March 14, 2018 / 8:20 AM / 3 months ago

Ireland's PTSB operating profit falls on impairment charge

DUBLIN, March 14 (Reuters) - Full year underlying profits at Ireland’s permanent tsb (PTSB) fell 65 percent year-on-year as the bank took a higher impairment charge ahead of a controversial sale of non-performing loans (NPLs).

The bank’s 3.7 billion-euro sale of a portfolio including some 14,000 home loans sparked vocal political opposition last month and possible legislative changes to protect borrowers if loans are sold to non-banking entities.

PTSB has come under particular pressure from European regulators to cut its high level of NPLs and said on Wednesday that they had fallen by 600 million euros to 5.3 billion, representing a slightly lower 26 percent of its total book.

It has targeted a reduction of NPLs to below 10 percent of its loan book by 2021 or sooner.

“I understand of course the view point of people who have either criticised us or have a different perspective,” PTSB Chief Executive Jeremy Masding told the Newstalk radio station.

“Since 2012 we have used all the options available to us. We’re not short of managerial focus nor compassion, what we’re now short of is options.”

The 75 percent state-owned mortgage lender reported a pre-exceptional operating profit of 65 million euros, down from 188 million euros a year ago. In 2016 it clawed back 65 million euros from money put aside for bad loans whereas it booked an impairment charge of 48 million euros last year.

Shares in the bank were 4.6 percent lower at 1.85 euros by 0815 GMT.

New lending surged by 74 percent in that period, increasing the bank’s share of the mortgage market to 12.6 percent from 9.1 percent in 2016, within striking distance of the 13-17 percent level it targeted to capture by the end of 2018 when re-listing on the stock exchange three years ago.

PTSB’s core Tier 1 capital ratio stood at 15.0 percent versus 15.3 percent as of the end of September under fully loaded Basel III industry rules.

The bank said the strong capital base gave it the capacity to manage down its NPL ratio but that it will have to carefully manage any impact from the execution of the NPL strategy.

“Real progress is being made on new lending volumes and NPL declines, with capital also holding up well, but there are still concerns over asset quality given the higher impairment charge,” Investec Ireland analyst Owen Callan said. (Reporting by Padraic Halpin Editing by Keith Weir)

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