# PTSB close to offloading its €22bn tracker burden



## DerKaiser (17 Feb 2012)

http://www.independent.ie/business/...floading-its-22bn-tracker-burden-3023125.html

Can anyone explain what is to be gained by this?

Let's just say the average tracker is 2.25% and the average cost of funding is 4% at the moment on the €22bn loan book. 

*Option 1*
Accept the €400m p.a. loss and hope it runs off relatively quickly or average funding costs come down. The total cost over time might eventually sum up of €2bn, but is only realised when it actually happens.

*Option 2*
Go through a costly admin, legal & accounting exercise of shifting things around the banace sheet and end up needing to capitalise a very prudent estimate of the cost up front (maybe €4bn), paying interest at high rates for the privilege of needing to hold this extra capital.

There was an argument for offloading large NAMA type business off the balance sheet of banks as it was the elephant in the room in terms to the complete uncertainty there was around the capital adequacy.

This, however, is the banks bread and butter retail business.  The annual losses will most likely come down as we eventually ease out of the crisis. The biggest danger is in overproviding for potential losses, crystalising them to an excessive degree of prudence leaving us (the state) with a both higher losses than required and a need to raise even more capital.


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## Brendan Burgess (17 Feb 2012)

Hi Der Kaiser

Interesting points. 

The tracker book will be unprofitable for some time. 
So PTSB will be a loss making institution for some time. 
It will impose some of the losses on the only available target - The SVR mortgage holders. 
It won't be attractive to depositors as its future is uncertain.
It won't be able to provide new mortgages as its  loans to deposits ratio is so high. 

So the thinking is...

Transfer the book at fair value to some other state-owned institution.
The bank will replace mortgages with cash thus reducing their loans to deposits ratio. 
PTSB is well capitalised, so it can take the loss without needing to make further provisions. 
New PTSB will be profitable. 
Pressure will be off it to exploit SVR customers. 
It can rebuild its brand and may be sellable. 



> Go through a costly admin, legal & accounting exercise of shifting things around the banace sheet



This is a very interesting point. They should just quickly agree a figure without paying a fortune to consultants for valuations etc. PTSB's loss will be the other state owned body's gain. The fortune lost on transferring Anglo's and Nationwide's book to another state owned entity was a disgrace. 

However, before all this happens, they should announce a generous 25% credit for anyone who comes off their tracker or pays it off early. That would benefit the customer and save a lot of admin work.

Brendan


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## DerKaiser (17 Feb 2012)

Brendan Burgess said:


> This is a very interesting point. They should just quickly agree a figure without paying a fortune to consultants for valuations etc. PTSB's loss will be the other state owned body's gain. The fortune lost on transferring Anglo's and Nationwide's book to another state owned entity was a disgrace.
> 
> However, before all this happens, they should announce a generous 25% credit for anyone who comes off their tracker or pays it off early. That would benefit the customer and save a lot of admin work.
> 
> Brendan


 
So long as AIB do the same I agree 100%!


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