Permanent TSB savers set for squeeze with interest to fall

PERMANENT TSB (PTSB) is to cut the interest rates it offers savers but said it had no plans to start charging people for keeping money in the bank.

The 75pc State-owned bank is paying savers more than the market average, and said that while it plans to continue to do so, the premium will be at a lower level.

Chief executive Jeremy Masding said the bank wanted to move from 0.12 percentage points above the market rate to 0.05 percentage points.

The news emerges after Ulster Bank insisted that it would not charge savers. Its parent company RBS had written to UK customers warning that they may be charged for their deposits in future.

Global interest rates are at very low levels as central bankers try to provide stimulus to flagging economies. That squeezes banks’ profitability as it puts downward pressure on the income that they earn from interest — leading to the possibility of future charges on deposits. So far Irish banks have not moved to charge customers for deposits, a drastic step that could lead to their losing customers.

An RBS spokesman said that the bank had no plans to impose such charges but could take action if the Bank of England’s base rate enters negative territory. The BoE rate is currently 0.5pc and is expected to be cut next month in reaction to the result of the Brexit referendum. Permanent TSB said it would review market conditions on an ongoing basis.

Meanwhile, the founder of Dublin safe deposit box facility Merrion Vaults, Seamus Fahy, said demand had risen by 25pc in the last six months, with low interest rates for savers among the factors behind that. Fahy said the low rates are effectively costing savers paying fees for their accounts. “Our clients are finding it cheaper to put the cash in our vaults,” he said.

He said demand for gold bullion from his Merrion Gold company had risen by 40pc in the period, with gold prices up around a fifth since the end of January.

Earlier last week PTSB bank reported its first after-tax profit since 2007 — €80m in the first half.

Masding said that Michael Noonan would be “leaving money on the table” if he sold off 75pc State-owned Permanent TSB now.

Masding also said that if the Minister for Finance came to him looking to do a deal today, he would advise against doing it.

“Let’s spend the next 12-18 months on making this business as valuable as we possibly can, and if at that time Minister Noonan decides that he wants to do a transaction then so be it,” he said.

Masding said the bank has a sustainable future as a stand-alone entity: “I believe we’ve settled the argument about whether we can survive.”