PTSB holds mortgage rates and stays upbeat on interest income

Permanent TSB said it expects is net interest income to rise 13 per cent this year, more than previously expected, driven by the European Central Bank’s (ECB) removal of charges on excess deposits stored with the Frankfurt-based organisation.

The Dublin-based bank is the only one of six mortgage lenders active in the Irish market yet to increase home loan rates since the ECB hiked its main lending rate from zero to 2 per cent over the past four months.

PTSB had previously expected its net interest income to be “higher than the prior year”. The improved outlook follows on from AIB and Bank of Ireland also upgrading their forecasts in recent weeks. Tens of billions of excess deposits stored with the ECB are now earning 1.5 per cent in interest, compared to minus 0.5 per cent before the central bank started to raise official borrowing costs.

PTSB also said it expects operating costs to be 15 per cent higher than last year, up marginally from previous guidance, as it continues to “invest in the business”.

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The bank said on Monday it had “materially completed” its acquisition of Ulster Bank’s €6.2 billion non-tracker business, part of a deal for the exiting bank’s assets that will see PTSB’s loan book grow by close to 50 per cent.

PTSB said the changing interest rate environment and transfer of the first batch of Ulster Bank assets should see its net interest margin amounting to 1.5 per cent this year, up from its previous estimate of 1.4 per cent.

“Our imminent acquisitions of Ulster Bank’s SME and asset finance businesses and 25 of its branches will support the bank in generating greater scale with more customers and becoming a much stronger competitive force in Irish retail banking,” said PTSB chief executive Eamonn Crowley.

PTSB has opened more than 100,000 new current accounts and 35,000 new deposit accounts so far in 2022, a 250 per cent and 80 per cent increase respectively on the same period last year, as Ulster Bank and KBC Bank Ireland customers are forced to find new homes for their banking.

New lending volumes jumped 33 per cent in the first nine months of the year to €1.8 billion, driven by a green mortgage offering which is now accounting for approximately 25 per cent of home loan drawdowns. Its share of a growing market declined, however, to 16.9 per cent from 17.5 per cent year-on-year.

“Whilst the macroeconomic environment remains uncertain, the Irish economy continues to outperform in terms of growth and employment levels,” said Mr Crowley.

PTSB expects an additional €180 million of gross interest income, €40 million of funding costs and €50 million of operating expenses next year as a result of acquiring the Ulster Bank assets.