Ireland's permanent tsb narrows losses, still trails rivals

Tue Aug 19, 2014 2:37am EDT

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By Padraic Halpin

DUBLIN, Aug 19 (Reuters) - Irish state-owned mortgage lender permanent tsb (PTSB) cut its first-half underlying loss by 62 percent but continues to lag behind its main rivals, who have returned to profit after the country's banking crash.

The smallest and weakest of Ireland's three remaining domestically-owned lenders posted a 171 million euro ($228 million) loss, with impairment charges on loans falling to 148 million euros, a third of the level reported a year ago.

That compared with a profitable six months for both Allied Irish Banks and Bank of Ireland, which are recovering faster from a crisis that saw some banks fail, others fall into state hands and led Ireland into a three-year EU/IMF bailout.

"2014 is set to mark an important milestone as the year in which we will report a sharp improvement in underlying losses for the first time since 2008," Chief Executive Jeremy Masding said in a statement.

"The economic and commercial environment continues to improve and this provides an increasingly positive backdrop to the execution of our strategy."

The 99 percent state-owned lender is seeking approval from European authorities to split itself and move bad assets off its balance sheet but is still awaiting a decision on a revised plan submitted to the European Commission last year.

The core "good bank" reported an operating profit of 3 million euros in the first half, PTSB said.

Unlike its more diversified rivals, PTSB's profitability is dragged down by expensively funded loss-making tracker mortgages that follow the European Central Bank's low interest rate and make up two thirds of its loan book.

As a result, the bank's net interest margin - measuring the profitability of its lending - rose a touch to 0.88 percent, less than half the level of market leader Bank of Ireland.

Its proportion of homeowners in arrears for more than 90 days fell again to 13.7 percent, from 14.9 percent in December, while buy-to-let mortgage arrears fell to 15.5 percent.

Ahead of stress tests by the European Central Bank later this year, PTSB's core Tier 1 capital ratio, a measure of financial strength, fell slightly to 12.7 percent. (1 US dollar = 0.7491 euro)

(Editing by David Goodman)

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