ptsb in from or the Oireachtas Finance Committee

I was disappointed in the outcome of this meeting. They had really hit Richie Boucher hard on the cost of mortgages, but let ptsb away with it. They focused more on the restructuring of ptsb and when it might be profitable. Which, of course, allowed ptsb to justify their extraordinary high SVRs.

The members of the Committee didn't seem to appreciate that the variable rate borrowers are paying for the mistakes made by ptsb in the past.

The media coverage of the SVR issue was light

Permanent TSB won't follow AIB rate cut Irish Indpendent

Permanent TSB expects to return to profit by end of 2016 Irish Times

PTSB to write off debt for select mortgage arrears customers Irish Times

Irish Examiner: Repossessions of PTSB mortgages to increase

Michael McGrath

It's important for the consumer that the future of ptsb is secured.

When will the bank become profitable again?

Masding: Back end of 2016

McGrath: Capital position?

Masding
€855 original figure
€400 co co
80% of 455 has been covered
net shortfall : €100k to €150k

McGrath: What percentage is up for sale?

Masding: We had a roadshow to gauge the level of interest. The shape of the deal was not discussed - prices, share of equity, etc.

McGrath: I would not like to see the state's holding significantly diluted.

I will move onto SVRs which you are charging.
You are still at the high end.
79,000 customers

Your reaction to AIB's decision to cut rates. Are you reviewing rates?

Masding: It would be inappropriate to comment on the pricing decisions of competitors.
Our cost of funds is 178 points. BoI's is 115 bps.
We still have to work through the legacy issues, so it will take time to bring down the cost of funds

cost of funds does not include cost of capital,cost of risk, cost of running the group

I want to be competitive

We will continue to monitor rates, and try to cut costs of funds. But I can't give you any guarantee as to when that will happen.

McGrath: You are going to have to cut your rates if you want new business

Masding: I hope that price is not the only factor when people choose a mortgage.

Kierán O'Donnell

Your Net Interest Margin is very low - 80 BPS

AIB's cost of funds is about the same

Masding:
We have a core business and a non-core business
UK business - Capital Home Loans and some non-core Irish businesses

O'Donnell
Where is your funding coming from?

Fin Director
€14 b retail ; €3.6 retail; balance: NTMA
System funding is normal: €6n
Loans to deposits : 140% ( down from 200%)

O'Donnell
Compare your rates with the UK.
A similar rate for <70% LTV is about half the price.
We have no competition in the market
WE have taxpayer owned banks not passing on the lower rates to the consumer

Your tracker book is only 40%. BoI is 58%, yet they have a Net Interest Margin double what you have

How many have traded up their trackers?

Masding
Controlled competition is a good thing. In 2008, competition went mad, I was not here though.

I want to compete with the pillar banks.

Ger Mitchell: 95 customers worth €15m have moved in 5 months.

It takes 150 days for approval, to sell, to buy, and draw down.
We are ahead of where we thought we would be.

Pearse Doherty

Would tracker + 1% be higher than the current SVR?

Mitchell: It would never have been higher?

Masding
The Minister gave us permission to seek outside capital
The Minister gave us permission to appoint advisors

But we want to keep him at arm's length. We will bring the finalised deal to him for his approval.

The Dept of Finance stays objective

Doherty: Could the bank in its entirety be sold?

Masding: The Dept has put no restrictions on me, so hypothetically it could be sold.

Doherty: What happens if there is retrospective capitalisation?

Masding: Nothing to do with me. That's a political decision.

Doherty: We have seen BoI shares sold to Wilbur Ross for a very bad deal. I would be concerned that the State would sell cheaply while under pressure from the stress tests

Mading: My job is to get the best price with the advice of Deutsche Bank

Doherty: Timeframe?

Masding: End of July is final date. Q1 2015 would be when I will make an announcement.
We have to engage also with the minority shareholders.

Doherty: Why do you think that the second restructuring plan will be approved by the Commission. I am actually on my third plan.

1st 2012 - asked permission to build up the bank. In my head, that was agreed in principle in my head.
2nd August 2013. The stress test overtook that.

On the back of the stress test outcome and the improvement in the Irish economy, I have more confidence that it will be approved. I will submit it in the next couple of weeks.

Doherty: Raising a constituent's case.
Mading: We will come in and meet you and sort it out personally

Stephen Donnelly

If the ECB ran the stress tests today, how much would you need? €170m?

Finance guy: A fair bit less

Donnelly
Could the ptsb access more cheap ecb money?

Masding: Our collateral is not suitable for that scheme.
Personally, I think it's better that we have a normal bank, and not dependent on ECB funding. I want a deposit funded, safe retail bank.

Donnelly: The margin is 88 BPS overall, and 121 for the core bank . What would it be in the UK?

Masding: A UK bank would have a rate of 170 BPS

We still pay a premium over the Pillar Banks to attract deposits

Donnelly: Sale of Springboard . Being sold to Mars Capital . Gross loans €468 million. Does the CCMA apply to Mars Capital.

O'Sullivan: Compliance with the CCMA was a condition of sale.

Donnelly: What format does that commitment take? Is it contractual?

O'Sullivan: No. but we have it writing. And it will be covered by the new legislation.

O'Sullivan: We offer splits to buy to lets and there is less than 1% on the warehouse.

Donnelly: Do you have any Debt for Equity solutions?

O'Sullivan: No. It's a complicated proposition and there would not be any appetite from our customers . We are looking at lending into retirement and that is far more attractive.

Donnelly: Look at how AIB is using the Debt for Equity solution. AIB are doing a debt for equity on retirement.

Senator Thomas Byrne

You have 18% of the total loan market.

You have been listed as 92/ 355 repossession cases in Meath.

Very few BoI cases appearing. Why is this?

Mitchell: We had 25% of the market at the height of the boom

O'Sullivan: We have to be careful looking at one county and at one point of time. All banks have significant cases.

For every 100 customers deep in our arrears process, 23% end up in the legal process. That is lower than the average.

We have had 23 repossessions so far this year - executed repossessions. Only one still in situ.

The court will grant the order. The bailiff will act on the court's behalf if the house is still occupied.

Often a long time will elapse between the granting of the order and the eventual execution.

Byrne: What's your policy if the owner is not represented in court?
In the event of a sale of a repossessed house, how do you ensure that there is no messing?

O'Sullivan: We treat them no differently. The court makes sure of that. It's a question for the judiciary.
We have a panel of estate agents who work to a contract and Service Level Agreement.

Richard Boyd Barrett

Are we going to see a significant increase in repossessions?

O'Sullivan

They will increase from a very low base.
23 so far this year. 0.01% of the stock of properties.
We usually do find solutions.
There is a significant number of cases, where we have not begun legal proceedings.
We take action only when there is no other option, and doing nothing will be worse.
The legal process is a 4 year process, and we love to see it ended.
We have a significant number of people who are paying nothing and a significant number who have not completed an SFS.

Barrett: They are burying their heads in the sand when there is no solution available.

New Beginning are offering a solution. How can they do that if you can't?

O'Sullivan: We received details of that proposal in the last 24 hours. If it makes sense, we would welcome it.

Michael McGrath back in

What commitment do you give new current account customers that you will keep the fees for a certain number of years.

Masding: We have no intention of introducing fees in the foreseeable future.

McGrath
If someone pays down their mortgage can they move to a lower LTV priced product?

Mitchell: It's the rate they started with , at this point in time.

McGrath ( I missed the question)

O'Sullivan
We believe in debt write off at the end of a process

We have written off €175 million euro

We are working with 500 customers. If they work with us on the sale of the property. We will write off up to 80% of the debt. They must have at least 20% of the shortfall

McGrath : Have you written off any debt and left people in their home

O'Sullivan: No.

Lucinda Creighton

Recent court cases on SVR rates . Do you include a reference to market conditions in the loan agreements.

Masding: Can you repeat the question

Mitchell: No. We say that they can vary from time to time.

Creighton: Does it give any reference point for changes in the rate

Mitchell: No.

Creighton: How can you justify the increase in SVRs when the ECB has reduced the rate to zero.

Mitchell: There is no link between the ECB rate and mortgage rate. Our cost of funds is 170 bps.

We have reduced the SVR by 170 bps over the last two (?) years while other banks have increased them.

Mitchell : €14,5 billion in trackers.

Creighton: What percentage of income comes from SVRs

5 main pieces to deliver the price

Cost of funds
credit inputs
liquidity
capital
cost of doing business

Creighton:

Is the Central Bank involving itself in trying to get a fairer rate.

Mitchell: We have had discussions with the CB on our pricing and lots of other issues.

Senator Gerard Craughwell.

You are basing your recovery on the SVR customers. Where is fairness in all this?

Masding: Usual guff

Craughwell: Are you going to offer your SVR customers the new lower LTV prices

Mitchell: Some of our customers have moved across but that comes at a cost. Where they have borrowed more money.

Craughwell: What about the CB's proposed restrictions?

Mitchell: We have put affordability and serviceability at the heart of the matter. We are advocating for a more moderate approach to LTV

Senator Aideen Hayden

Do you believe we are in or approaching a property bubble?

Masding: We respect what the Governor is trying to do. He is forcing people to think. We want a graduated process over time. We are less obsessed with LTI. We want to focus on affordability.

Mitchell: No we are not in a bubble. The problem is the supply of housing.

Hayden: As the measure is predicated on a bubble, do you think it might damage recovery in a fragile property sector

Mitchell: It will reduce demand

Arthur Spring

"What is the cost of funding for mortgages alone?"

Glen: The costs in the core bank are 1.21%

Mitchell:

Cost of funds
credit inputs
liquidity
capital
cost of doing business

add up to 3.7%

Spring: What risk is attributable to new business?

Our models forecast the probability of default: 50% is lower than 90% . So the costs change.

Chairman

No other bank is writing off debt. What is your thinking behind it.

(This is disappointing for AIB who have been writing off debt for some time)

O'Sullivan

We don't write off it off for people who stay in their homes - i.e. debt forgiveness.

We do debt write off when people work with us and sell their homes, we do write off debt. We write up to 80% of it.

Chairman: How long have you been doing it.

O'Sullivan: We began earlier this year with 200. I'ts now extended to 500.