(Alliance News) - Permanent TSB Group Holdings PLC said Thursday its financial performance in the first quarter was stable.
In the first quarter, the Irish financial services firm said the net interest income from its performing loan book was "stable" was in the quarter.
The lender's net interest margin was 1.8% in the period, in line with 2019.
Chief Executive Jeremy Masding said: "'Business and financial performance remained stable in the first quarter, albeit with a decline in new lending towards the end of the quarter as the Covid-19 situation unfolded.
"The pandemic is having an unprecedented social impact on people and businesses in Ireland, and across the world. The resultant economic impact and outlook is challenging with the long term consequences of Covid-19 largely dependent on its severity and, the ensuing timeline over which business activity and employment levels begin to recover."
Permanent TSB's total new lending was up 1% year on year in the quarter to EUR350 million. New mortgage lending rose EUR300 million, up 4% year on year as the market grew 6%.
"The bank continues to manage its offering carefully by maintaining price discipline and credit underwriting standards," Permanent TSB explained.
The lender ended the quarter with a CET1 ratio, on a fully loaded basis, of 15.2%, in line with the 15.0% recorded at the end of 2019.
Looking ahead, the lender expects its credit loss to increase in the second quarter.
"The impact of Covid-19 is uncertain and thereby challenging to forecast; however, the bank is guiding that a net impairment charge of about EUR50 million - equivalent to about 60 basis points annualised cost of risk - is more appropriate for the first half, a position which we will keep under constant review and where we will update the market further at the half year results," Permanent TSB added.
The lender said business activity will be lower, with gross new lending taking a hit. Permanent TSB said new lending in 2020 could be reduced by 40% to 50% from EUR1.7 billion in 2019.
Net interest margin is expected to drop to 170 basis points in 2020 from 1.80% currently, meaning it will fall to 0.10%.
Masding said: "The bank's business model, with its focus on secured lending, gives some protection against an impairment shock. That said, we will continue to monitor closely both the macro-economic environment and quality of the loan book, to ensure we maintain prudent levels of coverage."
Permanent TSB said its profitability outlook is "challenging" but believes its capital remains strong.
The lender noted 97% of its total performing assets are secured residential mortgages. So, the full-year loan loss will be the result of the payment breaks it has granted in the first half and how long it takes for business activity and employment levels to begin to recover from the Covid-19 pandemic.
Masding added: "In summary, following significant progress made over the last number of years through increasing new lending; reducing non-performing loans; maintaining profitability; and, strengthening capital, the bank is currently in a strong position to deal with a significant economic downturn."
Shares in Permanent TSB were down 2.8% in London on Thursday afternoon at EUR0.46.
By Paul McGowan; paulmcgowan@alliancenews.com
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