Natwest sells Irish commercial lending business to AIB
LONDON (Reuters) – The Natwest Group announced on Monday that it had agreed to sell most of its Irish commercial lending business to its regional counterpart Allied Irish Banks, as part of the UK lender’s planned exit from Ireland.
The deal will see AIB repossess approximately € 4.2 billion ($ 5.01 billion) in gross commercial loans and associated unused exposures of approximately € 2.8 billion from Natwest’s Ulster bank.
Natwest said he expects to make a small gain on the divestiture. As part of the agreement, 280 employees will be transferred to AIB.
Natwest said in February it would liquidate its Irish branch as chief executive Alison Rose cut back underperforming parts of the public lender after suffering a loss in 2020.
AIB said in a separate statement that it would pay 4.1 billion euros for the loans, equivalent to 97.63% of face value, using its existing cash flow. After receiving regulatory approval, it plans to migrate the loans over 12-18 months.
AIB said the deal would increase profits from 2023 and generate net interest income of around € 100 million per year. The additional annual costs after the deal are said to be around 30 million euros per year.
As the deal would reduce AIB’s core tier 1 ratio – a measure of financial strength – by around 145 basis points, it said its CET1 ratio remained above its target of 14%, at 15.8 % at the end of the first trimester.
“AIB’s historic acquisition of Ulster Bank’s EUR 4.2 billion corporate and business loan portfolio will further support the bank’s ambitious growth plans and position us to support the business community and the recovery economy as we emerge from the pandemic, ”said AIB Managing Director Colin Hunt.
($ 1 = 0.8386 euros)
Additional reporting by Conor Humphries; Editing by Rachel Armstrong