UPDATE 1-Ireland says banking landscape poorer for NatWest's exit
* Third largest lender exits already concentrated market
* AIB, PTSB in talks over corporate, SME, retail loans
* Government says talks “potentially important development” (Adds details, analyst quotes)
DUBLIN, Feb 19 (Reuters) – Ireland’s finance minister said the banking landscape would be poorer as a result of NatWest’s departure but welcomed the interest from local rivals in the already concentrated market to buy parts of its loan book.
NatWest on Friday announced the wind down of its under-performing Ulster Bank business in the Irish Republic, where it is the third largest lender with an estimated 15% share of the mortgage market, 10% share of the SME market and a 20 billion euro ($24.2 billion) loan book.
Allied Irish Banks entered a non-binding agreement with NatWest to buy around 4 billion euros ($4.8 billion) of corporate and commercial loans. Mortgage lender permanent tsb (PTSB) is in early talks to buy some retail and small- and medium-size enterprise assets, liabilities and operations.
Finance Minister Paschal Donohoe described those talks as a potentially important development but that there were “many, many bridges to cross” when asked if 75% state-owned PTSB would need more government funds for any transaction.
“The Irish banking landscape will be poorer for the loss of Ulster Bank after all these years,” Donohoe said in a statement, adding that the government would have to reflect on why such a large bank present in Ireland for over 160 years had departed.
The withdrawal represents the most radical change to the Irish banking landscape since the 2008 financial crisis, Hargreaves analyst Susannah Streeter wrote in a note.
The exit by a string of foreign banks following Ireland’s post-2008 banking crash has left the market shy of competition. The central bank has raised particular concerns on lending to SMEs, where Ulster is one of just three lenders of scale.
Davy Stockbrokers have said an acquisition by the smaller PTSB in particular – turbocharging plans to increase its tiny presence in the business lending market – could have a transformative impact on its earnings profile.
Despite Ireland’s booming pre-pandemic economy, banks have struggled to grow their loan books following years of repayments and redemptions exceeding improving new lending. Analysts say loan purchases would boost their profitability.
The government also owns 71% of AIB and a 14% stake in the country’s other dominant lender, Bank of Ireland, following the crash.
Plans to further reduce those holdings have been on hold since bank values across the euro zone began to fall in 2018. AIB shares were 4.7% higher by 0900 GMT, PTSB were up 5.2%.
NatWest, which employs 2,800 people in Ireland and has 88 branches, has a preference to sell the loans to Irish banks, Chief Executive Alison Rose told reporters, but she declined to rule out sales to private equity firms.
Investment firms Cerberus and Lone Star have been reported to be interested in parts of the loan book. Opposition parties in Ireland said sales to non-bank entities would further damage the sector.
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