Natwest sells Irish commercial lending business to AIB

By Simon Jessop

LONDON (Reuters) -Natwest Group said on Monday it had agreed to sell most of its Irish commercial lending business to regional peer Allied Irish Banks, as part of the British lender's planned exit from Ireland.

The deal will see AIB take over around 4.2 billion euros ($5.01 billion) in gross performing commercial lending and associated undrawn exposures of around 2.8 billion euros from Natwest's Ulster Bank.

Natwest said it expects to make a small gain on the disposal. As part of the deal, 280 employees will transfer to AIB.

Natwest said in February that it was to wind down its Irish arm as Chief Executive Alison Rose slashes underperforming parts of the state-owned lender after it swung to a loss in 2020.

AIB said in a separate statement that it would pay 4.1 billion euros for the loans, equivalent to 97.63% of par value, using its existing cash pile. After receiving regulatory approval, it plans to migrate the loans over 12-18 months.

AIB said the deal would be accretive to earnings from 2023 and provide net interest income of around 100 million euros a year. Additional annual costs after the deal would come in around 30 million euros a year.

While the deal would cut AIB's core tier 1 ratio - a measure of financial strength - by around 145 basis points, it said its CET1 ratio remains above its 14% target, at 15.8% at the end of the first quarter.

"AIB's landmark acquisition of Ulster Bank's 4.2 billion euro 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," said AIB Chief Executive Colin Hunt.

($1 = 0.8386 euros)

(Additional reporting by Conor Humphries;Editing by Rachel Armstrong)