Permanent TSB made an after-tax profit of €80 million in the first six months of 2016, a major turnaround on a year earlier when it recorded a loss of €410 million.
This was the first group profit recorded by State-controlled PTSB since 2007, the year before the global financial crash.
Its net interest margin, excluding guarantee fees paid to the Government, increased by 31 basis points to 1.43 per cent.
The bank, which is 75 per cent owned by the State, recorded an impairment writeback of €61 million in the period, an improvement of €85 million on a year earlier.
Mortgage lending rose 4 per cent year on year to €211 million while its non-performing loans reduced further by €400 million from December 2015 to €6.2 billion.
The bank said its cost-income ratio “remains elevated” at 87 per cent due to regulatory cost pressure.
PTSB’s fully loaded core equity tier 1 ratio increased by 9 percentage points to 15.9 per cent.
Commenting on the results, PTSB chief executive Jeremy Masding said: "Having recapitalised the bank during 2015, the group has moved to pre- and post-tax profitability and is generating capital for the first time since 2007. This positions us better to focus on our commercial agenda and to grow the business.
“Of course there are challenges ahead. However, we remain as committed as ever to serving our customers and to delivering attractive and sustainable returns to our shareholders by making the most of our key strengths.”
The writebacks included €26 million in relation to a better underlying net performance, reflecting “sustained loan cures”. They also included €35 million resulting from an adjustment to the house price inflation assumption.
But the group expects an impairment charge in the second half of the year, arising from its underlying performance.This is mainly due to the quantum of writebacks from loan cures “moderating” and it returning to a normalised impairment flow. Its medium-term guidance of a cost of risk of 40 basis points or less remains unchanged.
PTSB said it had made a gain of €29 million from the sale of a share held in Visa Europe in the first half, which is included in other operating income.
Its total operating expenses, excluding regulatory costs, increased by 7.5 per cent, primarily due to a higher spend on certain regulatory and mandatory projects that are not expected to be recurring over the medium term.
Regulatory costs increased by €19 million as a result of its contribution to the Single Resolution Fund of €9 million and the deposit guarantee scheme of €10 million.
“We are anticipating potential increases in these costs going forward,” the bank said.
The Irish bank levy of €27 million will be paid in October. Excluding this levy, the group expects operating expenses to be lower in the second half.
PTSB said talks with the European Commission on extending the deadline for the sale of its non-core £2.3 billion CHL mortgage book in the UK are underway.
This book was to have been sold by the end of June but the sale was postponed due to the impact of the UK’s referendum on its EU membership of market activity.
PTSB said its intention remains to exit this business fully subject to market appetite and appropriate pricing.
“In this respect, it is not possible to give a precise date for completing a transaction, in particular, in light of the UK’s recent decision to leave the EU,” the bank said.
