Ex­clu­sive: Mas­d­ing comes out fight­ing but shares fall 14pc

Irish Independent - Business Week - - BUSINESSWEEK -

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.

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