Permanent tsb (PTSB) has raised 400 million euros ($436 million) in a share offer priced at the top of the range, prompting Ireland's finance minister to promise taxpayers a recovery of all the rescue funds invested in the bank. The smallest of Ireland's three remaining domestically owned banks had set a range of 3.90 to 4.50 euros per ordinary share for the issue, a test of investor appetite for the sector and for the country's No 2 lender Allied Irish Banks (AIB) ahead of a possible stake sale in the next 12 months.
The government, keen to recoup some of its investment in PTSB ahead of an election next year, sold an additional 98 million euros worth of shares to cut its stake to 75 percent from 99.2 percent to meet stock market requirements. PTSB will use the cash to repurchase 400 million euros of government-owned "contingent capital notes", debt instruments that can convert to equity in times of distress, meaning Dublin, which made a profit on the notes, will have recouped over 500 million euros of the 2.7 billion pumped into the bank.
With its stake now valued at 1.5 billion euros, Finance Minister Michael Noonan said the state would get all its cash back despite PTSB management consistently saying such an outcome was unlikely, stated as recently as March by its chief executive.
"The bottom line is that everything that the taxpayers have invested in PTSB will be recovered in due course," Noonan told national broadcaster RTE, while also acknowledging that "much work" remains to be done to complete its restructuring. The small mortgage lender is the only loss-making bank in the country amid a recovery in the sector that has mirrored a wider upturn that helped Ireland become the fastest-growing economy in Europe last year.
PTSB cut its loss before tax last year to 48 million euros from 668 million in 2013. Weighed down by a large stock of loss-making mortgages that track the ECB's record low interest rates, it only expects to return to profit by the end of 2016. The bank is targeting an almost doubling of its net interest margin (NIM), a key measure of profitability, to 1.7 percent by 2018. By comparison, Bank of Ireland, the country's largest bank by assets, recorded a NIM of 2.11 percent at the end of 2014.
Like other lenders, it is also under public and political pressure to cut mortgages rates, another potential headwind, as the government threatens to hike its annual bank levy if they do not ease the burden on customers. The only Irish bank to fail European stress tests raised the remaining 125 million euros needed to fill the capital hole identified via so-called additional Tier 1 bonds which it sold at a hefty 8.625 percent yield.
The government, whose rescue of its banking sector was the most expensive in the euro zone, will now switch its attention to the 99-percent state-owned AIB, having appointed Goldman Sachs to advise on a possible stake sale. "The state really should look at capitalising on the level of institutional investor demand sooner rather than later," said Investec analyst John Cronin.
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