UK banking giant NatWest Group to take 16.7% stake in Permanent TSB (PTSB) in deal to sell much of its Ulster Bank unit’s loans and other assets to controlled lender by the Irish State.
The figure was revealed on Friday as both sides confirmed they had signed a binding agreement for PTSB to acquire around € 6.8 billion in mortgages and business loans from Ulster Bank, upon its exit. of the Irish market.
The amount of the transaction is lower than the 7.6 billion euros estimated in June when a first memorandum of understanding was signed. A spokesperson for the PTSB said the difference was due to loan repayments expected between the middle of this year and the finalization 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 with € 6.4 billion in cash, as well as NatWest, which is expected to take 90.9 million new PTSB shares. That will give it a 16.7% stake, worth around € 136 million, based on the PTSB share closing price on Thursday. PTSB shares rose 2% at the start of trading on Friday.
PTSB’s loan portfolio will grow by 40%, after more than a decade of contraction following the financial crash, and see its branch network expand by 30% as a result of the transaction.
“The conclusion of a binding agreement is an important step forward and supports our organic growth strategy while seizing this unique opportunity to accelerate the growth of Permanent TSB,” said PTSB Managing Director Eamonn Crowley.
Mr Crowley said earlier this year that the loan purchase – combined with the result of a contraction in the Irish market from five retail banks to three, with the planned exits of Ulster and KBC Bank Ireland – should bring the PTSB’s return on equity at 9 percent over the medium term. It was showing a 2-3% return in the years leading up to the Covid-19 pandemic, a fraction of the 8-10% that analysts see as a sign of a viable bank.
Some 450 of Ulster Bank’s 2,500 employees are expected to move to PTSB with the deal. Another 280 will be transferred to AIB as part of the purchase agreed by this bank of 4.2 billion euros in business loans. The Irish Times previously reported that Ulster Bank was also in talks to sell its portfolio of € 6.5 billion tracker mortgages to AIB.
The agreement is subject to the approval of the Competition and Consumer Protection Commission (CCPC), the Central Bank and the shareholders of the PTSB. Both sides expect Ulster Bank’s performing mortgages, which make up the bulk of the deal, to roll over in the fourth quarter of next year. Ulster Bank’s performing micro-business loans and lending business Lombard Asset Finance, which had combined portfolios of € 630 million in June, will move soon after.
Ulster Bank said: “Ulster Bank customers do not need 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 percent to 62.5 percent. The UK bank will enter into a shareholder cooperation agreement with Finance Minister Paschal Donohoe to ensure orderly sales of PTSB shares by both sides in the future as they seek to reduce their holdings.
“This transaction is a very positive development for PTSB and represents an important opportunity for the bank, its stakeholders and its 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 has a more important role than ever in providing meaningful competition to consumers in terms of product choice and price. “