Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Permanent TSB Group Holdings PLC (ILPMF, Financial) reported a profit before tax of EUR 75 million, a significant increase from EUR 25 million the previous year.
- The company has grown its deposit base by over EUR 1 billion year on year, reaching EUR 23.6 billion.
- The bank's NPL ratio has reduced to 1.7%, making it the lowest in Ireland and below the European average by 20 basis points.
- Permanent TSB Group Holdings PLC was upgraded to investment grade by Fitch, which positively impacted their debt issuance.
- The company announced a new distribution policy aiming for a payout ratio of 40% over the medium term, signaling a positive outlook for shareholder returns.
Negative Points
- The company's mortgage market share has decreased from 23% to 13% due to a reduction in the switcher market.
- Total operating expenses increased by 20% year on year, partly due to the integration of Ulster Bank business.
- The cost-income ratio is high at 73%, although the company expects it to reduce by year-end.
- The net interest margin decreased by 2 basis points year on year, reflecting increased deposit and wholesale funding costs.
- The company faces challenges in achieving a 40% distribution payout due to current capital models being capital consuming.
Q & A Highlights
Q: With the strong capital levels, when might we expect a distribution from your balance sheet?
A: Eamonn Crowley, CEO: It's reasonable to expect a distribution in 2026 based on 2025 profits. We are in ongoing engagement with regulators regarding our IRB models, which will influence our capital distribution capabilities.
Q: Can you discuss the impact of recent product changes and prospective rate changes on net interest income?
A: Nicola O'Brien, CFO: Our asset yield remains strong, and even with rate reductions, customers are rolling onto higher rates. We expect our net interest margin to remain resilient, supported by lending diversification and treasury asset performance.
Q: What initiatives are in place to manage costs and improve efficiency?
A: Eamonn Crowley, CEO: We have numerous initiatives, including a full review of our mortgage sales and servicing processes to improve efficiency and customer engagement. This will involve investment but is expected to yield savings and better service.
Q: How long can you maintain the post-model adjustments in provisions?
A: Nicola O'Brien, CFO: We have an 18-month program to refresh our IFRS 9 models, which will likely reduce the post-model adjustments over time. However, some level of management judgment will always be necessary.
Q: Can you provide more details on the NII outlook and deposit migration for the second half of the year?
A: Nicola O'Brien, CFO: We expect net interest margin to be slightly down in the second half due to rate movements. Deposit costs will likely remain stable, and we anticipate better margins on our loan book and treasury assets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
