Austrian bank Bawag has signalled that it plans to carry out a deal to free up some capital PTSB must hold on its balance sheet against loans, which would lower the net cost of its €1.62 billion deal to buy the Irish lender.
A transaction agreement on the takeover, published on Bawag’s website, states that PTSB will work with the Vienna-based group on a potential so-called significant risk transfer (SRT) deal on part of the Irish group’s loan book.
PTSB will allocate staff to work on such a project before the takeover is completed, to enable Bawag to carry out a potential SRT transaction after the sale goes through, according to the document.
An SRT would see groups of institutional investors take on part of the risk of losses on the loans in portfolios for an extended period, reducing the level of capital the bank needs to hold in reserve against the loans.
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Bawag has been one of the most active users of SRTs relative to the size of its balance sheet, according to analysts. It was reported last week to be planning such a deal on €2 billion of its credit card receivables. Irish banks Bank of Ireland and AIB have also engaged in such deals in recent years to improve their capital efficiency.
Other measures are also set to reduce the net cost of the PTSB acquisition.
An accounting manoeuvre is on track to deliver a sizeable gain – of close to €400 million – on day one of the deal going through. This immediate profit, also known as badwill or negative goodwill, is created when a business is acquired at a discount to its inherent value.
The €1.62 billion value of the Bawag deal is at a discount to PTSB’s reported end-2025 net assets, of just under €2.02 billion.
PTSB itself used this accounting move to good effect when it acquired a portfolio of loans from Ulster Bank in 2023 – generating a €362 million gain and avoiding having to go cap in hand to shareholders for capital to help seal the deal.
[ Bawag: what can Irish consumers expect from PTSB’s new owner?Opens in new window ]
However, Bawag chief financial officer Enver Sirucic told analysts on Tuesday afternoon that the group would likely reinvest whatever badwill gain is created from the deal into PTSB.
PTSB also secured approval in January from the Central Bank for a new model to calculate credit risk capital requirements on its mortgage book, which is releasing about €130 million of capital.
The Vienna-based lender has promised significant investment in the bank to modernise its branch network and technology as well as expand product offerings.
Bawag said this week that it plans to provide more information next Tuesday, when it reports quarterly results, on how it plans to fund the PTSB deal.
The transaction agreement also provides details of commitments it has given for a minimum of 24 months after the deal goes through in late 2026 or early 2027.
These include maintaining PTSB’s headquarters in Dublin as well as a “meaningful branch footprint across Ireland to continue to provide brick and mortar banking services to the Irish customers of PTSB, including access to cash in line with applicable regulation”.
It will “engage constructively with employee representatives” on organisational changes. While Bawag’s deputy chief executive Sat Shah told reporters on a call that it was “a little premature” to talk about potential job reductions, redundancies are expected to be a key part of the near-term plan as the group sees the PTSB purchase boosting its earnings per share by 20 per cent by 2028.
Bawag also plans to carry out a “detailed review” of product lines it has on offer in Austria, Germany and the Netherlands, with a view to rolling them out in Ireland. This will include household energy-efficiency loans, small-business and self-employed banking products, investment brokerage services, and financing of residential and commercial real estate development and investment, according to the document.
