EUROPEAN bank stress tests have found that Ireland’s permanent tsb (PTSB) had a capital shortfall of 800 million to 850 million euros at the end of 2013, a source familiar with the process said Friday.

    The shortfall will drop to around 200 million euros (US$253 million) after taking into account the bank’s financial actions so far this year plus the potential conversion of 400 million euros of contingent capital notes, known as CoCo bonds, the source added.

    Finance Minister Michael Noonan said last week that the 99.2 percent state-owned bank would be able to raise any additional funds it might need from private investors. All other Irish lenders passed the tests, the result of which were to be released yesterday, the source said.

    The smallest and weakest of Ireland’s three remaining domestically owned banks, PTSB remains the only loss-making lender. In the first half of this year, however, it cut its underlying loss by 62 percent to 171 million euros.

    Two-thirds of PTSB’s loan book is made up of expensively funded and loss-making tracker mortgages, which are linked to the European Central Bank’s low interest rates.

    PTSB, one of European 25 banks that have failed the tests, according to two people familiar with the matter, said it would release a response to the test results Sunday.

    The state-controlled mortgage lender recently sold two portfolios of mortgage loans, which it said improved its regulatory capital position. It has appointed Deutsche Bank to advise on its capital market plans. (SD-Agencies)