Lender on track to report as much as a €400 million accounting gain
However, Davy analyst Diarmaid Sheridan estimates that the badwill gain amounted to about €200 million, as the fair value of PTSB rose in the wake of the deal being agreed at the end of 2021, mainly as a result of rising interest rates since then.
Mr Sheridan sees PTSB reporting a €200 million pretax profit for 2022 next week, the highest since 2007, when PTSB was part of the same group as Irish Life. He estimates that PTSB posted a net €177 million of exceptional gains last year.The European Central Bank clarified in early 2021 that it would recognise verified accounting badwill from a capital point of view when assessing deals, as it pushes for banking consolidation at a time when banking assets are trading at a discount.
The Iseq Financial index, dominated by the three listed Irish banks, has jumped more than 50 per cent in the past 12 months. Still, Irish lenders continue to trade at a discount of between 20 per cent and 40 per cent of their estimated net asset values. The profit resulting from badwill gain has helped PTSB avoid having to raise additional capital to carry out the purchase of the Ulster Bank loans. Ulster Bank’s parent, NatWest, has also taken close to a 17 per cent stake in PTSB as part payment for the loans, further reducing the need for an equity raise.
PTSB bolster its balance sheet further ahead last October by raising €250 million of capital on through the sale of the riskiest form of bank debt, or so-called Additional Tier 1 notes.
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