PTSB made an unsolicited overture to buy Finance Ireland, the State’s largest nonbank lender, late last year and remains interested in doing a deal, according to sources.
The bank is being advised by international boutique investment bank Alantra, the sources added. Any bid would be expected to be in excess of €300 million, according to industry sources.
Finance Ireland is 51 per cent-owned by US investment management giant Pimco, which is said not to be in a hurry to exit. London-based investment company M&G owns almost 40 per cent, with the remainder held by management, led by chief executive Billy Kane.
“While we have no comments on your specific query, in line with PTSB’s business strategy, we continue to focus on organic growth and are open to exploring inorganic growth opportunities on an ongoing basis,” a spokeswoman for PTSB said in response to questions from The Irish Times.
A spokesman for Finance Ireland and a spokeswoman for Pimco also declined to comment.
[ Finance Ireland raises over €700m to boost car and property lendingOpens in new window ]
PTSB is currently in the middle of a programme to cut about 300 jobs – or almost 9 per cent of its 3,359 staff, as of December – as the smallest of the three Irish banks seeks to cut costs.
Finance Ireland was set up in 2002 by Billy Kane, a former chief executive of PTSB precursor Irish Permanent. It had €1.1 billion of car, commercial real-estate, agri and small-business loans at the end of 2023.
It also held the title of over €1.5 billion of residential mortgages at that stage – though the loans are held off its balance sheet through bond market vehicles. Finance Ireland revealed last week it has decided to stop mortgage lending, having effectively been out of this market in recent years.
“An acquisition of the Finance Ireland loan portfolios presents compelling industrial logic from PTSB’s perspective,” said John Cronin, founder of SeaPoint Insights, an independent research and analysis firm specialising in banking and financial services.
“Increased scale would serve to diversify PTSB’s revenues further as well as drive improved efficiency. Fundamentally, PTSB can fund the lending at a significantly keener cost than Finance Ireland.”
While PTSB completed the transformational €6.8 billion of loans from Ulster Bank in 2023, increasing its loan book by close to 50 per cent at the time, its €29 billion of total assets are a fraction of those of its larger rivals.
PTSB’s return on tangible equity (RoTE)– a key measure of profitability – was 7.5 per cent last year. Analysts see a figure between 8 and 10 per cent as a sign of a healthy bank. PTSB is targeting a figure of about 9 per cent over the coming years.
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AIB’s RoTE came to 26.7 per cent last year, albeit inflated by a heightened interest rates environment, while Bank of Ireland’s was 16.8 per cent.
PTSB is currently working on a plan to lower the perceived riskiness of its mortgage book – or lower its risk-weighted assets. Analysts see this freeing up as much as €270 million of expensive capital reserves, which could make it easier to fund deals.
Chief executive Eamonn Crowley confirmed last month that the company will likely return to paying dividends next year for the first time since the onset of the 2008 financial crisis.
Mr Crowley said PTSB will need “to balance” shareholder distributions with investing in growth, at a time when analysts are concerned about the bank’s small scale.
Finance Ireland funds itself in the international wholesale and capital markets. It raised €700 million last week refinancing portfolios of car and commercial real-estate loans on the bond market. Its assets could be much more cheaply financed as part of a bank, which would have access to deposit funding.
