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Permanent TSB is going to give a little bit of its bailout money back

The bank wants to raise €525 million from private investors and most of that will go to the government.

Image: Jim Fenton

Updated 13.30

PERMANENT TSB PLANS to pay back €400 million of its taxpayer-funded bailout when it taps private investors for more money.

The bank this morning released its annual results which showed a pre-tax loss of €48 million for 2014 – down from €668 million the previous year.

Chief executive Jeremy Masding said the bank planned to raise €525 million from the private sector in the coming months which would “mark the first stage of returning (the bank) to private ownership”.

That’s good news for the taxpayer, good news for customers, good news for the state,” he said.

As part of that plan, it will buy back a €400 million “CoCo note” – or contingent-convertible note to be exact – currently in state hands.

That comes after the government pumped €4 billion in taxpayer funds into Irish Life and Permanent, now Permanent TSB, when it took a 99.2% stake in the business.

The state got about €1.3 billion of that money back when it sold Irish Life to a Canadian company in 2013.

Finance Minister Michael Noonan welcomed the announcement as the “first step” in returning the bank to private hands and the government recouping its money.

What’s not clear, however, is the extent to which selling off a part of the bank to private investors will dilute – and therefore devalue – the state-owned share in the long term.

Masding told RTÉ’s Morning Ireland the bank was “still in the middle of the transaction” and the deal was expected to be finished by the end of June.

What I can say is that the state plans to remain the majority shareholder at this time and obviously I can’t speculate on the size of shareholding private investors will own,” he said.

Jeremy Masding at Finance Committees Source: Sam Boal/Photocall Ireland

‘Stress test’ shortfall

The remainder of the money the bank was looking to raise would be used to fill a shortfall on its balance sheet identified in the ECB’s “stress tests” last year.

Permanent TSB was the only Irish bank to come up short in the financial doomsday scenario the European regulator plotted.

The bank also said it had signed deals to sell about €5 billion in “non-core assets”, the biggest share of which were tracker mortgages in the UK from the Capital Home Loans business it effectively shut down in 2008.

The remainder was a book of mainly Irish commercial-property loans worth €1.5 billion.

It said it was now focussing on its core retail banking business in Ireland, where it more than doubled new mortgage lending last year.

First published 10.47am

READ: AIB is finally paying out some money to taxpayers >

READ: ‘The banks weren’t showing compassion, they were waiting for an increase in property prices’ >

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About the author:

Peter Bodkin  / Editor, Fora

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