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Permanent TSB Eyes 10% Good-Bank Unit Return on Equity by 2017
-- Permanent TSB Group Holdings Plc,
the Irish state-owned lender, is forecasting a 10 percent return
on equity for its good-bank unit by 2017 under a plan to return
it to private ownership after a bailout.
The bank is targeting a 5 percent return on equity by 2017,
including its internal bad bank of distressed mortgages and a
unit of loans to be sold, according to an investor presentation
seen by Bloomberg News. David Clerkin, a company spokesman,
confirmed the contents of the presentation, dated Jan. 7.
Jeremy Masding, who has been chief executive officer for
almost two years, considered closing the 99.2 percent state-
owned bank as its bad-loan losses soared following the collapse
of a real estate bubble. His board decided that the “least
worst option” was to keep it going, he said in August.
“Ireland’s economy is recovering, with clear improvements
in the labor and property markets,” the bank said in the
presentation. “Investors are well positioned to benefit from
improved consumer sentiment.”
Permanent TSB sees European Union approval for its
restructuring plan, arising from a 4 billion-euro bailout ($5.5
billion), by April, according to the presentation.
Return-on-equity, or ROE, is a measure of profitability.
The Bloomberg Europe Banks and Financial Services Index, which
tracks 44 lenders, has a combined ROE of 3.5 percent. The metric
tumbled from about 20 percent before the financial crisis,
according to data compiled by Bloomberg.
2017 Sale
Irish taxpayers have injected 4 billion euros into Dublin-
based Permanent TSB since July 2011. They recouped 1.3 billion
euros last year by selling the lender’s former life insurance
arm to Great-West Lifeco Inc., the Canadian insurer.
The bank plans to return the good bank to full or partial
market ownership by 2017, according to the presentation. It will
“seek opportunities to attract a strategic or capital-markets
investor early in the planning period,” it said.
Permanent TSB may start marketing the good bank, which has
about 15 billion euros of loans, in the second half of 2014, a
person with knowledge of the matter said in October. It also
plans to start selling parts of its 10 billion-euro non-core
unit, including its U.K. residential mortgage loans, this year,
two people said at the time.
The bank plans to rebuild its group net-interest margin,
what it makes on loans compared with what it pays on borrowings,
to 1.5 percent “in the medium term,” according to the Jan. 7
presentation. This compares with a 0.82 percent margin in the
first half of last year, when the lender posted a 449 million-
euro interim operating loss as a result of a 430 million-euro
loan-loss charge.
Masding said in March he sees the group, which has been
unprofitable since 2008, returning to profit at the “back end”
of 2016 on a month-by-month basis.