AIB in talks to buy Investec Ireland

Move comes after bank exited EU aid plan which prevented it from doing deals

AIB is among a number of parties circling the Irish unit of South African financial services group Investec in what sources are describing as a competitive process

AIB is among a number of parties circling the Irish unit of South African financial services group Investec in what sources are describing as a competitive process

 

AIB is in early talks to acquire investment and stockbroking firm Investec Ireland, a month after the bailed-out lender exited a European Union state-aid restructuring plan that banned it from doing deals, according to sources.

The 71 per cent state-owned bank, which returned to the main stock markets in Dublin and London last June, is among a number of parties circling the Irish unit of South African financial services group Investec in what sources are describing as a competitive process. However, Investec has not made a definite decision to proceed with a sale of the business.

Spokesmen for AIB and Investec Ireland declined to comment when contacted by The Irish Times on Friday.

Deals

The development comes less than 15 months after the chief executive of Investec in Johannesburg said he was on the hunt for more deals in Ireland, as the company, which bought NCB Stockbrokers in 2012, needed further scale in its Irish wealth and investment management business. However, the fallout from Brexit has forced the group to weigh alternative options for the Irish unit.

Investec entered the Irish market in 2000 when it acquired treasury and corporate banking specialist Gandon Capital Markets. Twelve years later it bought NCB in a deal worth up to €32 million.

The Irish businesses, which employs about 250 people and is led by chief executive Michael Cullen, is involved in private banking, wealth management, capital markets and investment banking.

AIB, where Bernard Byrne is chief executive, exited the stockbroking business at the height of the financial crisis 2011 with the sale of Goodbody Stockbrokers to Kerry-based financial services group Fexco and management and staff in a deal worth €24 million. The acquisition of a securities and investment firm would serve to boost its non-interest income and diversify its profits.

Challenges

A sale of Investec Ireland to a regulated bank in the EU would help it get around challenges posed by Brexit to the business. While the company’s Irish wealth management and investment business, Investec Capital & Investments (Ireland), is regulated by the Central Bank in Dublin, the banking unit, Investec Bank plc (Irish Branch), is authorised in the UK, where its immediate parent is based.

It is understood that one potential solution, seeking authorisation as a branch of a non-EU bank under a law change enacted in 2013, has proved difficult as the UK is still a member of the EU.

AIB’s three-year EU restructuring plan on foot of a €20.8 billion taxpayer bailout during the financial crisis, which prevented the bank from making acquisitions without getting a derogation from the European Commission, expired at the end of last year. However, the bank would still need clearance from Minister for Finance Paschal Donohoe for any significant deals.

One issue that may scupper a deal is the fact that bailed-out Irish banks are effectively banned from paying bonuses to employees, as they would be subject to a prohibitive 90 per cent tax under the 2011 Finance Act. Performance-related pay is a widespread feature of remuneration in the securities and investment industry.