NatWest to Take Stake in PTSB as Part of Irish Loan Deal

NatWest Group Plc is set to take a minority stake in Permanent TSB Group Holdings Plc as part of a potential deal to offload 7.6 billion euros ($8.9 billion) of assets to the Irish lender.

The two banks signed a non-binding memorandum of understanding to work together on an agreement that would see Permanent TSB take over much of NatWest’s Ulster Bank Ireland unit including some performing mortgages and micro-SME loans as well as its Lombard Asset Finance business and 25 Ulster Bank branches, according to a statement Friday.

“As part of the consideration for the perimeter transferring to Permanent TSB, NatWest will become a shareholder with up to 20% of the enlarged share capital” of Permanent TSB, the Irish firm said in a statement. Permanent TSB will also pay “an additional cash consideration.”

That means the U.K. government, which currently holds a majority stake in NatWest, will in effect become an indirect shareholder in the Irish lender which itself is 75% owned by the Irish state.

“We see this as a once in a generation opportunity to fast-track the growth” of Permanent TSB, Chief Executive Officer Eamonn Crowley said.

Permanent TSB shares surged as much as 15.6% in Dublin, the most since March 2020, to 1.41 euros at 8:26 a.m. in Dublin. NatWest rose as much as 2.2% in London.

Add Scale

The deal allows the Irish firm “to add scale, substantially increasing earnings and returns to merit a re-evaluation of the investment case,” Davy analyst Diarmaid Sheridan said in a research note.

As many as 500 Ulster Bank staff will transfer to Permanent TSB, which does not expect to have to raise new capital to complete the deal at this stage, the statement said.

NatWest said in February it would gradually exit its business in the Republic of Ireland. Since then it has agreed terms to sell about 4.2 billion euros of performing corporate and commercial loans to AIB Group Plc, and reached a deal with unions on staff affected by its exit.

“In line with our strategy of a phased withdrawal from the Republic of Ireland, I am pleased that we are today announcing a significant update,” NatWest CEO Alison Rose said in a separate statement. “Our focus remains on supporting our customers and colleagues as we continue our withdrawal from the Republic of Ireland.”

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