Saturday 25 March 2017

AIB and Permanent win bid for €12.2bn of deposit transfers

Duo beat off competition from six other contenders in auction as sell-off of state-owned Anglo and Nationwide assets marks first stage in their wind-down

AIB was one of the successful bidders for the €12.2bn of deposits. Photo: Getty Images
AIB was one of the successful bidders for the €12.2bn of deposits. Photo: Getty Images

Laura Noonan and Tim Healy

AIB and Permanent TSB were last night unveiled as the successful bidders for the €12.2bn of deposits being transferred out of embattled Anglo Irish Bank and Irish Nationwide.

Documents lodged with the courts show the Irish duo beat off competition from six other contenders -- including local players Bank of Ireland and EBS -- to win the auction process.

The bidding war began a fortnight ago, when Finance Minister Brian Lenihan approached the courts and asked for permission to sell off the state-owned banks' deposit books.

Almost-nationalised AIB gets the biggest pile of deposits, taking over €8.6bn from Anglo Irish Bank, while Permanent TSB will take over Irish Nationwide's €3.6bn deposit book.

Anglo is being allowed to retain "significantly less than €1bn" in deposits that are linked to loan accounts, while Nationwide will retain "a tiny amount" of loan-linked deposits.

The successful auction marks the first stage of the wind-down of Anglo and Nationwide and was last night welcomed by the Department of Finance and the NTMA.

In a statement, AIB said the deposit inflow marked a "significant and positive step" to improve the bank's liquidity and the bank's crucial loan-to-deposit ratio.

AIB lost about €12bn in deposits in the autumn, pushing its deposit base down to about €61bn. The bank is believed to have suffered further outflows later in the year, in common with its peers.

The flight in deposits from across Ireland's banks saw reliance on cash from the European Central Bank (ECB) surge to more than €140bn by the end of January.

AIB's reliance on this funding is expected to decline almost immediately, though the bank may have to pay depositors higher interest rates than it is paying the ECB.

Viable

Sources also added that AIB's victory in the deposit auction clearly demonstrates that the bank is "viable", even though it will soon be more than 90pc state-owned.

Irish Life & Permanent-owned Permanent TSB last night said the acquisition of €3.6bn in deposits was a "very significant day" for the bank, which has one of the worst loan-to-deposit ratios in Ireland.

The detail of the deals will see AIB and Permanent TSB taking on assets as well as deposits, since deposits are classed as "liabilities" on a bank's balance sheet (because they have to be repaid).

AIB has agreed to take Nama bonds with a face value of €12.2bn and will also make a cash payment of €3.5bn. The deal is not expected to trigger any significant capital hit at Anglo.

Permanent TSB will take on €2.89bn of Nama bonds and €790m of "Irish Government and Financial Institutions bonds", according to documents filed in the High Court.

The deal marks the first time Permanent TSB holds Nama bonds, since the bank is the only institution that hasn't had to sell its troubled loans into the toxic loans agency.

Asked about the bank's reaction to taking Nama bonds, a spokesman said Permanent TSB was "happy with all aspects of the deal".

The deposit transfer was brought before the High Court at about 3pm yesterday, marking the third time Mr Lenihan had approached the court under the auspices of the recently-instituted Credit Institutions Stabilisation Bill.

Mr Justice Brian McGovern was asked not to make any order until after 5.01pm yesterday, so that the business day could be concluded before news broke.

Irish Independent

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