Permanent TSB has plenty of money for businesses – but it's being picky about who gets it

PERMANENT TSB SAYS it has plenty of money to lend to small Irish businesses – but it’s being picky about which firms it deals with.

The bank returned to the SME market last December when it announced a series of new offerings tailored for small businesses.

Today, as the company announced its first half-yearly profit since the boom, Permanent TSB chief executive Jeremy Masding said progress on the bank’s new business products had been better than expected – and the figures were ahead of its targets.

However he added there was still more work to be done to inform potential clients that the bank was open for business.

“I think the challenge is, how do we let the world know that we’re in the SME business? When you’re not making money, you can’t spend money,” he said.

“So, I think as we begin to return to profitability, hopefully Ireland as a country sees that we’re vibrant, alive and ready to lend.”

The firm’s new business lending is yet to breach the €100 million mark, Masding said, while the bank had only received 650 loan applications to date.

Permanent TSB chief executive Jeremy Masding

The dominant players

Recent figures from the Central Bank showed 95% of the Irish market for lending to SMEs was dominated by the three largest players, Bank of Ireland, AIB and Ulster Bank.

More competition in the sector has been identified as one of the key factors that would drive down borrowing costs for domestic SMEs, which pay among the highest rates in the EU to take out loans.

Masding said Permanent TSB said his bank had plenty of capital available – but only for the most secure borrowers.

“We can’t lend money to businesses that are not creditworthy. That would just put Ireland back in a place,” he said.

“I think the issue for us is working with customers to try and find a place where we don’t contribute to over indebtedness. And the SME sector, like all sectors in Ireland, is suffering from the drag of the banking crisis or economic crisis.

“So I think it will be slow for us to grow that business. It would be rash of any bank CEO to just throw money out the door.”

Masding said the bank was relying on its own resources to fund its SME business and it had no intention of partnering with the Strategic Banking Corporation of Ireland, the state’s wholesale lender for the sector.

Big picture

Permanent TSB this morning announced it had delivered its first after-tax profit since 2007.

The bank, which remains 75% state-owned after its post-Celtic Tiger bailout, delivered a net return of €80 million – compared to a loss of €410 million for the same six-month period last year.

New mortgages written up by the bank were up 4% year-on-year, while its impairment charges were down nearly 40% to €61 million.

However its share price remains less than half of that achieved when it returned to the market last year after hitting a new low with the Brexit vote last month.

Permanent TSB's share price

Masding said if he had been offered profits in the first half of 2016 four years ago, he “would have gladly accepted it”.

“That said, I will not allow the team to get carried away. Brexit is a setback.

“Ireland continues to be a challenging environment for a bank, but by our return to profitability, I believe we have settled the argument about if we can survive. Now we have got to prove we can thrive and build a compelling commercial and competitive business.”

The Carvalho of banking

While once Permanent TSB could have been considered the Lionel Messi of high-volume lending, Masding said he now saw the bank as being more in the mould of Portuguese midfielder William Carvalho.

Portuguese midfielder William Carvalho

“He’s steady, doesn’t make any mistakes, his market value went up during the European Championships, he lets others take all the glory, doesn’t really give the ball away.

“I suspect if you ask Jose Mourinho or Antonio Conte, that person is the type of person they would have on their team sheet.”