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AIB to take on €4.2 billion worth of Ulster Bank's corporate and commercial loan book

The move will see 280 Ulster Bank employees move over to AIB as part of the deal.

AIB HAS AGREED a €4.2 billion deal with Ulster Bank to take over performing corporate and commercial loans.

The latest moves comes after the February NatWest announced plans to wind down Ulster Bank operations in the Republic of Ireland altogether over the coming years.

The loan agreement was announced in an AIB statement and said it 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 €4.1 billion, equivalent to 97.63% of par value, payable in cash funded from its existing resources.

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, hailed the acquisition and said it showed his bank’s hopes for the future.

“AIB’s landmark acquisition of Ulster Bank’s €4.2 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.”

The bank said 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.

AIB said it anticipates the impact of increased risk weighted assets of €5.3 billion (related to €4.2 billion of drawn loans and €2.8 billion of associated undrawn exposures) to be c. 145bps of CET1.

It said 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%.

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