Ireland Explores New Banking Force as NatWest Eyes Exit

Ireland’s government said it’s exploring the creation of a so-called third force in banking, should NatWest Group Plc opt to exit the Irish market.

Irish officials have been war gaming the bank’s exit, with one possibility that state-owned Permanent TSB Group Holdings Plc might acquire some of Ulster’s loans, according to people familiar with the matter. AIB Group Plc is also in negotiations on buying some of the assets, said another person, who asked not to be identified because a deal could still fall apart.

NatWest is reviewing Ulster Bank, with a decision set to be announced as soon as Friday. While it’s not the first time the lender’s future has hung in the balance, Irish union and government officials have been increasingly convinced in recent weeks that NatWest is preparing to bring the shutters down, perhaps over years, on the business.

“A third force that would be able to compete with Bank of Ireland, and with AIB, that is something that I support,” Deputy Prime Minister Leo Varadkar said in parliament Thursday. “That’s something that we are exploring.”

Read More: NatWest Nears Decision Day on Ulster Bank Future

Ulster has mostly struggled since helping drive the Irish real-estate bubble more than a decade ago, which resulted in a $20 billion rescue from the former Royal Bank of Scotland, which changed its name to NatWest in 2020. The lender has scrabbled for profitability since then, saddled by bad debts, high costs and increased capital requirements.

NatWest’s board is set to meet today to weigh Ulster Bank’s fate, the Irish Times reported late Wednesday, without saying where it got the information. Reports on Ulster’s future are “extremely worrying,” John O’Connell, head of the Dublin-based Financial Services Union, said.

Exit Inevitable?

“The announcement that Ulster Bank Ireland will exit the Irish market tomorrow appears quite inevitable now,” Diarmaid Sheridan, an analyst at Dublin-based securities firm Davy, said.

NatWest is reviewing its strategy in light of the coronavirus pandemic and challenges to the economy, a spokesperson said Wednesday in a response to questions. The lender declined to comment on Thursday.

Opposition politicians urged Irish Finance Minister Paschal Donohoe to intervene.

“Instead of allowing the assets of Ulster Bank and its customers to be flogged off to vulture funds, there should be political intervention to work towards the delivery of a real third force in Irish banking using the State-owned Permanent TSB,” said Ged Nash, a lawmaker with the Irish opposition Labour Party. “Government must take a hands-on approach.”

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.