Bank loan

NatWest set to take 16.7% of PTSB in Ulster Bank loan sale deal

British banking giant NatWest Group is set to take a 16.7% stake in Permanent TSB (PTSB) in a deal to sell a large portion of its Ulster Bank unit’s loans and other assets to the government-controlled lender. Irish state.

The figure was revealed on Friday as the two parties confirmed they had signed a binding agreement for PTSB to acquire around 6.8 billion euros in mortgages and business loans from Ulster Bank, during its exit from the Irish market.

The size of the transaction is less than the 7.6 billion euros estimated in June when a first memorandum of understanding was concluded. A PTSB spokesperson said the difference was due to loan repayments expected between the middle of this year and the completion of loan sales between late 2022 and early 2023.

The deal, which also includes 25 of Ulster Bank’s 88 branches in the Republic, will be funded by €6.4 billion in cash, plus NatWest taking 90.9 million new PTSB shares. That will give him a 16.7% stake, worth around 136 million euros, based on PTSB’s closing share price on Thursday.

PTSB’s loan portfolio will grow by almost 50%, after more than a decade of contraction following the financial crash, and will see its branch network expand by 30% following the transaction.

“Reaching a binding agreement is a significant step forward and supports our organic growth strategy while seizing this unique opportunity to accelerate the growth of Permanent TSB,” said PTSB Chief Executive Eamonn Crowley.

Mr Crowley said earlier this year that the purchase of loans – combined with the result of a contraction in the Irish market from five retail banks to three, with planned exits from Ulster and KBC Bank Ireland – should push PTSB’s return on equity at 9 percent. cent in the medium term. It was delivering a 2-3% return in the years before the Covid-19 pandemic, a fraction of the 8-10% that analysts consider a sign of a viable bank.

Transfer of personnel

Some 450 of Ulster Bank’s 2,500 employees are expected to transfer to the PTSB with the deal. A further 280 will move to AIB as part of that bank’s agreed purchase of €4.2 billion in corporate loans. The Irish Times previously reported that Ulster Bank was also in talks to sell its €6.5 billion tracker mortgage portfolio to AIB.

The agreement is subject to the approval of the Competition and Consumer Protection Commission, the Central Bank and the shareholders of the PTSB. Both parties expect Ulster Bank’s performing untracked mortgages, which form the bulk of the deal, to be transferred in the fourth quarter of next year. Ulster Bank’s successful micro business lending and its Lombard Asset Finance lending business, which had combined portfolios worth €630 million in June, will be moved shortly thereafter.

Ulster Bank said: “There is no need for Ulster Bank customers to take action. If they are potentially impacted by today’s announcement, we will be in direct contact with them and letters and emails will be sent to potentially impacted customers as soon as possible by early January.

The new shares issued to NatWest will dilute the state’s stake in PTSB from 75% to 62.5%. The UK bank will enter into a shareholder co-operation agreement with Finance Minister Paschal Donohoe to ensure orderly sales of PTSB shares by both parties in the future as they seek to reduce their holdings.

“Positive Development”

“This transaction is a very positive development for PTSB and represents a significant opportunity for the bank, its stakeholders and customers to consolidate its position in the Irish banking market and position itself for future growth,” said Mr. Donohoe.

“With the withdrawal of Ulster Bank and KBC from the Irish market, a larger-scale PTSB is playing a bigger role than ever in providing meaningful competition to consumers in terms of product choice and price.”

Sinn Féin welcomed the deal, saying the extra scale for the PTSB would support greater competition. However, its financial spokesman Pearse Doherty raised concerns about the timing of the deal and the outsourcing of mortgage services to Pepper Finance.

“It is crucial that the regulator takes all steps to ensure adequate support for P TSB customers throughout this process. This includes reviewing the timeline in which this process is concluded,” he said.