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AIB buys €4.2bn of Ulster Bank loans


AIB chief executive Colin Hunt

AIB chief executive Colin Hunt

AIB chief executive Colin Hunt

AIB has agreed to buy €4.2bn of Ulster Bank’s performing corporate and commercial loans.

This follows an announcement from Ulster Bank in February that it was withdrawing from the Republic of Ireland market.

The previously announced non-binding Memorandum of Understanding between Ulster Bank’s parent NatWest Group and AIB has now moved to a legally binding agreement, according to statement from AIB and Ulster Bank.

This agreement is for the sale of around €4.2bn portfolio of performing commercial lending, plus up to €2.8bn of undrawn exposures.

The exact size of the portfolio and amount payable will depend on movements in the portfolio up to completion of the deal.

The transaction remains subject to customary regulatory approvals, after which, AIB intends to migrate the loan book on a phased basis over a period of 12-18 months.

The deal is expected to be accretive to AIB earnings in 2023.

Based on the current portfolio size and following full loan migration, AIB expects customer loan net interest income of around €100m, as well as some related fee income per year.

Increased operational costs as a result of the transaction are expected to be approximately €30m a year, according to AIB.

AIB said it remains well-capitalised compared to its minimum regulatory requirements.

Approximately 280 employees who are directly involved in the servicing of the loan book will transfer to AIB under the Transfer of Undertakings legislation.

AIB CEO, Colin Hunt, said the “landmark acquisition of Ulster Bank's €4.2bn corporate and commercial loan book will further underpin the bank's ambitious growth plans and position us to support the business community and Ireland's economic recovery as we emerge from the pandemic.”

“We continue to deliver on the strategy we announced last December to enhance and diversify our revenue streams and ensure AIB's long-term sustainability,” he added.

Ulster Bank today said there would be no immediate change for customers and that its commercial banking relationship managers will continue to actively engage with business customers throughout the process.

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Jane Howard, Ulster Bank CEO, said: “Today’s binding agreement represents a significant update on our phased withdrawal and although it remains subject to regulatory approvals, 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.”

Ms Howard added that Ulster Bank’s talks with Permanent TSB as well as other “strategic banking counterparties” on other elements of its withdrawal “continue.”

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