AIB acquires €5.7bn of Ulster Bank mortgages

AIB Group plc confirmed that Allied Irish Banks plc entered into a binding agreement with NatWest Group and Ulster Bank Ireland DAC for the acquisition of a performing Ulster Bank tracker mortgage portfolio with an expected value of €5.7 billion.

AIB CEO Colin Hunt said: “We are delighted to have reached agreement with NatWest and Ulster Bank on another loan book acquisition and look forward to welcoming these customers to AIB.

“This acquisition further adds to our growing balance sheet and progress towards our strategic targets.

“Our strong capital position, which is well ahead of our medium-term target of >13.5%, enables us to invest in our business, pursue RoTE accretive inorganic opportunities and make distributions to shareholders.”

AIB said it will acquire the portfolio consisting of 47,000 Ulster Bank customers for €5.4 billion, equivalent to 95.15% of par value, payable in cash funded from its existing resources.

NatWest Group CEO Alison Rose said: Today’s announcement is another key milestone in our phased withdrawal from the Republic of Ireland.

“Our priority remains to support our customers and colleagues through this transition and we will be working closely with AIB to ensure the successful completion of this transaction.”

AIB said: “The exact consideration payable will depend on movements in the portfolio up to completion.

“AIB intends to engage a third party service provider to administer the portfolio on its behalf.

“This servicing arrangement will have no impact on customers who will retain their existing terms and conditions.

“The transaction remains subject to obtaining any necessary customary regulatory approvals.

“AIB will acquire an economic interest in the mortgage portfolio in the second half of 2022 with formal completion expected in 2023.

“The transaction is expected to be accretive to earnings in 2023.

“On an annualised basis and inclusive of discount unwind, AIB expects total income of c. €90m and a 30bps average servicing cost.

“As required under IFRS 9, AIB will incur a Day 1 expected credit loss (ECL) charge as the portfolio migrates following formal completion.

“AIB anticipates the transaction to reduce CET1 by c. 70bps reflecting increased risk weighted assets of c. €2.5 billion.

“AIB’s fully loaded CET1 at end March 2022 was 16.6% with a further 130bps CET1 reduction expected in relation to the agreed acquisition of Ulster Bank’s corporate and commercial loans.

“The Transaction is also expected to be enhancing to RoTE in 2023, as AIB progresses towards its medium-term RoTE target of greater than 9% in 2023.”

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