NatWest has stood out as a bright spot on the FTSE 100 in London this year, with its shares soaring close to 90 per cent as the former basket case of British banking accelerates its exit from State ownership — propelled as heightened interest rates boost earnings.

The UK government’s stake in the lender — which four years ago ditched its almost 300-year-old moniker Royal Bank of Scotland that had been tarnished by the group’s £45 billion bailout in 2008 — has fallen from 38 per cent at the end of 2023 to about 11 per cent today. This has been driven by drip-feeding NatWest shares on to the market and selling into stock buy-backs by the group.

The expectation is that UK chancellor of the exchequer Rachel Reeves, conscious the banking giant succumbed to state control during the lifetime of the last Labour government, will have signed off on a full exit by the middle of next year.

The same can’t be said of the Irish bank in which NatWest took a big stake two years ago: PTSB.

Now 57 per cent-owned by Irish taxpayers, PTSB has fallen 15 per cent so far this year, leaving it one of the worst-performing banking stocks across Europe as the sector advanced 25 per cent.

The bank may have increased the size of its balance sheet by about 50 per cent over the last two years by acquiring €6.75 billion of loans from NatWest’s Ulster Bank (in a deal that resulted in the UK lender taking an initial 16.7 per cent stake in PTSB as part payment). And its earnings may have been buoyed by the spike in official interest rates in recent years.

But the bank is still subscale, with about €29 billion of assets (compared to €159 billion at Bank of Ireland and €137 billion at AIB). It is, as Goodbody Stockbrokers analyst Denis McGoldrick reminded clients in a report last week, most at risk from the likes of Spain’s Bankinter turning its Irish unit Avant Money into a bank next year (initially adding a deposits offering to its existing mortgage range) and neobank Revolut entering the mortgage market.

PTSB is also at a disadvantage when it comes to funding. It had less than €3 billion of idle deposits earning money for nothing at the Central Bank of Ireland at the end of June, while Bank of Ireland had €28 billion and AIB had almost €31 billion.

Indeed it has had to pay proportionately more to secure deposits than the two larger banks, resulting in its margin — the difference between the average rates at which it funds itself and lends on to customers — narrowing by 0.08 of a percentage point in the first nine months of the year to 2.23 per cent. It warned in October that the margin will decline to 2.2 per cent by year-end, marking a downgrade from the 2.25 per cent rate forecast at the start of the year.

PTSB also has a costs problem. Its running expenses equated to 66 per cent of income last year, well above the 39 per cent and 42 per cent posted by AIB and Bank of Ireland, respectively.

If you look at the bank from a revenues-per-employee angle, the view is even less pretty. PTSB’s total income-per-employee stood at about €219,000 last year, according to calculations based on the bank’s average staff numbers. Bank of Ireland’s ratio was almost €420,000 and AIB’s nearly €465,000.

The average among western European banks was just shy of €400,000, according to US management consulting firm Kearney.

While PTSB previously targeted a ratio of 55 per cent in 2025, it backed away from that earlier this year and set a target of 60 per cent for 2026. But with the European Central Bank cutting rates more quickly than expected – unveiling a fourth quarter of a percentage point reduction since June on Thursday and setting the scene for more reductions next year – that revised target, too, has been looking a tad optimistic. Davy analyst Diarmaid Sheridan has pencilled in a 65 per cent estimate for 2026.

Something had to give. And it did, on Tuesday, when chief executive Eamonn Crowley opened a voluntary redundancy programme to staff. That follows a redundancy package launched two months ago, aimed at eliminating 20 senior management positions.

A spokeswoman for PTSB — whose workforce has grown by 850 to about 3,240 full-time equivalents over the past four years after taking on hundreds of Ulster Bank staff and retaining others hired on temporary contracts to deal with a growth in customers — declined to say how many jobs the bank aims to cut under the wider programme. But it will need to run into the hundreds to have any meaningful impact.

Davy’s Sheridan says it’s difficult to say exactly how many jobs may need to go. “We don’t yet fully know what the minimum operating cost of the bank is, taking into account regulatory demands, expectations on service levels and investment requirements — as well as future loan growth,” he said.

NatWest, like the Irish Government, has no interest in being a long-term investor in PTSB. Both moved in June 2023, seven months after NatWest became a shareholder, to sell down their holdings on the market — taking advantage of a short-lived spike in the share price during the period.

NatWest continues to own 11.7 per cent of PTSB. And it seems stuck for now, with the stock languishing 15 per cent below where it climbed two years ago.

Investors may hope the fresh attempt to get costs under control, and PTSB’s ongoing campaign to convince regulators to allow it to hold less expensive capital in reserve against loans, will provide a catalyst for the stock. But, for now, they’re sticking to the sidelines.