Permanent TSB (PTSB), which has not paid a dividend since before the financial crisis, is unlikely to be in a position to return to making payouts to investors for at least two years, according to sources.
It is expected that it will be late next year at the earliest, when Irish and European supervisors complete an annual review of euro zone banks’ risk profiles, before regulators will consider lifting a long-standing “dividend blocker” at the company, the sources said.
That would mean that it would be at least early 2025, when PTSB reports earnings for next year, before it could announce a dividend.
Group chief executive Eamonn Crowley declined to comment when asked by reporters after the bank’s annual general meeting in Dublin on Friday on when he expects regulators to lift the ban on payouts.
PTSB, in which Irish taxpayers hold a 62.4 per cent stake, is alone among the State’s three surviving bailed-out banks in not having returned to paying dividends since the 2008 crash, having consistently delivered sub-par profit returns as its balance sheet shrank dramatically over the course of more than a decade.
However, the bank’s purchase of €6.1 billion of mortgages and €165 million of micro-business loans since last November from Ulster Bank, and imminent purchase of the UK-owned lender’s Lombard Asset Finance Business, has transformed the prospects of the bank.
The deal, in combination with a boost from rising interest rates, prompted PTSB to forecast in March that its return on equity (RoE) – a key measure of profitability relative to shareholders’ equity in the business – will rise to 13 per cent over the medium term. Analysts generally see an RoE ratio of between 8 per cent and 10 per cent as a sign of a healthy bank.
PTSB was delivering an unsustainably low RoE of between 2 and 3 per cent before the pandemic and announcements by the parents of Ulster Bank and KBC Bank Ireland that they were quitting the Republic.
PTSB forecast in March that its total income for 2023 will be about €650 million, which would mark an almost 60 per cent improvement on last year, and that its cost-to-income ratio would fall below 70 per cent, compared with 84 per cent.
Davy analyst Diarmaid Sheridan and Goodbody Stockbrokers’ John Cronin have said they expect the bank to raise its guidance when it reports half-year results this summer as the ECB continues to raise official interest rates.
Mr Crowley told reporters on Friday that the company’s “performance has been strong” so far this year, and that official interest rates may end up higher than what PTSB had factored in.
“But we’re not in a position to raise forecasts yet,” he said.
Mr Crowley added that the bank has not seen an increase in distress among mortgage borrowers, even as they grapple with rising living costs and the bank has raised the cost of fixed-mortgage products since the European Central Bank started hiking official rates last July. The higher rates affect customers as roll off fixed-rate contracts.
