Interview: AIB CEO confident of taking on Ulster Bank loans, but not its branches

AIB chief Colin Hunt said AIB was "very confident" it will be in a position to close the transaction, saying that any Competition Commission issues were "a matter for another day".

AIB chief executive Colin Hunt

AIB's agreement to acquire €4.1bn in corporate loans in the carve-up of Ulster Bank will not involve taking on its deposits or any of Ulster's 88 branches in the Republic, AIB chief executive Colin Hunt has said.

In an interview, Mr Hunt also said he expected about 300 Ulster staff to join AIB when the deal is clinched in the coming months, but said that he would not discuss what AIB will likely pay for the transaction, amid continuing due diligence over the purchase.  

The decision by Ulster Bank parent NatWest last month to pull out of the banking market in the Republic altogether had thrown Irish banking into crisis and sparked a scramble for the Ulster loan books of mortgage and corporate lending. 

The crisis deepened when Bank of Ireland announced this week the shrinkage of a large part of its branch network.        

Behind the scenes, the Irish Government has marshalled AIB — in which it owns a 71% stake — and for its 75%-owned Permanent TSB to take large chunks of the Ulster loan books. 

The participation of other players, including Bank of Ireland, in which the Government holds a 14% stake, and the potential involvement of so-called vulture funds — which already own large parts of Ireland's distressed mortgage loans — in the carve-up is unclear at this stage.

The acquisition by AIB of the corporate loans will strengthen its huge share of business lending in the Republic.

Mr Hunt said that AIB was committed to the future of its branch network. Picture: Aidan Crawley/Bloomberg

Asked how the acquisition will get through any Competition Commission investigation, Mr Hunt said AIB was "very confident" it will be in a position to close the transaction. 

He said though the transaction would "unquestionably" propel AIB to be Ireland’s leading corporate and business bank, but he said any Competition Commission issues were "a matter for another day", and he was focused on closing the deal. 

Mr Hunt said it would be wrong to say the Government had engineered the Ulster Bank sale, and the "move was one that was driven by the executive here, supported by the board, and executed by us".

"There is no question of Government engineering here," he said, iterating under the bank's agreement that the Government does not interfere in the day-to-day running of the bank. 

Asked when AIB first got involved, Mr Hunt said that speculation that NatWest was reviewing the future of Ulster Bank first surfaced in the media in September. The bank "immediately" contacted NatWest Group at a senior level to make clear its interest in the loan book if it were to become available, he said.  

"And that was the genesis of the transaction and the MOU [memorandum of understanding] we announced two or three weeks ago," he said. 

The chief executive insisted that competition in Irish banking was fairly intense, with companies having links to international banks, while AIB also faces competition from virtual and digital banks, as well as An Post, which is seeking to be an increasingly important player in financial services, and from credit unions. 

When asked his response to critics who say the carve-up of Ulster Bank will only strengthen the dominance of the big two, AIB and Bank of Ireland, he said that competition for banking in Ireland was not confined to the five (and now four) retail banks.  

Mr Hunt said that in terms of house prices that the housing market last year had weathered the Covid storm much better than he a year ago "when we were just staring into the Covid-19 abyss". 

He said one of the underpinnings of the housing market last year was the fact of imbalance in supply of housing with the annual demand for 30,000 new homes not being met by the output of around 20,000 units.  

Where we are sitting today, the general view in the market, and it is one I probably subscribe to, is that we will see a very small positive momentum in terms of house prices across the economy this year," he said.  

The Covid crisis was also reshaping the housing market, with a number of people beginning to contemplate working outside Dublin, he said.  

On the further sale of non-performing loans or exposures, he said the bank will seek to reduce its NPE (nonperforming exposure) ratio of 6% to around 3% by the end of 2023. 

He said the reason for selling soured loans was that it strengthens the balance sheet and will help the bank to serve its customers. 

Mr Hunt said that he would not comment on the scandal enveloping broker Davy.

Asked whether there were any similar issues lurking within Goodbody, amid plans by AIB to buy the rival broker, Mr Hunt said he was "very comfortable" that Goodbody would fit neatly into AIB.  

He said AIB was “deeply aware” of being a pillar bank in the State, and was "deeply conscious" of its regulatory license, "but we are equally conscious of the fact that we have a social license to operate". 

Following the decision earlier this week by Bank of Ireland to close many branches across Ireland, Mr Hunt said that AIB was committed to the future of its branch network, following its decision last December to close five outlets in Dublin, Galway, and in Cork. 

In the Republic, AIB has 200 branches and its sister bank EBS has 70 branches, while it has 15 outlets in the North.