AIB CEO confident of taking loans to Ulster Bank, but not its branches

AIB’s agreement to acquire € 4.1 billion in corporate loans as part of the Ulster Bank spin-off will not involve the takeover of its deposits or any of Ulster’s 88 branches in Republic, said AIB chief executive Colin Hunt.

In an interview, Mr Hunt also said he expected around 300 Ulster employees to join AIB when the deal is done in the coming months, but said he would not discuss what AIB will likely pay for the transaction, as part of ongoing due diligence on the purchase.

Ulster Bank’s parent company NatWest last month’s decision to withdraw completely from the Republic’s banking market had plunged the Irish banking sector into crisis and triggered a rush for mortgage and corporate portfolios. of Ulster.

The crisis worsened when Bank of Ireland announced this week that it was cutting much of its branch network.

Behind the scenes, the Irish government has asked AIB – in which it has a 71% stake – and its permanent 75% -owned TSB, to take a large chunk of Ulster’s loan books.

The involvement of other players, including the Bank of Ireland, in which the government has a 14% stake, and the potential involvement of so-called vulture funds – which already hold much of the troubled mortgage loans of the Ireland – in the dismemberment is unclear. at this stage.

AIB’s acquisition of business loans will boost its huge share of business loans in the Republic.

Mr Hunt said AIB is committed to the future of its branch network. Photo: Aidan Crawley / Bloomberg

Asked how the acquisition would go through a Competition Commission investigation, Mr Hunt said AIB was “very confident” that it would be able to close the deal.

He said the deal would “unmistakably” propel AIB into Ireland’s premier corporate and investment bank, but said any issues with the Competition Commission were “a matter for another day”, and that he was focused on making the deal.

Mr Hunt said it would be wrong to say that the government organized the sale of Ulster Bank, and that “the decision was driven by the executive here, supported by the board and carried out by us. “.

“There is no question of government engineering here,” he said, repeating, under the bank’s agreement, that the government does not interfere in the day-to-day management of the bank.

When asked when AIB first got involved, Mr Hunt said speculation that NatWest was examining the future of Ulster Bank first surfaced in the media in September. The bank “immediately” contacted NatWest Group at a higher level to clarify its interest in the loan portfolio should it become available, he said.

“And that was the genesis of the transaction and the memorandum of understanding. [memorandum of understanding] we announced it two or three weeks ago, “he said.

The Managing Director insisted that competition in the Irish banking sector is quite intense, with companies having links to international banks, while AIB also faces competition from virtual and digital banks, as well as to An Post, which seeks to become an increasingly important player in financial services. , and credit unions.

When asked for his response to critics who say the Ulster Bank split will only strengthen the dominance of the big two, AIB and Bank of Ireland, he said competition for banking services in Ireland will only increase. not limited to the five (and now four) retail banks.

Mr Hunt said that in terms of house prices, the housing market last year weathered the Covid storm much better than a year ago “when we were just looking into the abyss of Covid-19 “.

He said one of the foundations of the housing market last year was the imbalance in housing supply, with annual demand for 30,000 new homes not being met by the production of around 20,000 units.

Where we are today, the general opinion in the market, and this is what I probably agree with, is that this year we will see very little positive momentum in terms of house prices in the economy ” , did he declare.

The Covid crisis has also reshaped the housing market, with a number of people starting to consider working outside of Dublin, he said.

Regarding continuing to sell non-performing loans or exposures, he said the bank will seek to reduce its NPE (Non-Performing Exposure) ratio from 6% to around 3% by the end of 2023.

He said the reason for selling bad loans is that it strengthens the balance sheet and will help the bank serve its customers.

Mr Hunt said he would not comment on the Davy envelope broker scandal.

When asked if there were similar issues lurking within Goodbody, amid AIB’s plans to buy rival brokerageMr. Hunt said he was “very comfortable” that Goodbody fits seamlessly into AIB.

He said AIB was “deeply aware” of being a mainstay bank of the state and was “deeply aware” of its regulatory license, “but we are also aware that we have a social license to operate.”

Following the decision taken earlier this week by Bank of Ireland to close numerous branches across Ireland, Mr Hunt said AIB was committed to the future of its branch network, following its decision in December latest to close five branches in Dublin, Galway and Cork.

In the Republic, AIB has 200 branches and its sister bank EBS has 70 branches, while it has 15 points of sale in the North.

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