Shares of Permanent TSB soared more than 16% today after news broke of a potential deal worth around 7.6 billion euros to buy parts of Ulster Bank’s business here.
The lender said it had entered into a non-binding memorandum of understanding with Ulster Bank owner NatWest over a potential acquisition involving certain elements of Ulster Bank’s retail and SME business in Ireland.
Assets include Ulster Bank’s successful non-tracker mortgage portfolio, its successful SME/Business Direct business, Ulster Bank’s Lombard Asset Finance lending business and 25 branches in the Ulster Bank network.
Earlier this year Ulster Bank announced a phased withdrawal from the Republic of Ireland over the next few years which will be managed in an “orderly and thoughtful” manner.
The bank, which is owned by British lender NatWest, has 1.1 million customers here, as well as 2,800 staff in 88 branches across the country.
It is expected that approximately 400 to 500 Ulster Bank employees, who are wholly or mainly assigned to retail and SME lending in the acquisition process, will transfer to Permanent TSB.
As part of today’s potential deal, NatWest Group is proposed to become a shareholder of Permanent TSB and take up to 20% of the lender’s equity.
Eamonn Crowley, CEO of PTSB Holdings, said today’s potential transaction complements the bank’s growth strategy and will accelerate the achievement of Permanent TSB’s ambition to become the best personal and small business bank in Ireland.
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“We see this as a unique opportunity to accelerate the growth of an Irish bank with a strong community and customer service ethic that has evolved over its 200 year history. It also supports the investments we are making in the transformation of our branch and digital banking services,” he added.
Speaking on Morning Ireland, Eamonn Crowley said the deal with Ulster Bank would be self-funding through NatWest’s 20% stake in PTSB and PTSB will pay it in cash.
As a result, he said, the bank does not intend to have to raise funds from existing shareholders, including the state which owns 75% of the bank.
Ulster Bank loans sold are linked to 100,000 customers, which roughly break down between 60,000 mortgage customers and 40,000 SME customers.
The permanent TSB currently has 76 branches across the country.
Two branches will be merged when and if it takes over Ulster Bank’s 25 branches. Thus, the newly expanded Permanent TSB will have a total of 99 branches if the deal goes through.
PTSB had €14 billion in mainly mortgage loans at the end of 2020 and its CEO said the proposed deal with Ulster Bank will take its share of mortgages above 20%.
In its statement today, Ulster Bank said there are other customer and customer products which are not covered in today’s announcement and will update them as appropriate. applicable.
“Although performing tracker mortgages are not part of today’s MoU, Ulster Bank and NatWest Group are working on a similar path for these clients with strategic banking counterparties. We will update this in due course” , the bank added.
Ulster Bank has said that while there will be no change for customers today, over the next few months it will be making a series of changes for customers as it implements its phase-out .
The lender said it will proactively contact customers when they need to move a bank or close accounts, adding that it will ensure customers are given sufficient time or notice periods as well as support they need to complete the process.
“As part of this, our commitment remains not to close any branches in 2021, and we do not expect to close any branches in the first half of 2022,” he said.
“Branches will continue to play an important role and in the second half of 2022 we will begin to phase out traditional teller/cash services to focus on in-person assistance with moving the bank and/or closing accounts,” a- he added.
Ulster Bank chief executive Jane Howard said the bank today announced a significant update to its process for phasing out the country.
“Our agreement remains subject to additional relevant due diligence, evaluation and approvals and may not result in a transaction,” Ms Howard added.
“Today’s agreement with PTSB will provide a good solution for these clients and colleagues, building on our recently announced agreement with AIB. We remain in discussions to find a similar constructive solution for our tracker mortgage portfolio. efficient,” she said.
“We anticipate further updates to customers and colleagues on progress in the coming months, including other products and services not covered in today’s announcement” , she added.
Ulster Bank agreed last month to sell the bulk of its Irish commercial loan portfolio, totaling 4.2 billion euros, to AIB.
AIB’s main rival, Bank of Ireland, is in talks to buy the bulk of Belgian bank KBC’s Irish assets, a move that could leave the country with just three retail banks.
Both the Irish and UK governments will effectively be shareholders in PTSB when completed, as NatWest remains 62% taxpayer owned, a legacy of the financial crisis a decade ago.
Agreement with Ulster Bank to strengthen PTSB’s role in the market – Donohoe
Finance Minister Paschal Donohoe said that while he recognizes that significant further work is required before a final transaction is agreed, he believes that a successful delivery of a transaction on the scale described in today’s announcement would be a very positive development for the PTSB and Ulster Bank staff and customers.
“The successful completion of a transaction along the lines described in PTSB’s announcement would be a very positive outcome providing a significant number of Ulster Bank customers with certainty as to where their loans are going, and a large number of ’employees comfortable in terms of job security,’ Paschal Donohoe said.
“However, I appreciate that the conclusion of any transaction is subject to normal due diligence, further negotiation and agreement on final terms, and the receipt of appropriate approvals,” he said. added.
Paschal Donohoe said that for Permanent TSB, the acquisition of these loan portfolios would give the bank additional scale, further strengthening its role in the market.
“With Ulster Bank and KBC exiting the market, an expanded PTSB is playing a bigger role than ever in providing meaningful competition to consumers, both in terms of product choice and price,” he said. .
“I am optimistic that these discussions will lead to a positive outcome and remain favorable to the bank as a shareholder,” he added.
FSU hails today’s MOU as a ‘positive development’
The Financial Services Union described today’s MoU as a positive development and a step forward.
General Secretary John O’Connell welcomed the commitment that a significant amount of staff will transfer to PTSB from Ulster Bank and that they will retain their current terms and conditions.
He also noted that some branches would also be taken over by the PTSB.
“Ulster Bank’s withdrawal from the Irish banking market has caused enormous anxiety for staff and customers alike,” he said.
“This announcement brings some clarity and reassurance to staff,” he added.
However, Mr O’Connell said there were many unanswered questions and as a result the union has requested a formal meeting with the CEOs of both banks.
He also highlighted the issue of the 600 employees based in Northern Ireland and said the union was now seeking job security assurances for Ulster Bank staff based in Belfast.
Shares of Permanent TSB surged in Dublin trading today.