Dáil Éireann Debate, Wednesday - 4 February 2015
14. Deputy Sean Fleming asked the Minister for Finance when the European Commission will deliver its response to the restructuring proposals for Permanent TSB; when the bank will raise the capital it requires under the stress tests; the progress that has been made to date in ensuring Permanent TSB plays a positive role in the Irish banking market; and if he will make a statement on the matter. [4677/15]
View answerA way forward for Permanent TSB was agreed with the Troika in April 2012 which envisaged it playing an important role in the future of Irish retail banking, being a more focused retail bank bringing competition to the marketplace which has consolidated significantly since 2008. In this regard Permanent TSB prepared a Restructuring Plan, which was submitted to the European Commission ("the Commission") in June 2012. As requested by the Commission, an updated version of the plan was submitted in August 2013 which incorporated improvements in performance over the intervening period.
The Permanent TSB restructuring plan submitted in autumn 2013 is now outdated and has been updated for both recent positive financial and operational performance in 2014 and the results of the Comprehensive Assessment. My officials have been in detailed discussions with the Commission over recent months in relation to the plan, details of which are confidential between the parties and commercially sensitive at the present time. However, I expect the restructuring plan to be agreed in advance of the capital raise.
As the Deputy is aware Permanent TSB is an important bank in a highly concentrated Irish market. While no restructuring plan has been approved, it has not prevented Permanent TSB from making significant progress in delivering key elements of the Restructuring Plan submitted over the last year and the business is being managed structurally in the way envisaged in the plan. Permanent TSB has made steady progress on returning to operating profitability, has significantly de-risked its balance sheet through a sale of a tranche of its UK mortgage portfolio and the sale of Springboard Mortgages and has made positive progress on arrears reductions, with 90 day + arrears in Homeloans c. 33% below peak levels at end 2014. I expect that the bank's full year 2014 annual results, which will be issued on 11 March 2015 will confirm this.
With regards to the Capital Raise, the Comprehensive Assessment Adverse Stress Test result identified a shortfall of €855 million. As a consequence the bank has submitted a Capital Plan to the SSM, which outlines how the bank intends to meet the capital shortfall. Much of the shortfall has been met through performance in 2014 and deleverage of assets in 2014. The remaining shortfall will require the bank to raise capital, including equity capital, from private sources in 2015, diluting the State's shareholding. Details of the capital raise will be finalised shortly. While there are no current plans to sell shares held by the State during the process I will keep this under review as it could be required to ensure a successful capital raise process for the State and other shareholders.
I am of the view that the best way to protect the value of the State's shareholding is to ensure Permanent TSB is well prepared, that it conducts a comprehensive and competitive exercise to raise the capital with appropriate legal and financial advice, and that the State has meaningful oversight and involvement in the process. Officials from my Shareholding Management Unit and our financial advisers, JP Morgan Cazenove, are well placed to fulfil this role.
