PTSB to seek €200m from investors to plug capital hole

Permanent TSB and its advisers plan to canvass more than 30 institutional investors and private equity groups in Europe and the US in the coming weeks to seek an investment of €200 million or more to help plug a shortfall in its capital identified yesterday as part of a pan-European exercise by regulators.

Permanent TSB was the only bank in Ireland to fail the European Central Bank’s stress tests. The ECB found a capital shortfall of €854.8 million but PTSB said it has already accounted for more than 80 per cent of this through various actions.

It is understood that the outstanding shortfall now amounts to €125 million. PTSB's corporate advisers, Deutsche Bank and Irish stockbroker Davy, will try to raise this amount and more from third-party sources.

Jeremy Masding, PTSB's chief executive, told The Irish Times yesterday that "some preparatory work" to secure investment had already begun and the likelihood was that the minimum it would raise would "probably" be €200 million.

“On Tuesday morning, we’ll start the journey [of securing funds],” he said. “I am very confident that there will be high level of [investor] interest.”

Majority stake

Mr Masding declined to quantify how much of the bank would be sold as part of this process. The State owns 99.2 per cent of PTSB as a result of its €2.7 billion bailout in 2011. PTSB was the last of the domestic banks to be bailed out by the State, following the financial crash in 2008.

It is understood that the Minister for Finance, Michael Noonan, wants to retain a majority stake in PTSB but would be willing to sell between 30 and 40 per cent of the equity.

“We’ll construct what we think is the best value deal and then present it to the shareholder,” Mr Masding said.

Mr Noonan said he was “supportive” of PTSB’s plan to raise capital from private investors. “My officials will review any proposals made by Permanent TSB and will ... ensure a successful execution of the capital [raising] plan in 2015.”

PTSB is expected to seek firm bids from interested parties before Christmas with a view to agreeing a deal by the end of March next. The bank also plans to resubmit its restructuring plan to the European Commission shortly and is hoping for approval early in the new year.

Frankfurt supervision

PTSB has until November 9th to submit its capital-raising plan to the new Single Supervisory Mechanism (SSM), the Frankfurt body that will take over financial supervision for the euro zone from early next month. It has nine months to plug the capital hole identified by the ECB.

AIB, Bank of Ireland, Ulster Bank and Merrill Lynch International Bank all came through the ECB's tests with a clean bill of health. Mr Noonan said the results highlighted the "strength of the banking system" and the "significant progress" made since 2011.

Twenty-five out of 130 banks in the euro zone failed the ECB’s stress tests, including nine in Italy.

A dozen of the banks were deemed to have already raised sufficient capital since January. The remainder face an aggregate capital shortfall of around €10 billion.

The results were published as the ECB prepares to begin supervising the euro zone’s biggest banks from next Monday.

Asked if the stress tests would unlock lending, ECB vice-president Vitor Constancio, conceded that some banks might have been wary about lending as they had wanted to "pass the exam".