Annual Report 2020
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Annual Report 2020 Members of the Mount Sion Choir perform as part of the Marie Keating Foundation’s Concert4Cancer event in August 2020, which was proudly supported by the Permanent TSB Community Fund We are a community serving the community. This document contains certain forward-looking statements with respect to Permanent TSB Group Holdings plc’s Group’s (the ‘Group’) intentions, beliefs, current goals and expectations concerning, among other things, the Group’s results of operations, financial condition, performance, liquidity, prospects, growth, strategies, the banking industry and future capital requirements. The words “expect”, “anticipate”, “intend”, “plan”, “estimate”, “aim”, “forecast”, “project”, “target”, “goal”, “believe”, “may”, “could”, “will”, “seek”, “would”, “should”, “continue”, “assume” and similar expressions (or their negative) identify certain forward-looking statements but their absence does not mean that a statement is not forward looking. The forward-looking statements in this document are based on numerous assumptions regarding the Group’s present and future business strategies and the environment in which the Group will operate in the future. Forward- looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements of the Group to be materially different from those expressed or implied by such forward looking statements. Many of these risks and uncertainties relate to factors that are beyond the Group’s ability to control or estimate precisely, such as future global, national and regional economic conditions, levels of market interest rates, credit or other risks of lending and investment activities, competition and the behaviour of other market participants, the actions of regulators and other factors such as changes in the political, social and regulatory framework in which the Group operates or in economic or technological trends or conditions. Material economic assumptions underlying the forward looking statements are discussed further in Market and Regulatory context. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance. Nothing in this document should be considered to be a forecast of future profitability or financial position and none of the information in this document is intended to be a profit forecast or profit estimate. The Group expressly disclaims any obligation or undertaking to release any updates or revisions to these forward-looking statements to reflect any change in the Group’s expectations with regard thereto or any change in events, assumptions, conditions or circumstances on which any statement is based after the date of this document or to update or to keep current any other information contained in this document. Accordingly, undue reliance should not be placed on the forward looking statements, which speak only as of the date of this document. Investor and shareholder information and services including these Annual Reports, are available on-line at www.permanenttsbgroup.ie. Strategic Report Financial Highlights 2 Non-Financial Highlights 3 Strategic Report Strategic Chairman’s Statement 4 Chief Executive Review 6 COVID-19 9 Market Context 11 Our Strategy, Business Model and Culture 12 Responsible And Sustainable Business 22 Governance Financial Review 44 Risk Management 59 Corporate Governance Directors’ Report 84 Corporate Governance Statement 91 Financial Statements Directors’ Report on Remuneration 133 Statement Of Directors’ Responsibilities 137 Consolidated Financial Statements Independent Auditor’s Report 138 Other information Consolidated Financial Statements 146 Notes to the Consolidated Financial Statements 152 Company Financial Statements Company Financial Statements 242 Notes to the Company Financial Statements 245 General Information Alternative Performance Measures 249 Abbreviations 256 Definitions 258 Permanent TSB Group Holdings plc - Annual Report 2019 1 Financial Highlights Financial Highlights Financial Performance Underlying (loss)/profit €m (a) Net Interest Margin % (b) Loss/return on Equity % (c) Financial2020 (€109) Highlights 2020 1.73% 2020 (5.4)% Financial Highlights 2019 74 2019 1.80% 2019 3.1% Underlying (loss)/profit €m (a) Net Interest Margin % (b) Loss/return on Equity % (c) Underlying20202018 (€109) (loss)/profit €m 94(a) Net20202018 Interest Margin % (b) 1.73%1.78% Loss/return20202018 (5.4)% on Equity % (c)4.5% 2020 (€109) 2020 1.73% 2020 (5.4)% 2020:2019 €(109)m 74 2020:2019 1.73% 1.80% 2020:2019 (5.4)% 3.1% Underlying2019 loss due to a fall74 in 7bps2019 lower because of margin1.80% Decreased2019 due to a fall 3.1%in operating2018 income and higher94 pressures2018 in the industry. 1.78% operating2018 income as a result4.5% expected2018 credit losses as a94 Margin2018 compressed as a 1.78% of2018 lower yields from treasury4.5% result of increased risk due to result of the low interest rate assets adverse changes in macro- environment impacting yields economic conditions on treasury assets Headline Cost to Income Ratio (d) Adjusted Cost to Income Ratio (e) Investment Spend (f) 2020 88% 2020 75% 2020 €72m Transformation and simplification 2019 80% 2019 68% 2019 €49m Headline Cost to Income Ratio (d) Adjusted Cost to Income Ratio (e) Investment Spend (f) Headline20202018 Cost to Income75% Ratio88% (d) Adjusted20202018 Cost to Income64% Ratio75% (e) Investment20202018 €24mSpend (f) €72m 2020 88% 2020 75% 2020 €72m 2019 80% 2019 68% 2019 €49m 2019 80% 2019 68% 2019 €49m 2018 75% 2018 64% 2018 €24m 2018 75% 2018 64% 2018 €24m 2020: 88% 2020: 75% 2020: € 72m Increased due to lower total Increased due to lower Reflects significant income while costs remain total income while savings reinvestment in the business stable from cost management has enabled digital investment, CET Ratio (Transitional basis) (g) reflectingNPL Ratio (h)stable costs Risk weighted assets (R.W.A) (i) 2020 18.1% 2020 7.6% 2020 8,480 2019 17.6% 2019 6.4% 2019 10,012 CETSustainability Ratio (Transitional basis) (g) NPL Ratio (h) Risk weighted assets (R.W.A) (i) CET20202018 Ratio (Transitional14.7% basis)18.1% (g) NPL20202018 Ratio (h) 7.6% 10.0% Risk20202018 weighted assets8,480 (R.W.A)11,990 (i) 2020 18.1% 2020 7.6% 2020 8,480 2019 17.6% 2019 6.4% 2019 10,012 2019 17.6% 2019 6.4% 2019 10,012 2018 14.7% 2018 10.0% 2018 11,990 2018 14.7% 2018 10.0% 2018 11,990 2020: 18.1% 2020: 7.6% 2020: € 8,480 Increase reflects generation Increased due to the sale Decrease primarily reflects of organic profits and of a portfolio of performing the de-recognition of deleveraging of non- loans and the unfavourable underlying exposures in 2020 performing loans (NPLs) economic outlook reflecting the impact of COVID-19 Management has provided further information on IFRS and Non-IFRS measures including their calculation in the Alternative Performance Measurements (APM) section on pages 249 to 255. (a) Operating (loss)/profit before exceptional items. See table on page 45 for a reconciliation of underlying (loss)/profit to operating (loss)/profit on an IFRS basis. (b) Defined as net interest income (NII) divided by average interest-earning assets. (c) Defined as (loss)/profit for the year after tax (excluding exceptional and other non-recurring items) expressed as a percentage of total average equity. (d) Defined as total operating expenses (excluding exceptional and other non-recurring items) divided by total operating income. (e) Defined as total operating expenses (excluding exceptional, other non-recurring items, bank levy and regulatory charges) divided by total operating income. (f) Investment spend includes both capital and operating expenditure. (g) Total common equity tier 1 (CET-1) capital on a transitional basis divided by total risk weighted assets (RWAs). (h) Defined as non-performing loans (NPLs) expressed as a percentage of the total gross loans of the bank. (i) RWAs are the Group’s assets or off balance sheet exposures, weighted according to risk. 2 Permanent TSB Group Holdings plc - Annual Report 2020 Non-Financial Highlights Strategic Report Strategic A new Ambition, ‘To be Ireland’s best personal and A new partnership with Ó Cualann Cohousing Alliance, small business bank’ contributing €350,000 over three years to support the development of affordable housing schemes in communities across the country A new Purpose, ‘ To work hard every day to build trust with our customers – we are a community serving the community’ A new partnership with the Strategic Banking Governance Corporation of Ireland (SBCI) providing €50 million in funding to Irish Small and medium-sized enterprises 71% Employee Engagement Score (SMEs) 3 training days delivered per employee in 2020, Reductions to our fixed and variable home loan with more than 900 employees enrolled in banking mortgage interest rates, benefiting more than 70,000 education programming new and existing home loan customers Financial StatementsFinancial 37% of the Senior Leadership population are Women 100 million logins on both Open24 Web and App in 2020 c.€700,000 invested in Irish community organisations, 10% reduction in carbon emission intensity in 2020 supporting local communities across the country (-55% reduction since 2009) Other information Our Commitment Awards And Ambitions For To Responsible And Recognitions In 2020 2020