PTSB has proposed its first dividend since 2008 after growing loans and deposits last year, even though underlying pretax profits dipped almost 3 per cent amid declining interest rates.
The planned dividend payout amounts to only €10 million – or 1.835 cents per share – making it a symbolic gesture and another step on the bank’s return to normality as it seeks a new owner. The bank also said it does not currently plan any further distributions as it remains subject to a sale process.
“I am delighted to announce a proposed final dividend, the bank’s first since 2008, which reflects the scale of our transformation and the renewed strength of PTSB,” said chief executive Eamonn Crowley. It results in a dividend yield of less than 0.6 per cent.
Underlying pretax profit declined to €175 million as net interest income fell 4 per cent to €590 million and the bank’s net interest margin – the difference between the average rates at which the bank funds itself and lends to customers – declined to 2.03 per cent from 2.20 per cent.
RM Block
The Irish Times reported last week that the bank is targeting late March for second-round takeover offers, with Austrian banking group Bawag and New York investment firm Centerbridge Partners said to be among parties still circling the State-controlled bank.
Lone Star, the Texas-based private equity giant led by Irish passport holder John Grayken, also counts among those that committed resources to assessing a PTSB offer. However, it is not clear whether it remains in the mix. Goldman Sachs is running the sale process for PTSB.
Crowley declined to comment on the sales process – or the potential impact of the Middle East crisis on it – when speaking to reporters and analysts, citing strict takeover rules. The bank has a market value of about €1.76 billion.
“Notwithstanding all the geopolitical uncertainty over the past year – or indeed the past week – the Irish economy continues to be resilient,” he said. “The banking sector in Ireland is in a very strong position by way of liquidity [and] capital.”
The chief executive highlighted that the group’s deposits increased by 6 per cent last year, while its mortgage book grew by more than 3 per cent and business banking portfolio expanded 9 per cent. “Revenues returned to growth in the second half of the year as interest rates stabilised,” he said.
How the conflict in the Middle East is already affecting Irish consumers
PTSB secured clearance from the Central Bank in January to lower the perceived riskiness – or so-called risk weighting – of the bank’s mortgage book, initially freeing up €100 million of expensive capital, but also allowing the bank to make better returns on new business in future.
In addition, the bank released €39 million of loan loss provisions last year, marking the fifth year of such reserves being reduced as the bank continued a trend of losing less money on bad loans than expected.
Looking ahead, PTSB sees its interest margin improving to 2.10 per cent this year and gradually widening to 2.3 per cent in 2028. It also forecasts that its cost-income ratio will fall below 60 per cent by that end of the period from 75 per cent last year.
Rivals AIB and Bank of Ireland reported annual cost ratios of 44 per cent and 49 per cent, respectively, this week.
Still, PTSB was alone among the three in managing to cut its running costs – by 2 per cent to €519 million – as staff numbers fell by 329, 10 per cent, to 2,918. Some 240 of the exiting staff participated in a voluntary redundancy scheme.
[ Simon Harris should take the private equity money for PTSB and runOpens in new window ]
Analysts see a new owner of PTSB moving more aggressively on costs. “We expect PTSB will require many years of investment and restructuring to rebalance the bank,” said Benjamin Toms, an analyst with RBC Capital in London.
Crowley’s base salary increased from €480,000 to €695,000 last July, after the Government removed remaining restrictions on the basic pay of executives in banks that were bailed out during the financial crisis.
