AIB has selected fledgling UK small-business challenger bank Allica Bank as preferred bidder for its almost £1 billion (€1.2 billion) British SME business loan book, which was put on the market earlier this year.
It is understood that a deal could be announced within weeks, allowing AIB to exit a segment of the market that has been delivering low returns for the bank, due to its small scale and relatively high labour demands.
AIB chief executive Colin Hunt told analysts on a call earlier this month, after the bank issued a trading update, that the group was in exclusive talks with a party on the loan book, without identifying the other side.
“Our plans to exit the GB SME market are progressing well with a sales process significantly advanced and we have moved to preferred bidder stage,” a spokesman for the bank said on Friday, declining to comment on the suitor for the portfolio.
A spokesman from Allica Bank also declined to comment.
Mr Hunt announced last December that the bank was retrenching from the British SME market, while doubling down in corporate lending in areas such as renewable energy, manufacturing and warehousing. The AIB spokesman confirmed on Friday that AIB UK remains committed to these areas, as well as to the healthcare and infrastructure sectors.
The Irish Times reported in March that AIB had hired international boutique investment bank Alantra to find a buyer for the British SME portfolio, which also includes £2.8 billion of associated deposits. Bidders had been whittled down to a shortlist of four by early August.
Allica Bank, which is backed by London investment firm Warwick Capital Partners, received full UK banking authorisation in late 2019 and went on to hire its chief executive, Richard Davies, last year from Revolut. The bank said last month that it had extended more than £600 million of loans to SMEs since it opened its doors in March 2020 and it was "laser-focused on growing this to multiple billions over the coming years".
AIB’s exit from the labour-intensive SME segment of the British market will save the bank an estimated €35 million in the coming years.
The bank also moved this year to restructure its business in the North, announcing in July that it was closing eight of its remaining 15 branches there, following hot on the heels of decisions by Bank of Ireland and Danske Bank to shut branches in the region. AIB had cut its network in the North from 30 branches in 2017.
Bank of Ireland said in February that it was cutting its Northern Irish network by more than half to 13 locations as part of a major branch cull across the island this year.
Meanwhile, Danske, the biggest bank in Northern Ireland, said in July it was shutting four branches in that market in a move that would reduce its footprint to 32 locations.