I thank the joint committee for the opportunity to meet with it today. First, may I express my thanks to the committee for allowing us to postpone our scheduled meeting with it last month as we were in the middle of the capital raise exercise. We very much appreciate its understanding at that time.
In my opening remarks, I want to address a number of key areas, following which my colleagues and I will be happy to take any questions. I will first update the committee on some transformational developments on the corporate front. In the first instance, as committee members will have read, the European Commission completed its review of our restructuring plan and signed off on it in April. This plan provides a clear roadmap for the group and while it reflects many of our own plans and ambitions for the coming years, it also sets out clear targets in areas such as the deleveraging of non-core assets which the group is now bound to deliver within a specified timeframe. We believe the plan will support the re-emergence of Permanent TSB as a competitive, profitable and vibrant force focused on the Irish retail banking market and capable of delivering value for both its customers and shareholders.
Approval of this plan paved the way for the second key recent corporate development, namely, the very successful capital raise that we completed last month ahead of the ECB required date of 26 July next. In that exercise, the group raised a total of €525 million through two transactions. We successfully sold just under 90 million new shares at a price of €4.50 each to raise €400 million and in a separate transaction, we raised €125 million through the issuance of AT1 capital at a very competitive coupon of 8.6%. At the same time, the Minister of Finance successfully sold just under 22 million shares raising some €97 million for the taxpayer. This was done to facilitate the re-entry of the group on to the main markets of the Irish and London Stock Exchanges.
As a result of the capital raise and the sale of shares by the Minister, we have substantially transformed our capital position and equity base, have purchased from the Minister the €400 million of contingent convertible notes which formed part of the recapitalisation of the group by the Minister in 2011, have had the group's shares admitted to the main markets of both the Irish and the London Stock Exchanges, brought new international investors on board while preserving a very significant 75% stake in the group for the Minister, on behalf of the taxpayer, and reinforced our capital position, as requested by the ECB, following the rigorous stress tests undertaken on banks across Europe last autumn.
These are very significant developments in terms of the journey that Permanent TSB is undertaking as we try to rebuild our business and return as much money as possible to the Irish taxpayer and we are delighted that they have been so successful. We can assure the committee that given that it was a business with zero equity value post-PCAR 2011, the taxpayer now has an asset of real intrinsic value. I should point out that while the capital raise is now substantially completed, we are technically still in an offer period as smaller investors have a few more days to decide if they wish to buy shares on the same terms offered to larger investors last month. As a result of this, and because we are also now subject to detailed legal and stock exchange-related rules, there may be some areas where we are limited in terms of what it is appropriate for us to say. For example, while we will be happy to answer questions related to current facts and circumstances related to our group, which are all set out in our equity prospectus which is available on our website, speculation about future events and circumstances is generally inappropriate for us now. That said, we will try to be as helpful as possible.
The second area I want to refer to is the issue of standard variable mortgage rates. Clearly, this has become a very contentious issue in recent months. I will take this opportunity to share the position of Permanent TSB for which the following facts are particularly relevant. We must ensure all our variable rate mortgage products make financial sense on their own account. Making financial sense means making a return for shareholders - my primary fiduciary duty – after accounting for various inputs, including the cost of funds, business, risk, regulation, tax and debt-equity capital, all of which remain elevated in Ireland. We do not subsidise our mortgage rates by non-interest charges such as arrangement fees which are common in other markets. We do not fund our mortgages from the ECB with its historic low rates of interest. Around 15% of our funding now comes from the ECB - down from over 55% at the height of the crisis. I wish to place on record that the constant refrain of "low ECB rates" is not a material fact in this debate. When it comes to funding our mortgages, we are much more reliant on relatively expensive retail and corporate deposits paid to customers here in Ireland and on money raised on the international markets, all of which are much more expensive than ECB money. We are impacted by the high volume of mortgage defaults we have in Ireland. It is an unfortunate fact that people who pay their mortgages here have to pay a bit extra to make up for the historically high number of people who cannot or will not pay.
Having said all of this, I do not want to close the door on delivering more customer value through compelling propositions and competitive rates. As I told shareholders at our recent AGM, our goal is to work through the various factors that contribute to the cost of our variable rates and seek to reduce those inputs bit by bit. Some of that is down to us on our own while some of it is down to the country generally. If we can do that, I believe we will be able to move to a situation where we can share some of the benefits with our customers.
The third area I want to refer to is arrears and our asset management unit, AMU. Nothing is of more importance to us than to be able to work with our customers to ensure that they can work through the life of their mortgage without falling into arrears or for those who do fall into arrears, to be able to help them to come to arrangements which are fair to them and realistic for the bank and which avoid, wherever possible, the possibility of them losing their homes or the taxpayer losing a disproportionate level of capital. I am very proud of our performance in this area. Mr. Shane O'Sullivan and his team have done a great job of creating a unit which is best in class and which has helped thousands of customers tackle their problems and restructure their loans on an agreed basis. We have proposed 28,500 sustainable solutions to customers in arrears. We have reduced the number of home loan customers in arrears of over 90 days by over 8,000 - some 38% - over the past year or so and we are now making realistic offers to thousands of customers every month. These and other figures are captured in some graphs we have presented to the committee and which we can discuss later.
That said, some people continue to hold out for a silver bullet that will resolve the arrears or negative equity problems for everyone in one go. Unfortunately, it does not exist. All the experience of similar challenges internationally tells us that these problems are overcome slowly and patiently and not by waving a magic wand about so we are taking the slow and patient approach and it is paying dividends for us and for our customers. When talking about arrears, I believe there has been a disproportionate focus on insolvency and bankruptcy as a solution to this problem. Our view is that both options may work for customers in certain positions but they are never going to be widely utilised solutions.
Finally, I am happy to say that the improvement that we all see beginning to take hold in the wider economy is reflected in our own trading performance. We are seeing good progress in deposit gathering, in growing our current account numbers and in mortgages and other lending. Like other banks in Ireland, Permanent TSB has been through an extraordinarily difficult period. There were long periods during the past number of years when many people understandably questioned whether the group would survive at all yet here we are today with real evidence that our recovery is real and our prospects are good.
That said, we continue to have significant challenges and I hope we remain humble and focused. We still have to manage difficult day-to-day issues, including how to return to sustainable profitability while building long-term rewarding relationships with customers. Additionally, we still have difficult legacy issues to deal with that require a lot of time and resources. Overall, however, we are in a good and an improving position.
I thank the committee for allowing these opening remarks. My colleagues and I are happy to take any questions.
