Adds details, share price in paragraphs 2-3, 6, 10-11

By Padraic Halpin

DUBLIN, Oct 30 (Reuters) - Irish bank Permanent TSB PTSB.I put itself up for sale on Thursday, seeking to capitalise on a "significant" rise in demand for its shares from international investors and allow the government to sell the last of its shares in the sector.

PTSB, by some way the smallest of the three Irish banks that emerged from the euro zone's biggest state rescue over 15 years ago, said the formal sale process, if successful, would result in the government exiting its 57.4% stake.

The proposal will test the appetite for Ireland's highly concentrated banking sector four years after Belgian lender KBC KBC.BR and British bank NatWest NWG.L quit the market and almost two decades since other foreign banks suffered big losses during Ireland's banking crash.

IRISH GOVERNMENT SUPPORTIVE OF SALE

"Given the robust economic backdrop and increased investor appetite in PTSB shares, the board is of the view that now is the right time to seek a new long-term owner," PTSB Chair Julie O'Neill said in a statement, also citing increased consolidation in the European banking sector.

The Irish government is supportive of the decision to seek a buyer, Finance Minister Paschal Donohoe said.

The bank's shares were 15% higher at 2.70 euros at 0850 GMT.

PTSB had a market value of 1.29 billion euros before the announcement, following a 63% surge in its share price this year up to the end of trading on Wednesday.

Effectively nationalised and split from its profitable life insurance arm after the 2008 crash, the mortgage-focused lender was transformed into a much larger player after buying 6.75 billion euros of loans from NatWest in 2023.

The bank, which has a more than 20% share of new Irish mortgage drawdowns so far this year, is targeting a return on tangible equity (ROTE) - a key profitability metric - of around 9% in 2027 and 11% by 2028.

It also intends to restart dividend payments next year for the first time since the 2008 crisis and is awaiting the results of a regulatory inspection of its revised mortgage risk models that, if approved, will improve ROTE.

The head of Spanish lender Bankinter BKT.MC, which has been expanding its Irish subsidiary Avant Money, said last week that it has a low appetite for non-organic growth overall and in Ireland.

PTSB has appointed Goldman Sachs as financial adviser. Ireland's finance department has appointed Rothschild & Co and William Fry.

(Reporting by Padraic Halpin. Editing by Muvija M and Mark Potter)

((padraic.halpin@thomsonreuters.com; +353 1 500 1504; Reuters Messaging: padraic.halpin.thomsonreuters.com@reuters.net))