Expectations of PTSB payback are unrealistic

Michael Noonan's view that taxpayers will get back every cent put into AIB, Bank of Ireland and Permanent TSB is a curious one in the case of the last institution.

“I am confident that, over time, we will, at a minimum, fully recover the funds this Government invested in AIB, Bank of Ireland and Permanent TSB,” the Minister for Finance wrote. “If economic and trading conditions continue to improve over the next decade or so, the cash returned to the State combined with the value of any remaining shareholding may exceed the funds invested.”

Bank of Ireland never tires of telling us it has returned more than the €4.7 billion it received from the State between 2009 and 2011. The State still has a 14 per cent equity stake in the bank worth about €1.3 billion.

AIB has received €20.8 billion but has yet to pay anything back to the State in relation to its 99.8 per cent stake, the €3.5 billion of preference shares or the contingent capital notes or CoCos as they as better known.

AIB itself has stated it expects to repay all of its bailout money to the State over time, with chief executive David Duffy telling the Oireachtas finance committee last year that this could involve a 10-year period. That brings us to PTSB. It was one part of Irish Life & Permanent, which received a €4 billion bailout. The Government split the company into two parts – PTSB and Irish Life, for which it received €1.3 billion in 2013 by selling it to Canada's Great-West Lifeco.

PTSB owes the €2.7 billion balance. Having failed the ECB stress tests last October, PTSB effectively has a €125 million shortfall in its capital base to plug.

Rather than tap the State for this money, it has decided to try and raise it from private investors. This could result in anything from €200 million upwards being sought by the bank, probably in return for a stake of 30 to 40 per cent. Some reports have suggested it could raise as much as €400 million.

Let’s suppose it is €400 million for a 30 per cent stake. That would give the bank an implied value of €1.33 billion and, in turn, value the State’s holding at about €930 million. Not too shabby but a long way short of the €2.7 billion it owes. And the expectation is that PTSB will keep whatever funds are raised from external investors, although that could change depending on the amounts involved.

Either way, the chances of the State getting its full €2.7 billion back from PTSB, which is a small retail bank in a small economy, look slim. A point PTSB chief executive Jeremy Masding has made publicly on a number of occasions.