PTSB and Ulster Bank seek competition clearance for €6.8bn loans deal

Transformational deal would increase PTSB’s loan book by almost 50%

Permanent TSB (PTSB) has started the process of seeking approval from the State's competition watchdog for a transformational deal to increase its loan book by almost 50 per cent with a portfolio purchase from Ulster Bank.

Ulster Bank's parent NatWest Group agreed last week to sell €6.8 billion of the Irish unit's mortgages and business loans to PTSB, as it advanced a plan to exit the Republic after years of sub-par profit returns. The deal also involves PTSB taking over 25 of Ulster Bank's 88 branches and NatWest accepting a 16.7 per cent stake in the Irish State-controlled lender as part payment.

The Competition and Consumer Protection Commission (CCPC) was notified of the planned transaction on Wednesday, according to a filing on the authority’s website. Interested parties have been given until January 4th to make submissions.

The CCPC has already signalled that it will be applying a robust test to plans by the three remaining retail banks in the State to carve up the loan books of Ulster Bank and KBC Bank Ireland, as the two overseas-owned lenders withdraw from the market.

The departing lenders accounted for about 25 per cent of mortgage lending in 2020, while Ulster Bank is estimated to have held a steady share, of about 20 per cent, of the SME market in recent years.

Phase-two investigation

The CCPC decided in October to launch a full phase-two investigation into Bank of Ireland’s planned purchase of KBC Bank Ireland’s mortgage-focused €9 billion of performing loans, in order to ascertain if it would lead to a “substantial lessening of competition in the State”.

Ulster Bank chief executive Jane Howard told the Oireachtas Finance Committee earlier this month that she expected to hear "sometime in January" whether the CCPC will also start a phase-two assessment of the bank's agreed sale of €4.2 billion of corporate loans to AIB.

AIB is also known to be in talks to acquire Ulster Bank’s €6.5 billion of tracker mortgages, where customers’ borrowing costs are linked to the European Central Bank’s main rate.

Some of the country’s non-bank lenders are closely monitoring the CCPC assessment of the flurry of deals among the mainstream banks. Non-banks may be presented with opportunities if banks are required by the authority to sell on parts of the loan books being traded, in order to secure regulatory clearance for their planned deals, according to industry observers.

Chris Hanlon, the chief executive of First Citizen Finance, one of the largest non-bank consumer finance firms in the State, told The Irish Times earlier this month that he would "definitely" be interested in loans that the retail banks may be required to divest.

His company, which is currently focused on car finance as well as lending to the agriculture, SME and commercial real estate sectors, is actively considering entering the mortgage market to take advantage of opportunities posed by the exits of Ulster Bank and KBC Ireland.