AIB Group PLC AIB acquisition of EUR4.2bn Ulster Bank loans (2867D)
June 28 2021 - 1:02AM
UK Regulatory
TIDMAIBG
RNS Number : 2867D
AIB Group PLC
28 June 2021
EMBARGO 07:00 28 June 2021
AIB Group plc - confirms acquisition of EUR4.2 billion Ulster
Bank corporate and commercial loans
AIB Group plc ("AIB", the "Group") confirms that Allied Irish
Banks, p.l.c.(1) has today entered into a binding agreement with
NatWest Holdings Limited and Ulster Bank Ireland DAC for the
acquisition of c. EUR4.2 billion of performing Ulster Bank
corporate and commercial loans (the "Transaction"). This agreement
has been reached further to the Memorandum of Understanding that
was announced on 19 February 2021 and follows a period of due
diligence on the loan book.
AIB will acquire the portfolio for a total consideration of
EUR4.1 billion, equivalent to 97.63% of par value, payable in cash
funded from its existing resources. The exact size of the portfolio
and consideration payable will depend on movements in the portfolio
up to completion. The Transaction remains subject to customary
regulatory approvals following which, AIB intends to migrate the
loan book on a phased basis over a period of twelve to eighteen
months to ensure optimised customer outcomes.
The Transaction is expected to be accretive to earnings in 2023.
Based on the current portfolio size and following full loan
migration, AIB expects customer loan net interest income of c.
EUR100 million (excluding discount unwind) and some incremental fee
income per annum. Increased operational costs as a result of the
Transaction are expected to be c. EUR30 million per annum. As
required under IFRS 9, AIB will incur a Day 1 expected credit loss
(ECL) charge as the loans migrate, which will impact the
contribution of the Transaction in 2022.
AIB anticipates the impact of increased risk weighted assets of
EUR5.3 billion (related to EUR4.2 billion of drawn loans and EUR2.8
billion of associated undrawn exposures) to be c. 145bps of CET1.
The Group remains well-capitalised compared to its minimum
regulatory requirements and in excess of its CET1 target of above
14% (Q1 2021 CET1: 15.8%). The Transaction is also expected to be
enhancing to RoTE in 2023, as AIB continues to target a return in
excess of 8%.
As a result of the Transaction, approximately 280 employees who
are directly involved in the servicing of the loan book will
transfer to AIB under the Transfer of Undertakings legislation, the
final number of roles will be confirmed as the deal completes.
AIB CEO, Colin Hunt, commented:
"AIB's landmark acquisition of Ulster Bank's EUR4.2 billion
corporate and commercial loan book will further underpin the bank's
ambitious growth plans and position us to support the business
community and Ireland's economic recovery as we emerge from the
pandemic. We continue to deliver on the strategy we announced last
December to enhance and diversify our revenue streams and ensure
AIB's long-term sustainability.
We look forward to welcoming new colleagues from Ulster Bank and
working with our new customers as they transition to AIB.
We are focused on delivering the transformation agenda and
progressing towards our target RoTE of >8%. As we set out in our
Q1 trading update, we are confident in the outlook for the
remainder of the year. We look forward to updating on our further
progress when we announce our first half results on 4 August."
-ENDS-
For further information, please contact:
Niamh Hore / Siobhain Walsh Paddy McDonnell / Graham Union
Investor Relations Media Relations
AIB Group AIB Group
Dublin Dublin
Tel: +353-1-6411817 / +353 -87-3956864 Tel: +353-87-7390743/ +353-1-6412430
email: niamh.a.hore@aib.ie email: paddy.x.mcdonnell@aib.ie
siobhain.m.walsh@aib.ie graham.x.union@aib.ie
Forward Looking Statements
This document contains certain forward looking statements with
respect to the financial condition, results of operations and
business of AIB Group and certain of the plans and objectives of
the Group. These forward looking statements can be identified by
the fact that they do not relate only to historical or current
facts. Forward looking statements sometimes use words such as
'aim', 'anticipate', 'target', 'expect', 'estimate', 'intend',
'plan', 'goal', 'believe', 'may', 'could', 'will', 'seek',
'continue', 'should', 'assume', or other words of similar meaning.
Examples of forward looking statements include, among others,
statements regarding the Group's future financial position, capital
structure, Government shareholding in the Group, income growth,
loan losses, business strategy, projected costs, capital ratios,
estimates of capital expenditures, and plans and objectives for
future operations. Because such statements are inherently subject
to risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward looking
information. By their nature, forward looking statements involve
risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of
factors that could cause actual results and developments to differ
materially from those expressed or implied by these forward looking
statements. These are set out in the Principal risks on pages 50 to
53 in the 2020 Annual Financial Report. In addition to matters
relating to the Group's business, future performance will be
impacted by direct and indirect impacts of the COVID-19 pandemic
and by Irish, UK and wider European and global economic and
financial market considerations. Any forward looking statements
made by or on behalf of the Group speak only as of the date they
are made. The Group cautions that the list of important factors on
pages 50 to 53 of the 2020 Annual Financial Report is not
exhaustive. Investors and others should carefully consider the
foregoing factors and other uncertainties and events when making an
investment decision based on any forward looking statement.
(1) A subsidiary of AIB Group plc
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