bps since Q3'23 following
the continued phase in of the CCyB in Q4'23 of +50bps, partially
offset by a reduction in the P2R of 20bps.
2024 Outlook
The Bank remains in a strong
position to continue to support our customers, the Irish economy
and our shareholders. Net Interest Income will be broadly in
line with FY23 as rising lending yields due to loan book repricing
are offset with a higher cost of funds as a higher proportion of
customers' avail of higher yielding deposit accounts.
Following the very successful and
safe acquisition of the Ulster Bank portfolio; the transfer of
employees; opening 25 new branches; together with on-boarding
additional headcount to safely acquire and serve a significant
growth in customer numbers; the Bank is focused on further
improving operational efficiencies through prudent cost management
with the ambition to operate with a cost base of c. €500m p.a. in
the medium term while we continue to invest in the Bank.
The Bank expects a mid-single digit
increase in 2024 operating costs as we continue to manage the
impacts of inflation, business growth and required investment for
the future. This will partially be offset by efficiencies as we
continuously review our operating environment.
Asset quality remains strong and is
benefitting from the strict underwriting criteria in place over the
last decade. Furthermore, Irish macroeconomic conditions remain
supportive of continued growth over the coming years, as such the
cost of risk is expected to be c. 10bps in FY'24.
Capital remains strong and having
assessed a range of scenarios, the CET1 ratio will remain well
above the Bank's minimum regulatory requirement. The Bank will
announce a distribution policy in H2'24.
- Ends -
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Further Information Please Contact:
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.