Ulster Bank advances exit with plan to transfer €7.6bn in loans to PTSB

NatWest, which is 55%-owned by the British government, will take a stake of up to 20% in PTSB
Ulster Bank advances exit with plan to transfer €7.6bn in loans to PTSB

Permanent TSB is to secure 25 Ulster Bank branches and €7.6bn of its loan boak under the deal which advances the plans first outlined in February. Picture: Sam Boal/RollingNews

Permanent TSB is to get €7.6bn of performing mortgage and other micro business loans, as well as 25 branches, under a deal that marks a further step in the plans of NatWest-owned Ulster Bank to quit the Republic.

The agreement advances the separate plan first outlined in late February when NatWest struck a deal to transfer €4.2bn of Ulster Bank's commercial loans, but none of its 88 branches, to AIB. 

It also struck an initial agreement with Permanent TSB at the time.       

Under the latest deal, NatWest, which is 55%-owned by the British government, will take a stake of up to 20% in Permanent TSB.

The Irish State will inject no new money to finance the Ulster Bank transfer, but it means the Government will dilute its long-standing 75% stake in the Republic’s third largest mortgage lender. 

Shares in Permanent TSB soared 16% to value the bank, which has long struggled since its rescue 10 years ago, at over €643m. 

Led by CEO Eamonn Crowley, the bank's share of the mortgage will jump to over 20% from 15%, as the consolidation of Irish banking picks up pace. 

In a shock decision, mortgage bank KBC also announced this year its decision to quit Irish banking, to the benefit of Bank of Ireland which plans to take most of its loans.                       

NatWest has yet to decide the future of the rest of Ulster's €8.9bn loans from a total loan book of €20.5bn it holds in the Republic. 

The loans include €7bn of performing tracker mortgages, which may yet go to AIB, and around €1.5bn in non-performing loans made up of both household and commercial loans. 

The transfer of branches is not expected to start before next summer.

Mortgage brokers believe that Ulster Bank's non-performing mortgage loans — as has been the case in previous such transactions over a number of years by Irish banks — will be sold to a vulture fund.

Daragh Cassidy at bonkers.ie said that Ulster Bank customers facing the end of their fixed-rate mortgage terms “will need to be mindful” because Ulster was well known for offering among the best competitive rates.

Ireland has long had among the costliest mortgage rates in the eurozone and the contraction of the industry is further bad news for customers, said leading broker Michael Dowling. 

Brendan Burgess at the Askaboutmoney website said Ulster had competed with low rates by offering no cash-back loans, while Permanent TSB offered cash-backs with more costly rates.        

Up to 500 jobs of Ulster Bank’s 2,800 staff in the Republic will transfer to Permanent TSB.

The Financial Services Union said it hopes more jobs at Ulster Bank can be secured in future loan transfers. 

However, it said that “the bigger picture” was the contraction of Irish banking services and the consequences for customers.

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