Ulster Bank customers unaffected as AIB to acquire loans for €4.2bn

The deal remains subject to regulatory approvals which are likely to take a number of months.

AIB has agreed terms with Ulster Bank and its parent bank NatWest to acquire its €4.2bn commercial and corporate loan book. 

The deal will see the pillar bank pay the equivalent to 97.63% of par value for the book with the loans and associated staff migrating to AIB over the next 12 to 18 months.

It follows on from the Memorandum of Understanding that was announced in February and follows a period of due diligence on the loan book. The deal remains subject to regulatory approvals which are likely to take a number of months. 

The exact size of the portfolio and price will depend on movements in the portfolio up to completion. Along with €4.2bn in performing loans the deal includes up to €2.8bn of undrawn exposures.

In a statement yesterday Ulster Bank said its loan customers will be unaffected by the deal. Approximately 280 employees who are directly involved in the servicing of the loan book will transfer to AIB.

The acquisition by AIB is part of the wider plan by Ulster Bank for a phased exit from the Irish market. Ulster Bank said there is no immediate change for customers and that it remains open for new and existing business.

Based on the current portfolio size of the loan book and following full migration, AIB expects a net interest income of approximately €100m as a result of the transaction.

Ulster Bank Chief Executive Jane Howard said the binding agreement represents a significant update on its phased withdrawal. "I am confident that we are with AIB, delivering a good solution for our performing commercial loan book customers. While we await approval, there remains no change for customers."

“Talks continue with Permanent TSB Group Holdings plc among other strategic banking counterparties on other elements of the phased withdrawal. I remain committed to managing our withdrawal carefully and responsibly over time.”

AIB CEO, Colin Hunt said the loan acquisition will underpin the bank’s growth plans and allow it to support the business community and Ireland’s economic recovery.

"We are focused on delivering the transformation agenda and progressing towards our target RoTE of >8%. As we set out in our Q1 trading update, we are confident in the outlook for the remainder of the year.”