Permanent TSB Group Holdings plc

Good morning and welcome to our 2025 interim results presentation. I'm going to give you an overview of the performance of the bank during the first half of 2025 and say a little about the progress that we've made through the first six months of our new three-year strategy. And in a few moments, our CFO, Barry Darcy, will provide a more detailed review of our financial performance. And I'll come back just at the end to discuss our progress towards our medium-term financial targets, and then we'll take some questions. So if we just turn to slide five, We've delivered a strong performance in the first half of 2025, supporting customers and communities around the country. Our customer deposits rose by 1.1 billion in the first half to 25.2 billion and are 7% or 1.6 billion euros higher than a year ago. And to put that in perspective, we attracted the same amount of deposits during the first six months of this year as we did during all of 2024. After many years where our loan book was shrinking, I'm pleased to say that our mortgage book grew nearly 1.5% in the first six months and is up 3% year-on-year. We signalled during our Q1 update that as the year progressed, the growth rate in our loan book would accelerate and this is now happening. I will take you through the latest trends in the mortgage market and our market share shortly. We also continue to diversify our loan book during the first half with our business banking book up 14% year-on-year to £1.2 billion. And looking at our key financials, due to the fall in interest rates, our total income reduced by 4% in the first half, but our operating expenses also reduced by 1%. In terms of profitability, our profit before exceptional items was €51 million. And as we recorded a nil impairment charge for the period, this was also our operating profit figure, which was 17% lower year and year. Moving to capital, our C21 ratio was 15.5% at the end of June, putting us in a very healthy position relative to our regulatory requirement. This has increased by 80 basis points since the end of last year. CO3 or Basel IV contributed 1.2% to capital during the period, which is larger than the 70 basis points we previously estimated. Another highlight of the first half was the submission of our new IRB mortgage model to a regulator, the Central Bank of Ireland, seeking their approval. And this is a major project for us that we've been working on for quite some time. And Barry will say more about this later. I'd also like to highlight our loan to deposit ratio, which is at 86%, which is three points lower than where it was at the end of 2024. And this leaves us well positioned to fund future lending. If we just turn to the next slide, PTSP operates exclusively in the Republic of Ireland, and we are fortunate that we have a very healthy economic backdrop to our business. The labour market in Ireland has been extremely strong in recent years, and while there are signs that businesses have become more cautious about hiring, this has not impacted our business in any way, though we do remain vigilant. The deal between the US and the EU on tariffs earlier this week, while not exactly what Ireland and Europe wanted, at least it provides some certain level of certainty so that businesses can plan and adjust to the new environment. From our perspective, we've conservatively modelled a scenario slightly worse than this in how we thought about our provision cover. And again, Barry will cover that later in the presentation. Irish consumers and aggregate have a healthy balance sheet. Household debt has been reducing for many years and is only now showing signs of growing again. Deposits meanwhile continue to rise to record levels and I've mentioned our bank continues to benefit as a result. Meanwhile, the mortgage market is growing as we expected with new lending forecast to increase to 14 billion this year and expected to be 15.2 billion next year as we tackle our large housing deficit. House price growth in Ireland has slowed this year, but by year end, it's still expected to be at least 5% higher year on year. We just turned to slide seven. Given all the news around tariffs and the fact that Ireland is a small, open economy, investors are naturally very interested in our resilience on foreign direct investment, or alliance, I should say, on foreign direct investment and its linkages with the domestic Irish economy and the risk to this investment flow in the future. So in slide seven, I just want to spend a moment commenting on some of the trends that have created the modern, successful Irish economy that we see today. Ireland has been a huge beneficiary of trade and globalisation, but the growth and development we've seen over decades was no accident. A big emphasis on education and supportive government policy, as evident in some of the statistics we show here, helped create a virtuous cycle of growth, rising living standards and inward migration. And as a bank, we are naturally keeping a close eye on any warning signs that this supportive environment may be changing. But so far, there is little to report. In the event the Irish economy deteriorates, it's encouraging that the government is running budget surpluses and our debt as a percentage of GNI star is forecast to be down at 65% at the end of this year. We just turned to slide eight. Turning to our lending performance in the first half, we had our strongest first half period in recent years. In fact, it's the best performance we've had since before the global financial crisis. Our total new lending was 1.6 billion, and that's up 66% year-on-year, with 18% of our new lending coming from higher-yielding business and personal lending. In mortgages, we lent 1.3 billion in the first half, and that's nearly twice what we lent in the first half last year, and our market share has landed at over 20% when you compare it to the 13.5% we recorded in the first half of 2024. New lending in business banking, which includes SME and asset finance, was £221 million, and that's an increase of 23% year-on-year, which we're particularly pleased about, as this is a new area of lending that we've been participating and competing in over the last four years. Consumer term lending payouts were lower year-on-year, but we have a strong ambition in this space to increase our market share, and we'll come back to that when we get to the year-end results. If we just turn to slide nine, this outlines our business strategy for 2025 to 2027. It's a three-year strategy. And in March, I took you through this strategy. And our ambition continues to be the best personal and business bank through exceptional customer experience. And the overarching goal of our strategy is to deepen customer relationships, diversify our income, and differentiate ourselves through customer experience. And in parallel, the bank will drive greater operational efficiency so that we continue to grow and generate sustainable returns for our shareholders. And to show our strategy in action, we turn to slide 10. And here are some examples of this strategy working. And as I've said, we want to deepen our relationships with our customers. Our correlation of relationship NPS score was 22 points, and this is up two points year on year. And we're working hard every day to drive that higher, as happy customers are more likely to consider us for their next financial need. And indeed, on that front, our latest survey suggests that 71% of all consumers would give serious and first choice consideration to PTSB to meet their next financial need. And you can see evidence of this in the number of new accounts we've opened. It is also our ambition to diversify our income. Our business banking book is growing at double digit pace. We're performing well in green mortgages. While in areas where we have work to do, like fee income, we have plans in place that will up our game. For instance, we are meeting more customers each month for financial health checks, and in due course, that should bring more business and more activity. We want the customer experience at PTSB to be different from that of our competitors, or altogether more human, as we like to say. We're striving to offer great technology with a human touch. Customers give us a 9 out of 10 score for our current home buying journey, so they clearly like what we're doing today. However, we know we still need to get better, and I will touch on that in a moment. On the technology front, we've made more progress in recent months with a lot of new features introduced into our app, such as a faster login times, biometrics, card management, and a digital gambling block. We have a very ambitious delivery plan over the next 12 months. And we're only starting by way of the increasing and improving the activity on our app. And finally, our strategic business transformation program, or the SPT, is underway. And you can see from our performance in the first half that we're starting to make progress on our call space. So if we just turn to slide 11. I spoke to you in March about the Strategic Banking Transformation Programme. The initiatives under SBT are focused on simplifying our business, digitising processes, improving agility and enhancing cost efficiency, all to improve both customer and colleague experience. Since mortgages make up 90% of our loan book, A key initiative in this programme is re-engineering our mortgage sales and service journeys. We are developing a new and improved mortgage sales service portal to enhance the customer experience and streamline back office processing. Currently, over 90% of customers who apply for a mortgage with PTSB start their journey on our online mortgage portal, developed in conjunction with CreditLogic and Irish FinTech. This portal allows you to submit documentation like bank statements, track your application, and interact with our staff via chat or phone. You can manage your mortgage application from start to finish through this portal, and customers really love this process, as we can see and as I mentioned in our survey results. We are enhancing this by integrating FinTech-led services like open banking and categorization to improve the experience. We will also be better able to target cross sales, particularly our insurance, protection, and indeed our current account offerings as part of the mortgage process. Managing your mortgage throughout its lifetime is currently a manual process for both customers and PTSB. In the near term, we will launch app functionality that allows customers to easily change payment dates, to manage rates, to request statements, and access other services directly through the PTSB app. And this will significantly reduce time and effort for both customers and colleagues while eliminating unnecessary paperwork. Over time, we will add more mortgage features to this self-service portal, enabling our customers to meet their banking needs on the go at a time that suits them best. And to better help customers when they do need more human support, we've invested in a new AI-enabled system for our call center. And this system will reduce call times and after-call wrap-up times, enabling our colleagues to support our customers more efficiently and deliver a better customer experience overall. So we'll just turn to slide 12. I want to just put a spotlight on our business lending and business activity. And this is another important element of our strategy, which is to diversify our income by growing our business banking portfolio. On slide 12, we provide more of a deep dive into both the SME and asset finance businesses, which make up our value stream, which is grow and run my business. We start from a position where our loan book is a combined €1.2 billion with market share percentages in the single-digit area. We think we can grow this book by 15% to 20% per annum over the next few years as we take back some of the share which was vacated by the exit of Ulster Bank. And indeed, growth in the 12 months to June was 14%. And we believe there's an open door for us in this market if we offer superior customer service with fast underwriting. And we intend to build our offering in business banking as we go forward. And you can see from the charts here that our loan book is well diversified across sectors and there are better yields to be gained in this market, which helps our net interest margin. Asset finance by its nature involves security, while on the SME side, 70% of our lending is to facilitate a business or business owners purchasing a property for business use and the building itself acts as the security. Our investment in the near time is focused on making this business scalable. And once we've done that, we will then look to broaden the offering by developing a bespoke business current account and savings offering for customers. If I just turn to slide 13, in May, we announced our new three-year sustainability strategy, which is focused on channeling investment and directing impact towards areas that enhance societal wellbeing. Not only is this the right time to do this from a societal perspective, but a recent reflecting business research found that 78% of Irish businesses see the sustainability market as a major growth opportunity to win more customers and increase revenue. So this shows that there's a commercial benefit to sustainability and we want to support customers in that respect. We're making strong progress in delivering the strategy with 43% of all new mortgage lending so far being green. And this year alone, we've lent 26 million in impact lending. And our science-based targets and carbon reduction plan has been developed and submitted to the science-based target initiative for validation. So thank you, and I'll now hand over to our CFO, Barry Darcy, who will take you through our financial performance in more detail.

Thank you Eamonn and good morning everyone. Slide 15 sets out our financial performance during H1 2025. Total operating income reduced 4% in the first half, as while our balance sheet has grown, our margins reduced, reflecting lower ECB and mortgage rates and higher deposits. Total operating expenses were £271 million or 1% lower. Within regulatory charges came in at £25 million with the reduction related to deposit guarantee scheme. Given the gap between income and cost growth, our cost income ratio rose three points to 76%. We've recorded a nil impairment charge in H1, reflecting a very positive macro in economic environment and the underlying health of our loan book. Exceptional items were 32 million, which is slightly higher than the 25 million we guided. This includes 29 million for our voluntary severance scheme and 3 million euros for non-core items. After these exceptionals, our reported profit before tax was 19 million euros for the period. And stripping out exceptionals and the movement in the impairment line, to give that better view, operating profit was 17% lower at 51 million euros. EPS, adjusted for exceptionals, came in at circa 4 cents for H1, while return on tangible equity on the same basis was 2.9%. Finally, our TNAV per share, our TNAV was 3.53 cents at the end of June, which is up 2% year-on-year. On slide 16... We show our net interest income performance. NII was 288 million for H1, or 7% lower as the effects of falling interest rates on our margin offset higher average interest earning assets. You can see from the chart here that the main negative driver behind NII was higher deposit costs. This was a function of higher average volumes relative to last year, particularly in term products and higher average rates. This was partially offset by lower wholesale funding costs from reduced repo volumes, as well as a gain on our hedge position on our MTNs and Tier 2 instrument. Here we have swapped a fixed interest cost into a variable, and this variable cost reduced during H1 as rates came down. Our asset yields reduced 21 basis points year-on-year, as income on our tracker mortgages and cash balances repriced. And I'll talk about that and our lending income in a bit more detail in a minute. Meanwhile, our average cost of funds rose three basis points year-on-year, though this was after the hedging gain. Our average cost of deposits rose about a quarter of a percent to 76 basis points, but the increase relative to H2 was near 10 basis points. Our net interest margin, or NIM, was 202 basis points for the half year, down 8 basis points from our Q4 exit margin of 210 basis points. This was slightly lower than budget, but this was due to stronger deposit inflows, so it's purely the effect of the denominator being a little larger in the calculation. The extra cash we took in during H1 raised our central bank deposits and the average ECB deposit rate during the half was circa 2.4%. This extra cash will support our lending in the second half and we still expect a margin of greater than 2% for the full year. As before, this is based off the current ECB deposit rate of 2% persisting to year end. The bank still remains sensitive to the interest rate environment, though this is reduced materially. At the end of June 2025, using a static balance sheet, balance every 100 basis points decrease in interest rates results in a 9 million reduction in our income. This sensitivity has been reducing as our tracker mortgages and central bank balances have declined. And for comparative, if you went back to our H1 24 results, we said that figure was 25 million for every 1%. So quite a change. On slide 17, we give some detail on our lending income and our mortgage book in particular. Our performing mortgage book rose 3% in H125 to 19.9 billion. We've shown this chart for a number of years, but it's worth noting that our NPLs are very small now. So if we included those to show you the total mortgage book, the growth rate will be similar. Falling rates outweighed the benefit from volume growth when we compared the two halves. And you can see the effect of falling rates on the chart in the bottom left. Our flow yield which captures new to bank customers was 3.69 percent as of June 25 down 65 basis points year on year but still higher than that for the stock which was 3.5 percent measured in the month of June. The other side of a lending story is what's happening with their fixed rate maturities. And here we have mortgages written when rates were much lower, such as in 22 when maturing onto higher rates today. And that is providing support to NIM as we go forward and at least out until 2027. We show you here the latest split of the mortgage book and as before fixed rate mortgages make up the majority of our book at 71% of the total and the variable component of the book is now 17% and the trackers are down 12% of the book. On net fees and commissions, Net fees and commissions make up almost all our non-interest income each year and are derived from our current account products, commissions from home life insurance sales, as well as from the operation of our card services. During H1 2025, we saw net fees and commissions increase 35% to €31 million. This reflects modest growth in underlying activity, with income boosted by the full six months of impacted changes in current account pricing that we introduced in April 2024. Also, unfavorable timing of receipts in the payment area. The latter added €4 million of income, which normally comes in in the second half of the year, and we've shown this in the shaded box on the chart. So in modeling the full year outcome, you just need to bear that in mind. Aside from fees and commissions, we also recorded 3 million in other income during the half, compared with 2 million last year. And this line tends to be predominantly FX gains. Just on slide 19, moving to operating expenses. Total operating expenses were 271 million for H1, down 1%. Regulatory charges came in at 25 million, and excluding these charges, underlying costs were flat, but in line with our expectations. Meanwhile, the bank's cost to income ratio was 76%, and we remain very committed to reducing this ratio in the coming years. Our strategic business transformation programme will play a big role in delivering this objective, which Eamonn spoke to earlier. One of the initiatives in this programme is a voluntary severance scheme, which is extended to all employees last December and is now at an advanced stage. When combined with management actions and natural nutrition, we continue to expect a reduction in staff numbers to circa 300 in 2025. Staff numbers at the end of June were 3085, down 162 or 5% compared with 3247 at the end of year. The scheme will generate annualised cost savings of circa 19 million euros, and an exceptional charge of 29 million associated with this was recognised in the first half. Other exceptional charges of 3 million were recorded in the period. For the full year for 2025, we remain on track to meet our cost target of 525 million. Moving to slide 20, Asset quality continues to remain very robust and as a result the bank has recognised a zero figure for P&L impairment in H1. So that's cost of risk of zero. Our total provision coverage was 1.8% of loans at the end of June, which is unchanged versus the position at year end. Our provision stock of £389 million includes £43 million of in-model adjustments. and 101 million of model overlay, which involves management judgment. As part of the review of our IFRS 9 models, we continue to challenge these overlays internally with a view to better incorporating them into our existing model parameters. We are working hard to complete these model updates for later this year, and it is a challenging piece of work, but we're working hard to deliver that. The weighted average loan to value in the home loan mortgage book is at 48%, with the new mortgage weighted average loan to value at 68%. In terms of guidance for 2025, we believe we are very well provided currently, and while uncertainty persists, we maintain guidance of a zero charge for the year. With regard to that uncertainty, just some updates on our conservative macroeconomic assumptions. Obviously, given all the developments in relation to tariffs and Ireland being such an open economy, it's natural that we've received quite a few questions on potential impacts. On this slide, we detail our economic forecasts that are behind our provisioning assumptions and we believe these are conservative. We came into this year with base case projections that were more cautious than consensus as we built a 15 to 20 percent tariff shock. So these numbers here are very similar to the ones in our annual report. As Eamon mentioned earlier the trade deal that was announced with the US is slightly better than we had modeled. So at this point we don't see any negative read across for impairment numbers. but uncertainty has increased since year end, but the weightings on our upside and downside scenarios remain unchanged as they are designed to represent a one in 20 probability relative to the base case. If we're only to use the base case scenario to model ECLs for mortgages, excluding management's adjustment to model outcomes, the ECL impairment allowance would be 91 million euros less than what we show at the end of June. On slide 22, Just to talk to funding liquidity, if I pick out key points here, customer deposits grew 7% year on year, which is a really strong performance and one that was ahead of market. As Eamonn said earlier, the growth of 1.1 billion in H1 was the same as what we achieved throughout all of 24. So we are well funded and I would expect that growth rate to slow as the year progresses. Around three quarters of this growth was in retail, turned deposits and corporate. Their current account balances are also up nearly 3% since year end. You can see that our average cost of interest bearing deposits was up 35 basis points year on year. But as I alluded to earlier, measured against H2 last year, the increase will be less. Indeed, our deposit costs are plateauing and should start to fall from here. Meanwhile, our MREL ratio remains very strong at 37%, which is ahead of our requirement. And we have no further plans to issue senior debt this year. The bank now has two rating agencies, Fitch and Moody's, who are holding at investment grade. And indeed, Fitch recently upgraded PTSB Group Holdings another notch to BBB. This will benefit us in the future when we come to future issuance and refinancings. On slide 23, looking at capital, our C2-1 on new CRR3 basis was 15.5% at the end of June, up 0.8% from December 2024. In the chart on slide 23, we showed the various moving parts in our CT1 over the last six months. The single biggest move obviously related to CRR3, which came into effect on the 1st of January. We previously conservatively estimated that the impact was a reduction in our RWAs of €0.5 billion. That equated to an increase in our CET1 of circa 0.7%. We can now confirm that the actual impact for CR3 was a reduction in RWAs of €0.9 billion, which has the effect of boosting CET1 by 1.2%. At this level, our CE21 is well in excess of a regulatory requirement, with our 2025 SHREP requirement at 10.83%. Management CE21 long-term target remains at circa 14%. and we're committed to optimising our capital structure over the coming years. Indeed, the bank has capital instruments with first call dates in Q4 2025 and Q2 26, and we are considering options in respect of these. And finally, just a brief update on our IRB model programme. Our new mortgage model was submitted to our regulator, the Centre Bank of Ireland, on the 30th of May and engagement with relevant teams has started. This is a strategically important project for the bank and we are working hard to ensure that we deliver a positive outcome. As you know, the bank's current model was submitted in 2017 when non-performing loans were extremely high within the bank. The profile of the portfolio has substantially improved since then. For instance, over 73% of the bank's mortgage book has been written since 2015 under both new credit policy and the central bank's macro potential rules. On the provisions slide, I mentioned that our risk weighted assets moved down by circa €0.9 billion because of CRR3, you should be aware that some of this benefit came through on our standardised book, which is essentially the loans we acquired from Ulster Bank, and some came through on the IRB book through the removal of the scaler. In aggregate, the risk density on our mortgage book reduced from 39.6% at year end to 36.4% at the end of June 2025. We will continue to positively and constructively engage with the central bank in line with how we engage in all matters with regard to the central bank engagement. And we'll update the market on the application when it is appropriate. So, to summarise, the bank has had a very strong performance in the first half of 2025 across our business and particular highlights were the growth in deposits, the acceleration in lending growth and our strong capital position. With the revenue environment more challenging this year, we're working hard to transform the way we operate, improve effectiveness and efficiency and you can see this in our 1% year-on-year decline in our cost base. We've had a very good start to the year and to the second half and we're confident about our prospects for our business going forward. I'll hand you back to Eamonn now and he'll take you through guidance for the medium term. Thank you.

Thank you, Barry. We're on to the last slide, so I just want to finish by reminding you about our guidance. for the year 2025 and indeed our medium term guidance out to 2027. As Barry has indicated, our business is performing really well and we are reiterating our guidance that we gave you in the full year back in March. So we're standing by that guidance. There will be a small change in the exceptional charge number where we said it would be around the 25 million. It'll actually be around 32 million. That's what we recorded in the first half. of the year. And once again, just again to mention and to say that the medium term targets do not assume any changes to our risk rate densities as part of our IRB model review. And indeed, when that model review comes through, we will have to amend the medium term targets to reflect what the impact that will have. But we have to wait until we go through that process. As regards distributions, Again, as I said back in March, we plan to restart dividend payments in 2026, but that is subject to our financial position. And indeed, we have to go through an approval process with a regulator in order to make those dividends. But we're still standing by our ambition to pay a dividend and our current policy is to grow that dividend payout to 40%. over time. And again to put that in context that will be the first dividend we will pay in 18 years as a bank. And again it's a clear sign of normalization of where we where we've come from and indeed where we want to go from from a shareholder point of view. So to summarise, we believe we're playing a critical role in the Irish market, providing much needed competition, and in particular in the business lending space. And we believe there's great potential for us to grow our business and improve our cost efficiency while meeting customers' evolving needs. And the first six months of 2025 really demonstrates that by way of the growth across the different lines. Finally, it would be remiss of me not to mention the successful disposal by NatWest of the remaining 11.7% share in PTSB. This marks another important step towards normalising the composition of our shareholder base and creates further liquidity in bank shares and was extremely welcome. to us and indeed the market when that deal was successfully executed. It also demonstrates that there's a strong market appetite to invest in PTSB and gives us confidence that our strategic direction to deliver real and sustainable value for our shareholders is recognised and supported. So I'd like to thank you very much today for joining us and we will now take questions on the results. Thank you. Jeremy Chap.