Investors have ‘immense’ interest in backing Ulster Bank deal

Permanent TSB's (PTSB) chief executive, Eamonn Crowley, said the bank will approach both stock market investors and the Government for cash if it needs to raise capital to buy Ulster Bank loans.

The bank is 75 per cent owned by the State as a legacy of a crisis-era bailout, with the minority of the stock held by market investors.

“The eagerness among some minorities to support us in any stage of raising capital is actually immense,” Mr Crowley told reporters after the group’s annual general meeting on Wednesday. “They’re very interested in a transaction.”

PTSB confirmed in late February that it was in talks to acquire Ulster Bank loans and deposits, after the latter's parent, NatWest, said it will wind down its unit in the Republic in the coming years.

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However, the talks have not gotten to a stage where both sides have agreed a memorandum of understanding (MoU) to advance a deal.

Mortgages

“But the fact that we’re still very much engaged constructively in this process, almost three months on from the original announcement, demonstrates that both parties want a transaction to happen,” Mr Crowley said, adding that this is “very positive”.

PTSB would most likely be interested in €9 billion of Ulster Bank’s €20 billion loan book, including non-tracker mortgages and small-business and consumer loans, according to analysts. That’s the equivalent of 60 per cent of the size of PTSB’s own loan book.

The estimated €550 million of capital reserves PTSB would need to raise to support such an acquisition equates to the bank’s current €687 million market value, which has more than tripled in the past 12 months.

The stock has been supported in recent months as the planned exits of Ulster Bank and KBC Bank Ireland from the market will narrow competition to just three mainstream banks.

Branch network

PTSB is also known to be in talks to take on Ulster Bank deposits and some of its 88-strong branch network.

Minister for Finance Paschal Donohoe has said that he would have to carefully consider any proposed deal involving PTSB that would require fresh taxpayer funds. Ireland's three surviving bailed-out lenders have so far only repaid two-thirds of their combined €29 billion crisis-era rescue bill. PTSB required a €4 billion bailout in 2011.

PTSB is reported to be considering excluding Ulster Bank’s 500,000 current accounts from a deal. Mr Crowley acknowledged the difficulties involved in the transfer of current accounts, as they are “live relationships” that include direct debits and standing orders.

Platform

However, he insisted that the bank's wider technology platform is up to loan and deposit transfers, with PTSB having taken on the Irish deposits book of UK bank Northern Rock and those of Irish Nationwide Building Society in the aftermath of the financial crash.

The bank has also transferred loans to outside servicing platforms as it offloaded non-performing mortgages and other unwanted loans in the past of the decade.

Mr Crowley said that he hopes to have signed up to a MoU with NatWest and possibly a binding legal agreement on a deal by the end of the year.

Meanwhile, PTSB company secretary Conor Ryan answered a shareholder query at the annual general meeting about the "prohibitive" costs faced by small shareholders who want to sell their holdings.

Thousands of investors in the bank before its 2011 bailout saw their combined holdings diluted to below 1 per cent as a result of the Government rescue.

Mr Ryan said that the bank is exploring “a number of options to facilitate the disposal” of low-value shareholdings.