Irish State-owned Permanent TSB Group Holdings today reported a loss before tax of €668m for the year to the end of December compared with a pre-tax loss of €919m in 2012.

The operating loss was unchanged year on year at €977m, but its bad debt charges rose to €927m from €883m in 2012.

The group comprises Permanent TSB, its bad bank and its non-core business unit.

Permanent TSB reported an operating loss of €153m in 2013, mainly on the back of a bad debts charge of €148m. The group said that it continues to work hard to ensure that Permanent TSB returns to profitability this year.

The bad bank reported a loss of €561m, mainly driven by a bad debts charge of €496m. The bank said it expects this loss to narrow this year as new defaults reduce and loans are "cured".

Permanent TSB  said this unit now has about 300 staff, which take over 1,000 calls daily. It said it has offered 18,000 long term solutions to customers in arrears.

Group chief executive Jeremy Masding commented: “Our key message is that Permanent Tsb bank is turning the corner. I’m delighted to be able to confirm that the permanent tsb Strategic Business Unit – effectively our customer-facing business - is now trading profitably.”

On deposits: “We continue to manage the funding side of the balance sheet in a proactive and professional manner. The combination of an increase in the retail, corporate and institutional deposit base and a tentative return to the capital markets demonstrates that we are both strengthening the Group’s balance sheet and reducing our over dependency on system funding”.

Economic View: Further ECB action not being ruled out; Dermot O'Leary, chief economist at Goodbody, comments  - - "Yesterday was a day for rather candid and somewhat surprising comments from some influential ECB Governing Council members. The most surprising comments came from Bundesbank President Jens Weidmann, who appears to have softened his opinions on whether the ECB should engage in further asset purchases. Mr. Weidmann has previously voiced his opposition to OMT, so while he stated that his view on the issue will be strictly based on the legal opinion of ECB staff, the comments do suggest that his hard line has softened.

Another supposed hawk, in the form of Bank of Finland Governor Liikanen, stated very clearly yesterday his view that quantitative easing (by way of secondary market purchases) is something that is not prohibited by the Treaty and that negative deposit rates is “no longer a controversial issue”. Both men mentioned the possibility of the ECB purchasing private securities in the market.

Given that the comments come from the hawkish camps within the Governing Council, they are significant, and indicate that the ECB is either preparing the ground for such actions in the coming months or, at the very least, engaging in some verbal intervention to highlight the bank’s willingness to act.

Although the speech from Mario Draghi yesterday was interesting for other reasons, in that it contained the closest to a mea culpa that we have heard from any of the European organisation, the commitment to do “whatever it takes” in terms of policy to prevent deflation was also a key conclusion.

First Derivatives FY14 to be broadly in line and encouraging start to the new year: Rachael Cairns of Goodbody comments  -- "First Derivatives has released a trading statement this morning highlighting that the growth in revenue and profitability which the group reported in H1 has continued into the second half. In addition, it has maintained investment into sales training and infrastructure to support growth in its current and future markets.

The group is guiding that its full year results to the end of February 2014 will be broadly in line with current market expectations. It notes that prospects for the business remain very positive and that the company has made an encouraging start to the new year.

Overall, a positive statement from First Derivatives as it highlights continued strong growth in the business and we note the encouraging start to FY15. In terms of our FY14 estimates, we forecast revenue of £70.2m and EBITDA of £12.8m, which are in line with market expectations. On FY15, our current forecasts are for revenue growth of 14% yoy to £80m and EBITDA of £15.2m, +18% yoy. We remain very positive on First Derivatives given the traction that is being seen in its software business and the upside potential that it offers, as well as continued double-digit growth from its consulting business. We reiterate our BUY recommendation"

Economic View: Promissory note deal under scrutiny; Juliet Tennent, economist at Goodbody comments  -- "According to the Irish Times this morning the ECB is reviewing the legality of the promissory note deal implemented by the Irish Government last February. This deal saw the controversial promissory note used to recapitalise IBRC exchanged for €25bn of government bonds with maturities between 25 and 40 years. These new bonds are held at the Central Bank, with a commitment to sell them by 2024 in pre-defined “minimum” tranches. The first €0.5bn is to be sold before the end of 2014, followed by a similar amount annually between 2015 and 2018, a further €1bn annually is scheduled for sale between 2019 and 2023 with the remainder sold from 2024 in €2bn tranche per year until all bonds are sold.

The ECB is examining the deal, ahead of the publication of its annual report in April, to assess whether it constitutes monetary financing, which is contrary to article 123 of the EU Treaty.

As the deal was completed over a year ago it is not likely that it will be reversed. However, the Government may come under pressure to accelerate the pace at which it plans to offload the bonds being held by the Irish Central Bank. Given the strong appetite for Irish sovereign debt and the historically low interest rate environment such a prospect should not pose too much difficulty

Bank of Ireland: Lloyds share sale keeps focus on State shareholdings in banks; Eamonn Hughes of Goodbody comments - - "UKFI has completed its sale of a 7.8% stake in Lloyds at 75.5p to bring its holding back to 24.9%. The sale has been on the cards for some time though the timing coincides with some sector weakness over the last few days (investors getting ready for the placing?). In recent days, BOI has been quite weak, down 4% in the last 5 days and down 19% in the past month. The Lloyds sale in the short term may keep the focus in investors mind’s in further placings by government shareholders, cognisant of the Irish government’s 14% stake in BOI. Given recent weakness, BOI is trading on 8.3x 2016 earnings, 1 point cheaper than the sector, a discount that widens to c.2 points on 2017 earnings (BOI on just 6.7x).

There has been much comment this week on the high level of impaired loans in Irish banks – Moodys report last Friday and the Mario Draghi letter to the Irish government opposition finance spokesman – which may have impacted BOI’s price performance. However, on the former, it appears to us that Moodys’ caution mainly stems from the uncertainty and lack of detail on the parameters of the ECB stress tests. Reports on Bloomberg overnight indicate their base case is that the Irish banks are unlikely to need capital in the ECB stress tests, but may in a severe stress test. These test parameters will emerge at the end of April and may lead to more positive actions by Moodys.

Our base case is that the 13-14% transition core tier 1 ratios at the main Irish banks will be sufficient to absorb the adverse scenarios in the ECB stress test (5.5% core tier 1 ratio). Also, the cocos are able to convert in the adverse scenario (if trigger 5.5%+) and are worth 1.8% of capital at BOI and 2.5% at AIB. So our base case is that the stress test won’t require either to raise any additional equity.

Commercial Property JLL predicting growth in office rents to average 6.3% until 2018; Eamonn Hughes and Colm Foley of Goodbody comments - - The Irish Times commercial property section picks up on recent forecasts issued by JLL which expect Dublin to experience the highest rate of annual rental growth in Europe between now and 2018 at 6.3%. At present, prime office space is attracting rents of up to €35 per sq. ft., although a new development in Stephens Green is quoting rents of €40 per sq. ft., with JLL predicting rents will reach €47.50 per sq. ft. by 2018. Aside from the development in Stephens Green the only other new development underway is the mixed office and apartment development on a 2.02 acre site in Ballsbridge which is likely to see supply continue to tighten, supportive for further rental growth.

JLL also expect rental growth in Dublin’s industrial market will also be steady with average rent increases of 7.3% for the next 5 years. Industrial rents are expected to achieve €6.50 per sq. ft. in 2014 and €8.50 per sq. ft. by 2018.

The projections from JLL are supportive for continued gains in the CRE market which should underpin the investment case for the REITs."