In a research note published yesterday, analyst Emer Lang said the home loan lender will have a return on equity of 2.3% and 3.7% in 2017 and 2018.
That compares with valuations on European banks which suggest they currently have much higher returns on equity.
Shares in PTSB — in which the Government sold a 25% stake to investors over a year ago — have been under pressure for some time.
Nonetheless, PTSB shares climbed 6% yesterday to 200 cent, but are down over 56% since the start of the year.
The slide quickened in the last three weeks since it became clear that Fianna Fáil, with the support of Sinn Féin and other deputies, would secure the support in the Dáil to legislate to empower the Central Bank to impose some sort of controls over mortgage rates.
PTSB could have the most to lose if the legislation were to pass into law, because it is the most exposed to mortgage lending of the Irish banks bailed out during the crisis.
Fiona Hayes at Cantor Fitzgerald said the shares had been “oversold” in recent weeks.
Ms Lang at Davy said that while “the mortgaging pricing environment remains a downside risk” to the bank’s margins, and while “legislation to cap mortgage rates remains on the table”, the passing into law of the legislation is “likely to be drawn out”.
PTSB’s plans to sell off the remainder of its UK lending book, CHL, will boost the lender even though the disposal will likely be delayed to next year, she said.
However, “intensifying mortgage pricing pressures will continue to weigh, driving our 2018 return on equity — adjusted for surplus capital — from 5% to 3.75% — versus 8.4% a year ago,” the Davy analyst said.
“Factors which are largely outside the bank’s control include a disproportionate regulatory cost burden — up to €62m per annum — increased political-competitive pressure on mortgage rates, and the impact of a Brexit-driven delay in deleveraging its residual UK portfolio,” she said.