Eamon Quinn: Permanent TSB joins the winners amid the great Irish banking exit

Stock markets are showing that Permanent TSB is among the winners in the great Irish banking contraction. Picture Dan Linehan

The winners in the great Irish banking contraction were the big two players, AIB and Bank of Ireland, as fierce competitors Ulster Bank and KBC prepared to close up in the Republic. 

Permanent TSB has now joined the winner's enclosure.                              

Ulster Bank's owner, NatWest, has advanced its exit plans by detailing it will transfer €7.6bn in mortgage and other loans, along with 25 of its 88 branches, to Permanent TSB, the third largest mortgage lender. 

The carve up of Ulster's €20.5bn loan books in the Republic is gathering pace. 

The future of €4.2bn of its commercial loans was already decided when NatWest struck an agreement with AIB in February. 

And AIB appears to be in pole position to scoop up a large portion of €7bn in tracker mortgages when NatWest concludes negotiations with full-service banks over the rest of €8.9bn of Ulster's loans.  

The shares of AIB and Bank of Ireland rose by 6% and 3.5%, and Permanent TSB soared 16% today. Those are clear signs that stock market investors are betting on the big winners in the carve up. 

AIB and Bank of Ireland will further strengthen their huge dominance, and Permanent TSB, which has for long struggled since the banking bailouts, will increase its pricing power as its mortgage market share climbs to over 20%. 

The Government owns stakes of 70% and 14% in AIB and Bank of Ireland. It currently owns 75% of Permanent TSB.

The Irish State, for one reason or other, will inject no new money to facilitate the deal and will see its share diluted, as NatWest unveiled its plan to take a stake of up to 20% in Permanent TSB. 

NatWest is a winner too. The bank, which is 55% owned by the British government, will smooth its exit from the Republic by taking the stake in Permanent TSB. It is risking little.       

The Government and the Financial Services Union, which is fighting to save as many as possible of the 2,800 jobs at Ulster Bank in future loan transfers, are putting on a brave face for what is a crisis for Irish banking. 

The crisis deepened on the shock decision earlier this year by KBC to also quit the banking market.

The losers are all Irish households and businesses. Irish banks already offer among the costliest household mortgage and small business loans in the eurozone. 

In mortgages, Ulster and KBC competed on price, with among the lowest rates in the market. 

Other lenders, including Permanent TSB, were noted for offering cash-back incentives and costlier loans. 

Stock markets are showing that AIB, Bank of Ireland, and Permanent TSB are the winners in the great Irish banking contraction.