Dáil Éireann Debate, Tuesday - 16 April 2013
255. Deputy Pearse Doherty asked the Minister for Finance if he will provide his assessment of the performance of Permanent TSB, in which he owns 99.5% of the shares, and which has just published its report and accounts for 2012. [16366/13]
View answerAs the Deputy will be aware Permanent TSB had a challenging year in 2012 and its results are a reminder of legacy issues in our banking system. The appointment of Jeremy Masding as CEO in February 2012 began an overdue process of fundamental restructuring in PTSB. Amongst many actions taken during 2012 the senior management team was restructured, an asset management unit was established, branches were closed, a voluntary redundancy scheme was completed and Irish Life and PTSB Finance were sold. During the same period PTSB agreed a strategic direction with the Troika and delivered on the restructuring actions required in its Restructuring Plan.
I will now comment on some elements of the financial accounts, which are laid out in significantly more detail in the recently published annual report for 2012.
While high deposit rates eroded net interest margin in 2012, I am satisfied that management took action to address this issue in the latter part of 2012 which should result in an improved net interest margin in 2013. Reduced deposit rates are required for a sustained profitable Irish banking system.
PTSB also reduced its homeloan Standard Variable Rate (SVR) to bring it in line with market rates for this type of product. As the Deputy will appreciate, this had a negative impact on net interest margin in 2012 but had a positive impact for SVR customers.
While operating costs were somewhat lower in 2012, restructuring actions taken in 2012 should have an additional positive impact in 2013. With regard to staff costs, which are a subset of operating costs, I have issued instructions to PTSB to develop a plan to deliver savings of 6-10% on its payroll and pension costs.
Provisions for impairments were high as mortgage arrears continued to rise, from already high levels, and resulting from an in-depth independent review of its Commercial Real Estate (“CRE”) loan book. Management took action early in 2012 to address the significant operational issues in its arrears management operations and I expect that these improvements will allow PTSB to significantly increase the volume of sustainable long term treatments offered to customers in 2013, as required by Government and the Central Bank. In addition PTSB outsourced the servicing of its CRE loan book to Certus, a contract which will significantly increase the resources and expertise allocated to this loan book.
On the balance sheet the funding position of PTSB improved during 2012 with Monetary Authority funding reduced by €3.3 billion including the elimination of ELA of €2.3 billion.
The Deputy will also be aware that included in the results are payments to the State. During 2012 PTSB accrued ELG costs of €165 million and paid interest of €40 million on the Convertible Contingent Capital Notes.
In summary the results highlight many of the issues in our banking system which require attention and while it will be challenging to achieve a full resolution of all legacy issues in PTSB, I am satisfied that the new management team have made progress in 2012, which combined with their ambitious restructuring plans for 2013, should deliver concrete results particularly regarding improved profitability and delivery of sustainable treatments for customers in mortgage distress. My officials will continue to monitor progress in PTSB closely.
