Bank loan

AIB seeks competitive clearance for final deal on Ulster Bank loan book

AIB has formally sought clearance from the Competition and Consumer Protection Commission (CCPC) for its acquisition of Ulster Bank’s successful follow-on mortgage portfolio.

he deal for the €5.7 billion loan portfolio, completed on June 1, is the latest in a series of deals prompted by the impending departures of Ulster and KBC from the Irish market.

This follows the CCPC’s approval of AIB’s purchase of Ulster Bank’s €4.2bn corporate and commercial lending business in April, one of several large deals completed by AIB. AIB’s Managing Director, Colin Hunt, for the past two years.

The mortgages, priced 1pc above the ECB rate and acquired at a slight discount to face value, will add €90m to AIB’s income from next year , according to the bank.

AIB said it intended to engage a third-party service provider to administer the portfolio of 47,000 loans. The service agreement will have no impact on customers, who will retain their existing terms and conditions, the bank said.

The CCPC has reviewed several major banking sector deals over the past year, as AIB, Bank of Ireland and Permanent TSB all scooped up the best parts of Ulster Bank and KBC.

In May, the watchdog conditionally approved the Bank of Ireland’s acquisition of KBC’s €9 billion performing mortgage portfolio after a lengthy review.

The BOI will have to provide lines of finance to non-bank mortgage providers as a remedy to competition under the deal. This agreement is still awaiting the approval of Finance Minister Paschal Donohoe.

Permanent TSB’s purchase of €7.6bn of small business loans from Ulster Bank was cleared last month and is also on the minister’s desk.

The billions in asset transfers will leave Ireland with a highly concentrated retail banking market of just three major players as the last two foreign banks leave the market.

CCPC said in April that international studies have shown that less banking competition leads to poorer outcomes for borrowers in terms of pricing, innovation and service.”