PTSB and AIB set to disclose discussions on Ulster Bank loan portfolio

The permanent TSB and AIB, in which the government has majority stakes, are set to announce on Friday that they are in talks to buy parts of Ulster’s € 20.5 billion loan portfolio Bank in the Republic as the UK lender prepares to confirm it is exiting the market, sources say.

Talks between the two banks and NatWest, advised by Goldman Sachs, continued Thursday evening as the board of directors of NatWest, the parent company of Ulster Bank, considered a plan to orderly liquidate the Irish unit.

It is understood that AIB, led by Managing Director Colin Hunt, is looking in particular at Ulster Bank’s portfolio of companies and medium-sized businesses, which potentially amounts to € 4 billion in loans.

The Permanent TSB (PTSB), of which Eamonn Crowley is CEO, surrounds Ulster Bank’s small business lending and part of its mortgage portfolio.

A deal with AIB, which shares most of the business banking market with Bank of Ireland, would be subject to close scrutiny by competition authorities. For its part, the PTSB may need additional capital, depending on the size of the transaction.

Tánaiste Leo Varadkar told the Dáil on Thursday that the government was exploring the creation of a so-called third banking force, with Finance Minister Paschal Donohoe “weighing all options” to protect customers and minimize job losses and avoid compulsory layoffs wherever possible, he said.

Mr Varadkar told Sinn Féin finance spokesman Pearse Doherty that “a third force that would be able to compete with Bank of Ireland and AIB is something I support, something that the government supports, and if it is possible to develop a solution along these lines ”.

This suggests that a major loan transaction with the PTSB could be considered.

A spokesperson for AIB 71 percent state-owned and a spokesperson for PTSB, in which taxpayers have a 75 percent stake, declined to comment. A spokeswoman for NatWest also declined to comment.

The Irish Times first reported last September that NatWest was actively considering shutting down Ulster Bank in the Republic as it grapples with lingering issues of low profitability, Covid-19 and high levels of reserves of capital that are trapped in the business.

It was reported on Wednesday evening that AIB and PTSB and others, including non-bank lender Dilosk, were in talks to varying degrees over the potential acquisition of parts of Ulster Bank’s portfolio.

Overseas investment funds such as Cerberus and Lone Star, which have been among the most aggressive buyers of distressed loans in Ireland and Europe in recent years, are also known to monitor elements of the loan portfolio of Ulster Bank.

Mr. Varadkar stressed that “in any case, people’s deposits and savings are fully protected and can be transferred to another bank”. Ulster Bank has a deposit portfolio of approximately 22 billion euros.

Ulster Bank employs approximately 2,800 people statewide with 88 branches and over one million customers. It is responsible for 20 percent of all SME loans and holds a 15 percent share of the mortgage market.

Mr Doherty said the possibility of a debt investment fund like Cerberus acquiring loans from Ulster Bank “would be an unacceptable outcome for homeowners / borrowers … it should be avoided at all costs”.

He said the state remains a key player in Ireland’s banking sector and the pillar banks “could play a major role”.

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