Permanent TSB fails ECB'S bank stress test

wenxue

what s will happen for TSB share,like Anglo leave stock market? I saw already drop 12.5% at Friday,what we will do? Buy or sell?

HobbyMan

wenxue wrote: »

what s will happen for TSB share,like Anglo leave stock market? I saw already drop 12.5% at Friday,what we will do? Buy or sell?

Who knows what will happen but TSB have made up a very large amount, if not all, of the short fall which was based on results from 31st December, 2013.

Ignoring the large shareholder, the bank is trading at 117% of book value so currently is too expensive for me to buy. Bank of America, for example, is trading at a discount of around 25% to book (from memory).

Obviously such a valuation is very basic as it ignores the banks funding structure and cost base etc. but even such a basic valuation shows the price/value differences between the two banks.

wenxue

HobbyMan wrote: »

Who knows what will happen but TSB have made up a very large amount, if not all, of the short fall which was based on results from 31st December, 2013.

Ignoring the large shareholder, the bank is trading at 117% of book value so currently is too expensive for me to buy. Bank of America, for example, is trading at a discount of around 25% to book (from memory).

Obviously such a valuation is very basic as it ignores the banks funding structure and cost base etc. but even such a basic valuation shows the price/value differences between the two banks.

Many thanks for reply

drop 10% today,

Sonnenblumen

An utter joke of a bank, crap customer service, thanks to the gov has been on a life support machine.

It was never a real bank (ie full banking operations) and this news hardly comes as a surprise. In fact if anything, it would probably force some to think about pulling the plug. I would reduce any savings below the threshold.

A banking option for customers who are happy to be treated like tossers.

HobbyMan

Sonnenblumen wrote: »

An utter joke of a bank, crap customer service, thanks to the gov has been on a life support machine.

It was never a real bank (ie full banking operations) and this news hardly comes as a surprise. In fact if anything, it would probably force some to think about pulling the plug. I would reduce any savings below the threshold.

A banking option for customers who are happy to be treated like tossers.

Such a reply isn't like you Sonnenblumen. It sounds like you had a bad experience personally.

Don't forget that AIB has also been on a life support machine. Actually due to the valuation difference it would be easier for the government to sell a stake in PTSB as opposed to AIB.

I am actually a fan of saving & loan type of banks. It always getsm ore difficult to value banks which have various spin offs such as insurance and trading operations (especially those with large trading operations as who knows what they have off-balance sheet in derivatives etc).

Remember though that the stress test results were taken from the banks figures from December last year and most of the banks that failed the test have already shored up their balance sheets (or are very close to it ie PTSB).

We started looking at PTSB yesterday in a mentorship group that I am holding so it will be interesting to see our outcome from a pure financial point of view (ie ignoring customer service etc).

Sonnenblumen

HobbyMan wrote: »

Such a reply isn't like you Sonnenblumen. It sounds like you had a bad experience personally.

Don't forget that AIB has also been on a life support machine. Actually due to the valuation difference it would be easier for the government to sell a stake in PTSB as opposed to AIB.

I am actually a fan of saving & loan type of banks. It always getsm ore difficult to value banks which have various spin offs such as insurance and trading operations (especially those with large trading operations as who knows what they have off-balance sheet in derivatives etc).

Remember though that the stress test results were taken from the banks figures from December last year and most of the banks that failed the test have already shored up their balance sheets (or are very close to it ie PTSB).

We started looking at PTSB yesterday in a mentorship group that I am holding so it will be interesting to see our outcome from a pure financial point of view (ie ignoring customer service etc).

Unfortunately I have not been immune to losing on some SPs but few would match the banks. Yes I have been burnt by all 4 main Banks but at least BoI is showing signs of making a recovery so I will wait patiently for some recovery in SP? I agree both AIB and PTSB are both on life support, and although AIB being a pillar bank is probably worthy of support/rescue but all have let me and many like me down very badly. In hindsight AIB was worse than Anglo but nothing like the losses incurred by the PTSB cornershop 'savings & loans' bank.

Although I have been a customer since my student days (but not for much longer) and have seen many changes over the years, they too have demonstrated a level of incredibly dumb management and decision making on ridiculous lending rarely seen. Shareholders have been screwed by it's SP collapse, by the disastrous merger with Irish Life (another pet hate of mine), etc etc.

If there was ever an opportunity I would liquidate PTSB. Why anyone would want to buy a stake in this failed entity defies logic.

It is interesting how one could look at any bank without looking at customer service. It is strangely reminiscent of the failed management thinking within the PTSB which ultimately triggered it's demise?

HobbyMan

Yes, I admit to losing money on the banks back in 2008 as well. At the time I heard that Warren Buffett was looking at Irish banks so I held a little longer than I should have. I was thinking of adding which in hindsight of course I am so glad I didn't.

Reading Michael Lewis' book The Big Short puts into perspective how much the banks knew before the house came falling down yet they kept passing the bucket along the line. Crazy times (and a crazy read).

I think BOI is fairly valued now. They have to increase their equity base to increase deposits as loans are 110% of deposits already. Once the loans are profitable their equity will increase. It's the usual viscious circle.

BOI are starting to lend to agriculture on a bigger scale. At least that is what farmers who I meet tell me. They have a 50%+ market share there so I guess that they are trying to find untapped cash to put onto their books.

PTSB is overvalued for what it is however over time this valuation would be the lower side of fair value imo but not at this point in time.

I met with a senior AIB banking official a while ago and he was of the opinion that there is too much state money running through AIB for the government to let the bank go bust.

I agree that PTSB made stupid lending decisions. I think that their loan book is 60% tracker. Oops. I also agree about the Irish Life merger. That's why I like vanilla saving & loan banks - no insurance arms, no trading operations. Keep It Simple Stupid - KISS. Who knows what derivative trading operations hold off balance sheet.

You can get a good sense of management looking at the accounts. The number of products each person buys is an interesting indicator for example.
If people thought customer service was terrible they simply wouldn't be open to cross selling.