Exclusive: Masding comes out fighting but shares fall 14pc
THE head of Permanent TSB said he’d be “amazed” if the Government isn’t considering a mini Nama to take problem mortgages and other loans out of the banks, and said he’d leap at the chance to move loans into a new bad bank.
The Welsh-born and Manchester-raised Jeremy Masding said “disappointment” was not in the vocabulary yesterday as the State-backed bank’s share price plunged, as much as 16pc at one stage, following the release of its interim results.
The slump eclipsed the lender’s success in regaining market share in the new residential mortgage market, which rose to 10.8pc from 10.4pc, as investors focused on the stubbornly high level of non-performing loans.
In a broad-ranging interview in today’s Irish Independent, Mr Masding said he would leap at the chance to shunt the worst so called “untreated” segment of the loan book into another State bad bank, or Nama mark II.
While no discussions between PTSB’s management and the Government have been held on the issue, Mr Masding claimed he would be “amazed if they haven’t considered it”.
He said “they haven’t reached out to me yet and my guess is the reason they haven’t reached out... is because they are trying to figure out how to make it work financially. How they will pay for it.”
A “system solution”, as Mr Masding characterises it, such as a bad bank, and a mortgage to rent scheme, rank among Mr Masding’s preferred options for the rump-end of the NPL book.
However he concedes that loan sales and an increase in the volume of foreclosures or home repossessions look inevitable.
The uncertainty about how much it will cost to clear the bank’s legacy of toxic loans and the pace of the run-off sent the share price in to a downward spiral yesterday.
Investec’s Owen Callan argued there was no catalyst in sight for a “rebound”. He predicted that until the bank shows some progress on this front or provides a clearer strategy, the stock looks set to remain in a trough as “it is hard to understand the investment case” for it.
His comments underscore the scale of Mr Masding’s challenge as he embarks on what he describes as “phase two” of the bank’s restructure.
He told the Irish Independent he has always viewed the turnaround as a “ten- year journey” and claims to be at the halfway mark.
Yet while Mr Masding attempted to focus the market on the road ahead, announcing the launch of a strategy to reduce NPLs to single digits over the “medium term”, the scant detail on how PTSB will arrive at its destination caused consternation. Mr Callan said he had expected more than a “single slide” in a presentation while Goodbody’s Eamonn Hughes said the bank had offered only “broad brush” details.
The lack of progress in cutting the NPL exposure absorbed the market’s attention even though the bank reported a 61pc yearon-year increase in its total new customer lending, bringing the volume of loans issued in the half to €392m.
Part of the problem is that AIB and Bank of Ireland have made significant inroads into their problem loans.
PTSB’s efforts to tackle NPLs took a back seat in 2016 as the lender grappled with the fallout from the tracker mortgage investigation, launched by the Central Bank after it emerged that borrowers, including who later suffered repossessions, were on the wrong interest rates.
Mr Masding claimed reducing NPLs have always been at the top of the bank’s agenda and emphasised PTSB has whittled down its exposure to soured loans by €2.8bn since 2013.
He told journalists at the lender’s headquarters in Dublin yesterday that it was “past time to address the residual NPLs”.
PTSB’s “untreated” section of the soured loan book stands at 13pc of the total loan book and the measures needed to clear the exposure look unpalatable and politically hazardous. As Mr Callan pointed out, loan sales to distressed debt funds will likely command a steep haircut, boring in to the bank’s excess capital buffers, which in turn underpin the bank’s valuation.
On the other hand, increased home repossessions pose social and political challenges to a lender still 75pc owned by taxpayers.
But Mr Masding told the Irish Independent that foreclosures must “ramp up” even though he regards them as a “last resort”.
PTSB’s efforts to tackle its residual or untreated NPLs comes as European regulators tighten the screw on banks, penalising lenders that continue to harbour high soured debt exposures.
Faced with this dilemma, Mr Masding hopes to persuade the authorities to reclassify a portion of the NPL book that is primarily cash generative.
PTSB views these loans as a core business unit. Over 52pc of the NPL book generates a cash yield of 3.6pc, meaning this portion of the portfolio generates a greater yield than the bank’s tracker mortgages.
But effort to tackle NPLs without generating a capital impact and ahead of bank stress test, means another delay in payment of a dividend, now unlikely to be paid by a 2019 target.