Permanent TSB Group Holdings plc

Good morning and welcome to our 2025 full year results presentation. I'm joined here today by our CFO Barry Darcy. I'm going to cover the key highlights for 2025 and comment on the wider progress we have made through this first year of our three year strategy. I will then take you through how we see the financial performance of the bank evolving over the next few years before handing over to Barry who will provide a more detailed review of our 2025 results. After this, we will be happy to take your questions. So if we just turn to slide five. 2025 was a transformational year for PTSB. The bank's balance sheet continued to grow as customers responded to the strength of our brand and product offering. We lent a total of 3.4 billion euros during 2025, and this is the highest level in 18 years, with circa 17% of this lending in non-mortgage lending. our deposits increased by 6% or 1.5 billion, our mortgage grew by over 3% and our business banking portfolio rose by 9%. Looking at our key financials, our total income reduced by 3% during the year due to the lower interest rate environment. However, it was a game of two halves, with income in the second half of the year recovering 3% relative to the first half, as margins stabilised, enabling volume growth to drive net interest income. Our operating costs also reduced by 2%, and I'm pleased to say that we achieved operating cost level of 519 million, which is 6 million less than what we'd guided a year ago, and 12 million less than 2024. In terms of profitability, our profit before exceptional items and tax was 175 million, which was 3% or 5 million lower than what we recorded in 2024. And this translated into a return on tangible equity of 7.3%, And as you know, we believe the bank is well positioned for this number to mature and increase over the next few years. Moving to capital, our core equity tier 1 capital level was very strong at 17.5% at the year end on a pro forma basis. And the approval of our IRB mortgage models is transformational for the bank as it significantly enhances our our competitiveness and will enable further sustainable business growth and returns for our shareholders now and into the future. And finally, I'm delighted to announce a proposed final dividend of €10 million or approximately 1.8 cents per share. And this is another important milestone for the bank for a number of reasons. It's the first dividend since 2008. It is the first dividend payment as a standalone business and not under the Irish Life banner. It is regulatory approved after an extended period of time when the bank was subject to a dividend restriction or dividend blocker, and it clearly reflects the renewed strength of PTSB. If we turn to slide six, 2025 was a year of real delivery for PTSB. As you can see on slide six, we met or exceeded our guidance on every key metric, be it income, costs, impairment, capital or returns. We turn to slide seven. This time last year, I took you through a refreshed three-year business strategy, so I won't dwell on this slide again today. Our ambition is to be Ireland's 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 through customer experience. And in parallel, the bank will drive greater operating efficiencies so we can continue to grow and generate sustainable returns for our shareholders. If we turn to slide eight. On slide eight, I would like to give you some sense of how this strategy comes through in the business on a day-to-day basis. And this is behind the headline financials. There are a lot of points here, so I'll only pick up a few. In our own home value stream, a key objective for us is to improve our digital mortgage sales and servicing journey for our customers. And this will be good for our top line, but also for our cost base, as we put more information and decisions into the hands of our customers through an online portal. Mortgage drawdowns through this portal were up 55% in 2025, and we've rolled out features through this portal, including balance availability, and statements, and indeed there are many more features to deliver in due course. In our Manage My Money value stream, we put a lot of investment into our app, and it is encouraging to see that the benefits of this investment is starting to come through. Customer ratings across iOS and Android have effectively doubled in the past year when measured on a monthly basis. We will continue to push hard on this front as the app is how most of our customers interact with us today and it is key to us attracting more current account customers with low-cost funding. And I should also say that our core relationship NPS score across consumer banking was up a further two points to 24 in 2025. In our grow and run my business value stream, our impact lending was up 16%, and we continue to widen our product footprint, such as a new higher purchase product line for companies at reduced rates, which are quite attractive. And we will also look to enter the PCP market in 2026, which is a very popular route for consumers when buying their car today. Finally, we've listed a number of achievements that come under the transform the bank and strengthen the foundation's value streams. I will cover the IRB model transformation on the next slide, and I've mentioned the dividend payment already, but I would also point to a 10% reduction in FTEs in 2025 and the progress we've made in embedding sustainability within the bank as evidenced by the upgrade in the CDP rating from a C to a B. In addition, we are rolling out AI tools across the organization. We have initial AIB capabilities deployed in customer service and operational processes, and we are also targeting advanced solutions in fraud, AML, and product innovation. So our AI adoption is progressing steadily with a clear focus on building the foundations needed to scale responsibly. and we continue to explore value-based use cases across priority areas and build our understanding of the benefits from AI tools as they become embedded. We just turned to slide nine. We've been talking to you about our IRB story for a number of years, and it was fantastic to finally receive regulatory approval to use new and updated models which better reflect where PTSB is today. As you can see in the chart on slide 9, the risk weighting on our total mortgage book has reduced dramatically since the end of 2024. The first major reduction reflected the implementation of CRR3 on the 1st of January 2025. And if we pro forma the end of 2025 number, the risk weight would fall another 4.6 percentage points to 30.7%. And that is a significant fall of around nine percentage points in just one year. We're not going to disclose specific numbers for our IRB book, but you've heard us talk about a risk rate on our new business of over 50% under the previous mortgage model. This has now reduced materially, which provides us with not only higher RAROC levels, but increased optionality as to how we might want to compete in the market. As we said on the call in January when we announced the news, the key point to understand here is that the risk weight and our overall book will continue to reduce in the years ahead as we write new business at lower risk rates and the older loans on the book, which have a higher risk rate, roll off. And this fact supports our confidence that the bank's RWAs are now projected to be 10% lower than we originally penciled in our medium-term financial plan. In recent weeks, we've been working on updating this plan and feeding the new IRB models into our ICAP cycle. This work is not yet complete, but clearly the bank's sustainable returns and distribution capacity are now a good deal higher than where they were. We are probably looking at a rate closer to the European average of around 50%, other things being equal, rather than the 40% which is covered in our dividend policy today. However, at this time, we do not plan to make any changes to this policy or recommend further distributions due to the ongoing formal sales process. We just turn to slide 10. So as we leave legacy issues behind us that for so long have held us back as a bank, we believe the PTSB franchise is now well positioned to really show what it is capable of. However, the fortunes of any bank are tied to the economies in which they operate. And PTSB is truly fortunate to operate exclusively in the Republic of Ireland, which has been and continues to be one of the most vibrant and resilient economies in Europe. And notwithstanding all the geopolitical uncertainty over the past year, and indeed over the past week, the Irish economy continues, as I say, to be resilient, and it is notable that our core market of mortgages apologies, it is notable that our core market, which is mortgages, new lending in 2025 surprised the upside with mortgage lending reaching 14.5 billion for the year compared with a more conservative forecast of 14 billion. And we took 20% of this larger market, which was in line with our expectations and our objectives. So if we just turn to slide 11, We've laid out here our medium-term targets, which are unchanged from what we gave you a few weeks ago, and also our new guidance for 2026. In giving you this new guidance, we are somewhat constrained in what we can disclose due to the restrictions of the takeover panel rules. But looking out to 2028 and underpinning these numbers is an acceleration in lending growth from the current 4% rate driven by an expansion in the mortgage market and an increase in the net interest margin to 2.3%. And it should be noted, we recorded a margin of 2.3% in 2023, so we regard this as not being overly aggressive. We also aim to keep costs well under control out to 2028, which will enable our cost-income ratio to fall significantly to less than 60%. If you look at asset quality, we continue to see signs, we continue to see no signs of strain in the book and we are well provided for. But we prudently model for a cost of risk that moves upwards towards a 20 to 25 basis point range three years from now. So we put all this together, we believe we can drive a return on tangible equity towards 13% by 2028. And if you roll this forward a couple of years, we believe that number will be higher than 13% in that sense. So just to mention that. So I'd like to thank you at this stage. I'll now hand over to our CFO, Barry Darcy, who will take you through our financial performance in more detail. Thank you very much.

Thank you, Eamonn, and good morning, everyone. Slide 13 sets out our financial performance for during 2025. Total operating income reduced to 3% during 2025, as while our balance sheet grew, our margins reduced, reflecting lower ECB and mortgage rates and higher average deposit costs. However, as Eamonn said, it is important to note that income returned to growth in H2 with a rise of 3% relative to H1, and it was only marginally lower on a year-on-year basis. Total operating costs were 519 million euros, or 2% lower, and this outturn was better than the 525 million euro we had guided. Within this, regulatory charges came in at a lower than expected 25 million euro, as we had no charge for the deposit guarantee scheme. Given the gap between income and cost growth, our cost income ratio rose 1.275%, albeit the ratio fell over the course of the year and was closer to 74% in H2. We've recorded an impairment release of 39 million euros for the full year, reflecting the underlying health of our assets and the completion of a review of our IFRS 9 models for the mortgage book. To note, this is the fifth year in a row that the bank has recorded an impairment release, and this is testament to our low-risk balance sheet and a prudent approach to provisioning. Exceptional items were 47 million euros, which is higher than the 32 million we guided at the half-year stage. This includes 35 million euros for the voluntary severance scheme and 12 million euros for other non-core items, which included some early cost for FSP or formal sales process. Stripping out exceptionals, our underlying profit before tax was 175 million euros for the period and our equivalent EPS came in at 20.6 cents for the year. Meanwhile, Return on tangible equity on the same basis was just over 7%. And finally, as Eamonn mentioned at the outset, we're delighted to be able to recommend a final dividend to shareholders of 1.8 cents per share, our first in 18 years. On slide 14, we show our net interest income, which was 590 million euros for the year, which is 4% lower. The main negative driver behind NOI was higher deposit costs. This is a function of higher average volumes relative to last year, particularly in term products and higher average rates. However, I mentioned at our interim results that our costs of our deposits had peaked, and indeed the average rate we paid on both our term deposits and interest-bearing deposits in aggregate was lower in here. Hedges in place to manage our IRRBB exposure within a risk appetite. As rates came down, we recorded a gain on hedges linked to our MTNs and Tier 2 instruments which helped lower wholesale funding costs. Our asset yield reduced 22 basis points year-in-year as income on our tracker mortgages and cash balances repriced. I'll talk about our lending income in more detail in a minute. Meanwhile, our average cost of funds, having been up 3% at the halfway stage, fell 4 basis points year on year when measured after the hedging gain. Our net interest margin was 203 basis points for the year, consistent with our guidance of greater than 200. Our Q4 exit NIM was 208 basis points, and favourable rollover rates on both the asset and liability side are helping to raise margins, as is a positive change in the mix. This puts us in a strong opening position relative to our guidance, which is for a NIM of greater than 210 basis points for 2026. Once again, this guidance is based on the assumption that the ECB deposit rates remain at 2% through the year. The bank's sensitivity to movements in interest rates has reduced materially in recent years, and we have shown that latest number on the slide for movements both up and down from here. Moving to slide 15, our new lending performance, our total new lending was 3.4 billion euros in 2025, which was up 31%. In mortgages, we lent €2.9 billion, and our market share was a strong 20%, compared with the 16% level we recorded in 2024. New lending in business banking, which includes SME and asset finance, was €450 million, up 4%. And again, we were particularly pleased with the 10% jump in new SME lending, while asset finance was flat 4%. And in response, we took steps in the fourth quarter to support a better position to compete across the different market segments. For a number of years, PTSB has not really been an active participant in consumer lending, and it only represents about 1% of our loan book today. However, we expect this to change. The 10% rise in payouts shown here hides what has happened since we refreshed our offering in September with lower rates a simple product set and an easier online process. Since that refresh, average weekly applications are up 25% and drawdowns up 63%. On slide 16, we'll give you some detail on our lending income and our mortgage book in particular. Our performing mortgage book rose by 3.5% in 2025 to 20.4 billion euros. Falling rates outweighed benefit from this volume growth, as our margin slide showed. You can see the different effect of falling rates in the chart at the bottom left. Our flow yield, which captures new to bank customers during the year was 3.62%, but it was still slightly higher than that for the stock, which was 3.53%. However, an important piece of our lending story is what's happening with our fixed rate maturities. Here we have mortgages written when rates were much lower, such as in 2022 and 23, maturing onto higher rates today, and that is providing support to NIM as we go forward. For instance, nearly half of our fixed rate matures in 2026 and 27, and is coming off rates that were closer to 3% rather than the 3.5% for the book overall. We show you here the latest split of the mortgage book, and as before, fixed rate mortgages make up the majority of our performing book at 74%. The variable component of the book is now 15%, and the ECB tracker portfolio is down to 11% of the book. On slide 17, net fees and commissions increased 5% to 58 million euros, driven mainly by growth in current account income. Unlike our competitors, we charge a flat per-month fee for our current account and provide a range of other benefits, including 2% cashback each month on your mortgage, if that is with PTSV also. Growing this revenue line is not just about growing our customer base and improving cross-sell. It is also about managing our outgoing costs, particularly in the payments area, and this is something that we've been working very hard at. Other developments mentioned include the final implementation of SEPA Instant, and we look forward to the imminent launch of ZipA in Ireland, which will make peer-to-peer payments easier between the local banks. Aside from fees and commissions, we also recorded €7 million in other income from €5 million last year, and we alluded to these customer-related effects and hedging gains in our Q3 statement. Moving to slide 18 and looking at operating costs, these were €519 million for the year, down 2%. This was better than our guidance of €525 million. Regulated charges came in at €25 million, and excluding these charges, underlying costs were down 1%. Meanwhile, the bank's cost-to-income ratio at 75%, And as I said earlier, there was a reduction from over 76% in H1 to near 74% in H2. At the start of 2025, we committed to a reduction of 300 FTEs. Through our voluntary severance scheme and natural attrition, we have delivered a reduction of 329 to an overall FTE number of 2918 for the year. The VEA scheme will generate annualized cost savings of circa... 21 million euros per annum, less than half of which came through during 2025. And the carry-forward benefit here will help offset general inflationary pressures. We also expect our depreciation charge to be lower this year. There was a one-off element relating to leased assets in 2025. For full year 2026, we're guiding a cost-to-income ratio of less than 70%. On slide 19 asset quality remains strong and as a result the bank recognised the 39 million P&L write back the fifth year in a row we have done so. The main drivers behind this result were the continued benign macro environment and the conclusion of the review of our first nine mortgage models. This review covered staging, LGD and PD models and contributed significantly to the 72 million decline you see in the total provision. Our provision stock entered the year at 320 million euros, our 1.4% of loans down from 392 million and 1.8% the previous year. Within the total, the main move that took place related to coverage of our Stage 1 loans, we previously held 64 basis points on these loans, marked us as a significant outlier relative to peers, and this is now reduced to 18 points, which is still marginally more conservative than our peers on a like-for-like basis. On the other hand, coverage of our Stage 3, our MPLs, is now higher than a year ago. As part of our provision models program, a new approach to calculating ECL for longer-dated MPLs was developed and now uses a DCF-based formula. This approach resulted in higher coverage levels for MPLs on the books for greater than three years. We recently completed a small MPL sale, and this also contributed to the reduction in our stock of provisions and a further fall in our MPL ratio to 1.4%. While the transaction completed after the year end, these loans were held as receivable at the 31st of December, 2025. The average loan-to-value on our mortgage book is now 46%, while the figure for new business was 65%. Our review of IFRS 9 models for other loan books is well underway and should conclude later this year. In terms of guidance for 2026, we continue to believe we are well provided for currently, and again, we would point to a nil or zero charge for the year. If I go to slide 20 next, our approach to scenario forecasting has changed post our IFRS 9 models review, and we're now more in line with the approach taken by our peers. For instance, we now have four rather than three scenarios for mortgages. What has not changed, however, is that our forecasts are still on the conservative side relative to consensus. Our downside one scenario best captures the geopolitical developments that we're seeing play out right now, with unemployment rising to 8.5% in 2027 and house prices falling to 8% or falling 8%. In the second tab, we'll provide you with a sensitivity showing how provisions would move if each scenario came to pass. On slide 21, looking at our funding and liquidity The picture here remains the same, that of the bank in a very strong position. You can see here that following over 5% growth during 2025, our balance sheet has now crossed the €30 billion mark, which is a significant threshold from a regulatory perspective. The key driver behind this was customer deposits, which rose 6% year-on-year. And while this was slightly lower than the 7% we reported in the first half, we did flag this would happen after it was a very strong start to the year. Our retail firm deposits rose 0.9 billion euros, and the growth in balances slowed during the year as market rates came down. That meant less cannibalisation from our current account balances, which were up 4%. I said at our interims in August that the average cost of interest-bearing deposits was plateauing, and this, indeed, the figure for H2 came in at nine basis points lower than H1. This should continue to fall going forward as our more expensive deposits in the 2.75% to 3% range start to roll off. Meanwhile, our MRL ratio remains very strong at over 36%. which is well ahead of requirement. And if we measured this on a pro forma basis using new IRB models, it would be even higher. It's no surprise, therefore, that we're reviewing our issuance needs over the next number of years. For instance, we have 650 million in medium-term notes that have a call date in April 2027 with a coupon of 6.6%. Under normal circumstances, one might look to refinance that toward the end of this year, and such a bond would probably have a 3% handle today, given where our rating and spreads are. On slide 22, before I take you through our capital, I just want to give you some color on the various changes that have taken place on our RWAs. Eamon mentioned earlier that the overall weight on our total mortgage book has fallen by almost nine percentage points since the end of 24. If we pro forma for our new IRB models, that is a combined effect in addition to the movement on CRR3 on 1st January and the new models coming into effect five weeks ago. We've mentioned that if we applied the new IRB models to our June 2025 mortgage book, the average risk weight would fall from 36.4 to 32.8%, or by 3.6 percentage points. Running this pro forma calculation again at the end of December 25 would reduce this weighting from 35.3%, you see in the table here, to 30.7. That's a reduction of 4.6 points, This translates to a performant drop in RWA's of over 900 million euros or the equivalent of 130 million euros in capital and compares with the circa 700 million reduction we spoke about just in January. If we look at the IRB book on its own, the reduction in average risk weights for the new models is larger at around six percentage points. Again, we expect this rate risk weighting to fall further over time as new lower-risk loans come onto the balance sheet and older, higher-weighted loans roll off. For clarity, our core PTSB home loan book is now the only book we have on IRB. All our other loans, be they the Ulster Bank mortgages we acquired, our legacy buy-to-let portfolio, our business banking and our consumer lending are now all unstandardised. This makes sense for us, and it's more efficient from a cost perspective given the relatively small scale of these portfolios. Looking at slide 23, our CET1 was 15.9% at year end, but on a performer basis, building in the benefit from the loan sale and the new IRB models, this would rise to 17.5%. In the chart here, we show the various moving parts in our CET1 over the last 12 months, and you can see that CRR3 and our IRB approval have lifted our capital level into a completely new territory. The greater than 900 million reduction in RWAs from IRB translates into a CET1 of gain of 1.5%, while the loan sale at it is 0.1%. At this level, our CT1 is well in excess of a regulatory requirement, with our 2026 SREP requirement at 10.69%. And while we're committed to optimising our capital structure, as Eamonn said earlier, given the ongoing FSP process, the Board does not plan to recommend further distributions to shareholders at this time. And so to summarize, we are very pleased with the financial performance of the bank in 2025. Particular highlights for me were the return of revenue growth in H2, the absolute decline we achieved in costs, and the very positive developments we saw in relation to our capital. I'll hand you back to Eamon now for some concluding remarks, and then we'll open for questions. Thank you.

Thank you, Barry. I would like to finish on slide 24 to remind you of our guidance for the full year of 2026 and the medium-term targets. We see our return on tangible equity rising to over 9% this year and reaching around 13% in 2028. And underpinning this improvement in returns is a rising net interest margin combined with an acceleration in loan growth as the Irish mortgage market grows and we continue to diversify our lending into business banking. With tight cost control, we believe our cost-income ratio will fall below 70% this year and below 60% in 2028. And lastly, we prudently model for some modest deterioration in the cost of risk from a zero charge this year to a range of 20 to 25 basis points in 2028. We believe PTSB is now in a really strong position to compete and win on the Irish market, which is one of the best banking markets in Europe, both from a growth and a structural perspective. In addition, with the bank now in a more level playing field from a capital perspective, we can grow while improving returns we generate for our shareholders. It's also important to note that 2026 represents our own birthday in that we are 210 years in existence and we were set up primarily to help customers save. and then use for the TSB to use those savings in order to help customers buy their own home. It's arguable not much has changed in our approach since then, except to get a mortgage in 1816. it was a lottery for people who saved. So we have much more sophisticated credit approval processes these days rather than just a lottery. But in that sense, our core purpose and what we operate today around building trust with customers, helping them with their financial needs, helping them with their savings, and indeed helping more than 9,200 customers last year acquire a home has not changed in that sense. So thank you very much for joining us today. and we would be happy to take your questions. As before, as we mentioned, we are restricted in the level of information we can provide about our formal sales process, but also our financial forecast in that sense, due to takeover rules. And I should mention as well, once again, our financial advisors, Goldman Sachs, are here with us today to ensure that all information we provide is permitted under these rules. So thank you very much for your attention, and we're happy to take your questions now. So thank you.