Permanent TSB (PTSB) joined its competitors on Wednesday by successfully raising €500 million through the sale of green bonds. This trend towards eco-friendly lending has been growing in popularity across international debt markets. The senior notes carried a coupon rate of 4.25 per cent and attracted a substantial €2.2 billion in orders from investors.
In 2021, the bank issued circa €700 million in green mortgage loans, which represented nearly a third of its new home lending. In Ireland, mortgage lenders offer cheaper green mortgages for homes possessing a Building Energy Rating (B3) or higher. For instance, PTSB’s triple-year fixed-rate green loans start at 4 per cent compared to a conventional 4.75 per cent mortgage for the same period.
CEO Eamonn Crowley regarded the successful sale as a clear indicator of investor confidence in the bank’s advantageous evolution and diversification of its investor base and funding sources. Irish retail bank AIB first ventured into the green bond market in late 2020, followed by Bank of Ireland in March 2021. Similarly, PTSB sold its green bonds via a parent company at the top of its corporate structure.
In recent years, the demand for environmentally friendly investment opportunities has sparked a surge in green bond sales. According to data from the Climate Bonds Initiative, green debt sales increased to $492.30 billion (€455bn) in 2023, up from $446.18 billion the year before. This surge occurred despite increases in interest rates by global central banks, which affected overall international debt markets.
Analysts predict that the new European Union standards for green bond sales, due to become effective in January 2025, will boost the debt market further by enhancing transparency, comparability, and credibility. This will assist investors in gaining a clearer understanding of the environmental, social, and governance standing of debt issuers.
Analysts at Goodbody, a stockbrokerage, have praised PTSB for its focus on residential mortgages and absence of commercial real estate exposure, citing that it makes the firm an enticing option for credit investors. They added further that the bank’s decision to allocate higher amounts of capital for new mortgages compared to its Irish competitors offers even more assurance to credit investors. There has been a significant improvement in PTSB’s ratio of non-performing loans, dropping to 3.3 per cent from 28 per cent in 2017.