Permanent TSB, one of the three remaining lenders in the Irish market, has announced that its mortgage and small business loans are in “robust” financial health, despite the recent increases in interest rates and the pressures of rising living costs on borrowers. The bank reported an underlying profit of €86m in the first half of the year, with net interest income reaching €298m. These figures reflect the benefits of higher interest rates and the closure of former competitors Ulster Bank and KBC. CEO Eamonn Crowley stated that the bank has returned to long-term profitability and expects to see significantly higher levels of income for the rest of the year, aided by higher-than-expected rate increases from the European Central Bank.
Permanent TSB’s share of the new mortgage market has increased to over 23% as of June, up from 16.3% the previous year. This growth is a result of Ulster Bank and KBC Bank exiting the market, as they were known for their competitive mortgage interest costs. However, the overall mortgage market is expected to shrink to €12.5bn this year due to the impact of interest rate hikes on customers switching rates or providers.
Permanent TSB is the last of the three remaining lenders to report half-year earnings. AIB reported net interest income of €1.77bn, while Bank of Ireland reported income of €1.8bn for the same period. These earnings have drawn attention to the interest rates charged by banks and the rates paid to savers for their deposits. The fortunes of all three banks have been transformed by ECB rate increases and the departure of KBC Bank and NatWest-owned Ulster Bank, resulting in a collapse of banking competition in the Republic.
Permanent TSB acquired mortgage and business loans worth €6.7bn and gained 88,000 new customers from Ulster Bank. The bank also acquired 25 of Ulster Bank’s branches, with NatWest taking a shareholding in Permanent TSB. Deposits at the bank increased to €22.6bn. In June, NatWest reduced its shareholding, and the Irish government reduced its stake in the bank to below 60%. Despite the backdrop of inflation and higher interest rates, Permanent TSB maintains that its credit quality remains strong.
The shares of Irish banks have experienced significant growth over the past 18 months. Prior to the announcement of half-year earnings, Permanent TSB shares had risen by 27% since the beginning of the year and by 65% since last summer, valuing the bank at €1.26bn. AIB and Bank of Ireland shares have also seen substantial gains, with increases of 93% and 72% respectively over the past year.