The Government faces a significant challenge in achieving the twin objectives of securing the best possible return for the taxpayer through the sale of PTSB and ensuring that the majority State-owned bank falls into ownership which is best for the banking sector.
It has emerged that Lonestar, a US private equity firm, as well as a consortium of Centerbridge and Sixth Street, also US private equity firms, are among the bidders for PTSB. The other bidder is Bawag, the Austrian banking group.
This is a disappointing level of interest. When EU Banking Union was established in 2015, one of the intended consequences was that it would presage a wave of mergers and acquisitions across Member States. So far, the reality has been somewhat different.
In the decade leading up to the financial crash in 2008, there were six Irish domestic banks and a raft of foreign-owned lenders with Irish operations. In the aftermath of the crisis, the six domestic banks collapsed into three and the foreign-owned lenders folded their Irish operations. Ireland was overbanked during the Celtic Tiger, but it now suffers from a lack of competition.
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The Irish economy is among the fastest growing in the EU. But it would seem the reputational fallout from the financial crisis is still casting a shadow over the sales process, along with some peculiarities of the Irish market.
Private equity firms do not always make the most suitable owners of banks as their focus is often to cut costs, maximise profit and then sell at the earliest opportunity. Of course, the US private equity firms circling PTSB might say they are in it for the long haul.
Of the interested parties, Bawag would seem to be the best fit. But it has reportedly made an offer of €1.6 billion, which is estimated to be well below PTSB’s book value
While getting the best return for the taxpayer is an important consideration, the priority for the Government must be doing what is in the best long-term interest of PTSB and the wider economy.
