The initial presentations to the committee seemed to be about which institution has the lowest mortgage rate in the market place. The latest entrants to the market assume they are third or fourth so there is some competition for placings.
This presentation gives a perspective on who we are, how we came about and what our business focus is as we move forward. Permanent TSB is the newest bank in Ireland, formed only 15 months ago as a result of the acquisition of TSB Bank by Irish Life and Permanent and the subsequent merger with Irish Permanent. Our core focus is on personal customers with strengths in mortgages and savings products, a link to the histories of both former organisations. We have an exclusive focus on the market in the Republic of Ireland so, unlike some of our competitors, we make our bread and butter here.
The TSB Bank was formed through a series of mergers of regional savings banks that historically focused on the deposit savings market, which is logical because it was a trustee savings bank. It then attempted to move and broaden the provision of all personal financial services products. It saw customer service as a key to competitive advantage. The conversations about commoditisation versus customer service that preceded this presentation were interesting but TSB saw itself as having a distinct competitive advantage in customer service. Before the merger it had 80 branches so it was a relatively small provider, number five or six competitively in most product areas.
By contrast, Irish Permanent has strong roots in mutuality. It was a building society until 1992 with a key focus on mortgages. It had a 22% market share at the time of merger. It was also strong in car finance through Irish Permanent Finance and had a relatively small presence in other retail product areas. It had 72 branches at merger - again a relatively small player in the scheme of things. Our major competitors would have upwards of 250 branches.
A key rationale for the merger was that we were a big mortgage provider and a small relationship bank. The logic behind the merger was to put the two together and become a competitor in all retail product areas while remaining true to the original values of both former organisations of being Irish and mass market driven as opposed to cherry picking. Our objective was to provide a real challenge to the status quo.
We provide full-service retail banking designed to challenge the two main banks in the personal banking sector. We have 2,750 employees and national coverage with 166 outlets, comprising branches, a small number of sub-offices and 55 agencies across the State. We now have full ATM access, something previous speakers would take for granted but, from our perspective, it was a key to enabling us to a strong competitor in the market place and with any current account offering we have the direct channels available to customers.
If we look at how the customers of the retail banks that merged benefited, Irish Permanent customers got access to a clearing system, got a proper current account with Internet and telephone banking, and longer opening hours. The TSB customers got access to the market leading mortgage product, a full range of life and pension products from our parent company Irish Life and access to the leading car finance product, and both got significantly increased national coverage. In addition, our key focus at the time was not to lose any existing customers by maintaining the level of customer service that had kept them loyal to the organisation and, in addition, to provide a real and significant challenge and alternative to the two leading competitors.
We are unique in the market in that all our fees and charges were submitted and approved by the Director of Consumer Affairs as far back as 2002, a prolonged activity that took significant discussion, justification and rationale. Our customer service gives us a competitive advantage and we had a significant investment in proportion to our scale. As those who are familiar with the retail banking system will be aware, the IT system is the bane of many of our lives and we spent €25 million merging the two IT systems from the two former organisations. That spend is the two ongoing because the process is not yet complete.
We also focused to a huge extent on product innovation. Our objective was not just to say we are new, because no one would come to us if we said that, but to bring new initiatives to the market place. I have included some examples of that in our presentation - the One Plan equity release product, a four-in-one card with ATM, Laser, cheque card, Internet or direct channel registration, and a series of free banking initiatives.
The presentation quantifies the level of customer service and the importance we place on it. On an annual basis we examine the level of satisfaction with our existing customer base and compare it with that of our competitors. We are reassured that four or five months into the launch, 92% of customers were either very or fairly satisfied, which compared well with our competitors, which we also track. Our core strength, particularly coming from the former Irish Permanent and its roots in mutuality, is in the mortgage market. We are currently the leading mortgage provider. There are many people claiming to be but we actually are, with a 25% share of the market. We focus very explicitly on the mass market. We do not cherry-pick and price accordingly. As an example of that, we have the highest share of first-time buyers. Almost half of our business is with first-time buyers. We give loans of up to 92% and so on and do not advantage higher net worth customers. Similarly, we do not disadvantage lower net worth customers.
We have a strong commitment to our existing customers as well as remaining as competitive as possible to get new business. Obviously it is in our interests to keep our existing customers as satisfied as possible. One of the initiatives we launched in order to reward them was One Plan, an equity release product launched at the end of 2002. From our perspective it revolutionises the lending market. It made lower-priced loans more accessible to mortgage customers, so instead of going out and getting oneself a term loan of between 8% and 10%, one is now entitled to get pre-approval for mortgage rates for any further loans one needs to access. It is aimed at existing mortgage customers. It revolutionised the market because of the results we have had with the product so far and because of the number of competitors which have lined up to follow us as a direct result of that launch.
Just to finish up on mortgages and on the strategies specifically going forward, we have a strong history of product development and innovation. For example, we were the first provider to introduce fixed rates to give customers security and the first to introduce discounted rates to make it easier for first-time buyers in particular to get onto the property ladder. We introduced a best-of-both-worlds product that offered customers the ability to fix their mortgage rate but, if the variable rate went below that, to switch without any breakage cost. We were the first provider to introduce that. I have said already that we introduced One Plan equity release to replace high term lending rates. We have an ongoing commitment to mortgage pricing and customer service is to our competitive advantage in the marketplace.
Some committee members may have seen some of the advertisements for One Plan over recent months. To finish off on our mortgage strategy, we have a history of competitive pricing, and in addition to competitive rates we have abolished the application fee that was around for a long time on mortgages. More recently we have absorbed - as now have some of the competition - the cost of the indemnity bond charge that used to be passed on as a hidden charge to customers.
In terms of customer service we go out regularly and talk to our mortgage customers and customers who have not taken out a mortgage and ask what exactly they need in the marketplace in addition to competitive rates. They say things like speed - they want to know immediately if they are entitled to a loan or not, whether they will get it and how much it will cost - so we offer instant approval in principle. One does not have to wait, as we will tell people there and then. We will not drag people around.
We have to ensure that existing customers are loyal and therefore satisfied because it is only through satisfaction that we will get loyalty. Finally, another initiative we introduced two years ago was a series of flexible product features to match needs. One Deputy earlier made a reference to coming into lump sums and potentially clearing mortgages. We offer those facilities if customers do have such luck. That completes the section within the presentation on mortgages.
Just briefly on savings and investments, both former organisations have strong roots on the deposit market, with the Irish Life side strong on mutuality and the Trustee Savings Bank, true to its name, very strong on the deposit savings market. That subsequently was complimented by our mother company, Irish Life's expertise on the life products. We now offer anybody a structured financial review. This is basically to ensure that the transition to needs-based selling is consistent and controlled throughout the organisation on the savings and investment front. In other words, rather than us recommending products based on what we perceive to be customers' needs we sit down and actually ask them all the questions to ensure that they are sold the appropriate product.
However, we recognise that it is a challenging interest rate environment, and as a result, particularly on the deposit savings and in general with the volatility in the stock markets, we recognise the importance of product innovation. We can talk about that later. I do not plan to take the committee through that in any great detail but we can talk about it later through questions if appropriate.
What has all this resulted in over recent years? We have taken a nine-year picture on our net interest margin, which is the difference between the rate we lend at and the rate we offer to our customers. We used to make a 3.4% net interest margin in 1993 but now make 1.78%. That is a reflection of how competitively priced we are and of our ongoing commitment to customers. It is also a concern to us because it has reduced in nine years by almost 50%, and having listened to some of the questions that preceded this presentation in terms of our competitors, the levels of margins that they are making, as well as the European benchmark quoted at 2.2%, causes us a very significant concern.
In addition, we are in a historically low interest rate environment so I do not see much potential to increase on that 1.7% in the short-term. We have six times more depositors than we have mortgages. As a result, the levels of returns on interest rates that are given to depositors are of ongoing concern to us.
I have put only a brief slide or two together on the current accounts because we are a relatively small player here, with 8% to 9% of the market. In order for us to close the gap on the incumbent current account providers essentially we need to innovate. I have just outlined some of the initiatives that we have focused on recently. We have launched a loyalty current account which essentially offers customers the potential to reduce their current account charges based on product holding. In addition we have set ourselves a clear objective of challenging the status quo when it comes to current accounts.
When one of our competitors eliminated free banking recently for credit balances over a certain amount we reacted by changing the current terms and conditions for existing current account customers by introducing free banking based on credit balance. That was a direct attack on our competitor and customers have voted with their feet as we have had a very positive reaction to it. While we introduced that approximately six weeks ago, just two weeks ago we introduced a new long-term promotion of free banking for all mortgage customers going forward. Our objective is to ensure that customers get the best value possible when it comes to current accounts.
Consistent with one of the previous speaker's comments, although I think he was speaking more about the mortgage product, our perspective and drive would be to ease the account switching process. We have as much documentation within our branches as possible to ease that. However, it is a long and cumbersome process and we are aware of what has happened in the UK and are watching very closely to see whether the introduction of regulation there has freed up the ability of customers to switch their current account. We would welcome any move on that side. Some of the committee may have seen one of our advertisements recently to support one of those promotions.
On the future, there is nothing that will shock or is inconsistent with the rest of our presentation. We have continuing investment in new processes, a strong commitment to growing aggressively through product innovation - including the examples I have taken the committee through - and competitive ongoing pricing both for new business and our existing customers. We see our differentiating factor as being customer service. At the end of the day that essentially means making sure customers know that they have the best service available. It is only through doing that and offering them competitive pricing that we will retain the loyalty of our existing customer base.