PTSB’s shares soar as it prepares to take over 7.6bn of Ulster Bank loans

Banks have signed a memorandum of understanding on sproposed deal

NatWest Group is to take a 20 per cent stake in Permanent TSB (PTSB) as part of a plan to sell €7.6 billion of loans

NatWest Group is to take a 20 per cent stake in Permanent TSB (PTSB) as part of a plan to sell €7.6 billion of loans

 

Permanent TSB’s (PTSB) shares soared on Friday as it confirmed that it plans to acquire €7.6 billion of loans and 25 branches from Ulster Bank, as the UK-owned lender retreats from the Republic.

PTSB and Ulster Bank’s owner, NatWest Group, said in statements on Friday morning that they had signed a memorandum of understanding on the shape of a proposed deal, which would also see between 400 and 500 Ulster Bank employees transfer.

The proposal envisages NatWest taking up to a 20 per cent stake in PTSB as part payment for a deal that is expected to increase the size of the Irish State-controlled bank’s loan book by more than 50 per cent to about €22.5 billion.

Minority stake

PTSB, led by chief executive Eamonn Crowley, said that it does not envisage the need to raise additional capital to complete the transaction. Shares in PTSB jumped 16.4 per cent in in Dublin, pushing its market value to almost €646 million.

The Irish Times reported last month that NatWest could take a minority stake, potentially in the region of between 10 per cent and 20 per cent, in PTSB under a deal.

PTSB said in February that it was in talks to buy certain Ulster Bank assets and liabilities after NatWest confirmed that it was winding down its unit in the Republic as it struggles to make sufficient profit returns. Analysts have estimated that NatWest has about €2 billion of expensive surplus capital tied up in Ulster Bank that could be released gradually as it withdraws from the market.

The transaction, which is not expected to be legally agreed until the last three months of 2021, will involve PTSB taking over Ulster Bank’s performing non-tracker mortgages and micro-business loans, the UK-owned group’s Lombard Asset Finance loan business and 25 of its 88 branches in the Republic. PTSB currently has 76 branches. It plans close two of these, on Eyre Square in Galway and Bishopstown in Cork, and move customers to nearby Ulster Bank offices it is acquiring.

Ulster Bank has about 2,800 employees. About 280 of these are set to transfer to AIB as it takes over Ulster Bank’s €4.2 billion corporate and commercial loan book, under a deal agreed last month.

Separately, sources said on Friday that AIB is also in talks to acquire Ulster Bank’s portfolio of about €6.5 billion tracker mortgages, where interest rates are linked to the main European Central Bank (ECB) rate.

PTSB said that it will offer all Ulster Bank personal customers, an easy-to-use account opening process that will allow customers to apply for a current account in less than 15 minutes.

“This potential transaction complements our growth strategy and will accelerate the delivery of Permanent TSB’s ambition of becoming Ireland’s best personal and small business bank,” said Mr Crowley. “We see this as a once in a generation opportunity to fast-track the growth of an Irish bank with a strong community and customer service ethos that has evolved over its 200-year history.”

Customer notice periods

Ulster Bank, led by CEO Jane Howard, said that over the coming months it will make a series of changes for customers as it implements its phased withdrawal.

Ms Howard told The Irish Times that current account customers and deposit holders will be given more than the three-month minimum notice period required under the Central Bank’s code of conduct rules to move their accounts. However, she declined to specify exact timeframes that will be given.

“We are trying to withdraw safely, in a customer-focused way,” she said. “Customers don’t need to take action until we let them know. But we will give customers notice, and plenty of notice, beyond the regulatory minimum.”

Still, customers who do not move their accounts within the timeframe they are given face the prospect of having their account closed and their money returned by cheque.

The bank expects to start closing branches that are not transferring to PTSB from the second half of next year. Ulster Bank will have up to 2,000 employees after the AIB and PTSB transfers. While Ms Howard has ruled out a widescale redundancy scheme this year, the bank may target voluntary severance in certain areas, she said.

Mr Crowley was not in a position to tell reporters on Friday whether any of the moving staff benefit from variable pay deals at a time when bonuses remain banned across Irish bailed-out banks.

Minister for Finance Paschal Donohoe said he believes a successful delivery of a transaction on the scale described in the announcement would be a very positive development for both PTSB and the staff and customers of Ulster Bank.

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