PERMANENT TSB IS to be bought by an Austrian bank for €1.6bn, in what the Irish deputy premier said was “the most significant development in the Irish retail banking market in over a decade”.

The purchase of PTSB by Austria’s fourth largest bank, BAWAG PSK, has been unanimously recommended by the PTSB Board.

The 57.5% stake held by the Department of Finance will result in around €931m of proceeds for the Irish State.

Tánaiste and Finance Minister Simon Harris said the offer by BAWAG offered Ireland the chance to clear its last shareholding in an Irish bank since the 2009 financial crash, and represented “another major step towards the normalisation of the banking sector in Ireland”.

The proceeds from the transaction will be held within the Exchequer while Harris examines how they will be used.

The purchase offer by BAWAG is to be implemented through a High Court-sanctioned scheme of arrangement.

Sinn Féin finance spokesperson Pearse Doherty said he believed banks such as AIB and PTSB should be kept “in state ownership, and we should have used AIB to try and ensure that the needs of the Irish economy are met”.

“With these banks going into completely private ownership, you have a situation in which they will serve only the interest of their shareholders,” he said on Tuesday.

“I don’t think that’s a good situation for Irish banking.

“I’ve been very concerned in relation to the sale of Permanent TSB without knowing the detail of what are the long-term plans for that bank, in terms of branches, in terms of personnel, and where they see that bank going.”

Harris said: “I am pleased that the Formal Sale Process, which attracted a significant level of buyer interest, has concluded in finding a new owner for PTSB who has a long-term vision for and commitment to PTSB and the Irish economy.

“The announcement by PTSB and BAWAG represents the most significant development in the Irish retail banking market in over a decade.

“PTSB has made great progress in building a strong competitive franchise in the market and BAWAG’s demonstrated deep knowledge of the European and Irish banking sector can propel PTSB to an even more competitive position in the market, with the benefits of this to be seen by Irish consumers, businesses and the Irish economy more generally.

“The Recommended Cash Offer by BAWAG presents the State with the opportunity to exit its last remaining shareholding in an Irish bank after 17 years and represents another major step towards the normalisation of the banking sector in Ireland.

“A sale of the State’s investment is consistent with the objectives of recovering taxpayer funds that were used to rescue the Irish banks and deploying these to more productive purposes.

“At a price of €2.97 per share the transaction will generate around €931m for the State upon settlement.

“Through a combination of fees, dividend income, the bank levy and disposal proceeds the State has recovered around four billion euro from its investment in PTSB.

“On an overall basis, this means the State is about €1.3bn above break-even on its €29.4bn investment in AIB, Bank of Ireland and PTSB from direct shareholding linked income and has recovered a further €1.8bn from the banking sector since the introduction of the bank levy.

“PTSB is an important pillar of the retail banking sector and wider Irish economy, and it has made great progress in strengthening its continued sustainable growth to enhance competition in the market and provide choice to consumers.

“The State has and continues to be very supportive of PTSB, and the Government believes that it is in the long-term interests of PTSB and citizens in general that the Bank be returned to full private ownership and begin the next phase of growth.

“I want to welcome BAWAG as the future owner of PTSB. BAWAG has built a strong franchise in other European markets and will support PTSB in its next phase of development and the Irish economy as a whole.”