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AIB to sell SME portfolio in Britain

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AIB has confirmed that it is selling its small and medium business (SME) loans in Britain in a move that will see it reduce staff numbers and save costs.

The State-backed bank is selling the performing loans, valued at around £600m (€715m), to Allica Bank.

The decision to sell the portfolio was previously announced as part of the bank’s ‘Strategic Transformation Programme’.

AIB UK will receive cash consideration of approximately £600m (€715m) for the loans.

The proceeds will be used for “general corporate purposes”, according to a statement from the bank.

The deal will mean AIB UK can reduce both its staff numbers and property footprint, as well as help it make €35m in cost savings, the bank said.

The move marks “another significant step in the implementation of AIB Group strategy and the commitment to reduce costs by €230m by 2023”, it added.

As at June 2021, the loan portfolio had a gross carrying value of around £600m and risk-weighted assets (RWA) of about £400m.

The sale is expected to be marginally accretive to capital, the bank said.

In the year ended December 31, 2020, the loan portfolio incurred a loss before tax of around £9m.

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Subject to approvals, migration of the loans will be on a phased basis with the process expected to start this year and complete over 2022.

Following the bank’s exit from the British SME sector, AIB UK will focus on growing its corporate banking business to companies in its chosen segments, including renewables, infrastructure, real estate, healthcare and manufacturing sectors.

AIB UK will now contact impacted customers to inform them that their loans are being transferred.

John Cronin, analyst at Goodbody, said while the portfolio disposed of is smaller than the €1.2bn originally mooted “we understand that this difference is a function of assets that fell out of scope (as is standard in such sale processes), and redemptions/repayments since the sale was first announced”.

“In overall terms we see this as a positive development for AIB [UK] given that it is a capital accretive deal… and it removes a loss-making non-core portfolio from the mix, positioning AIB [UK] to focus solely on its core segments in the UK going forward.”

Earlier this month AIB chief executive Colin Hunt said the bank would consider the resumption of dividends for 2021 on the back of increasing confidence about the economic outlook and “our ability to generate sustainable shareholder returns”.

The European Central Bank (ECB) in March last year recommended a temporary halt of bank dividends and buybacks because of Covid-19.


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