Natwest agrees to sell Ulster Bank assets to Permanent TSB

DUBLIN: Britain’s Natwest Group agreed to sell assets from its Irish arm to Permanent TSB , a move the mortgage lender and analysts described as a “once in a generation opportunity” for PTSB that saw its shares soar.

The deal includes 25 of Ulster Bank’s 88 branches and 7.6 billion euros ($8.94 billion) of gross performing loans, 7 billion of which relate to non-tracker mortgages, as well as performing micro-sme loans and its asset finance business, Natwest said as its Irish exit gathered pace on Friday.

On top of receiving a cash consideration, Natwest will take a stake of up to 20% in the enlarged share capital of PTSB. PTSB said it did not envisage requiring new equity, meaning the Irish state would not need to top up its current 75% holding.

“I think the deal is very good for existing shareholders because in effect they will get the benefit of an enlarged bank without having to put in any more capital and Natwest obviously see the value in it (taking a stake) as well,” PTSB Chief Executive Eamonn Crowley told reporters.

Shares in PTSB, which had 14 billion euros worth of mainly mortgage loans at the end of 2020 and now has 76 branches nationwide, were up 16.4% at 1.42 euros by 0945 GMT. Shares in Natwest were up 2.5%.

The British bank announced in February that it would wind down Ulster’s 20 billion euro loan book as Chief Executive Alison Rose slashes underperforming parts of the state-owned lender ater it swung to a loss in 2020.

The sale means Natwest has around 8 billion euros worth of Irish loans still to be offloaded.

It agreed last month to sell most of its Irish commercial loan book, totaling 4.2 billion euros, to Allied Irish Banks , one of Ireland’s two main lenders, which is seeking to strengthen its grip on the market ater Ulster’s exit. AIB’S chief rival Bank of Ireland is in talks to buy the bulk of Belgian bank KBC’S Irish assets, a move that could leave just three retail banks.

PTSB, which will take on about 400 to 500 of Ulster Bank’s 2,800 employees, said it expected to reach a legally binding agreement in the fourth quarter, with the business transfer to happen within the next 12 to 18 months.

The British and Irish governments will effectively both be shareholders in PTSB upon completion, since Natwest remains 55% taxpayer-owned, a legacy of the financial crisis of a decade ago.

Irish Finance Minister Paschal Donohoe welcomed the deal in providing meaningful competition in product choice and pricing as the market shrinks.

“The transaction represents a once in a generation opportunity to add scale, substantially increasing earnings and returns to merit a re-evaluation of the investment case,” Davy Stockbrokers analyst Diarmaid Sheridan wrote in a note.

Meanwhile, American Express Co beat estimates for second-quarter profit on Friday as increased consumer spending and an improving economy prompted it to release more funds from its loan-loss reserves.

Shares of the company rose 3% in premarket trading and were on track to open at a record high.

The reopening of the global economy is expected to unleash widespread demand for travel and shopping from consumers stuck indoors for more than 18 months, helping boost credit card transactions.

“We saw Card Member spending accelerate from the prior quarter and exceed pre-pandemic levels in June, with the largest portion of this spending growth coming from Millennial, Gen Z, and small business customers,” Chief Executive Officer Stephen Squeri said in a statement.

Squeri also said the addition of US Platinum card members touched record levels in the quarter on strong demand for premium, feebased products.

The company sold 2.4 million new proprietary cards in the quarter, while spending on goods and services on its cards grew 16% on a currency adjusted basis.

Net income rose to $2.28 billion, or $2.80 per share, for the quarter ended June 30 from $257 million, or 29 cents per share, a year earlier. Analysts had expected $1.67 per share, according to Refinitiv IBES data.

The credit-card issuer posted a benefit of $606 million due to the release of $866 million from its loan-loss reserves.

Excluding interest expense, Amex’s total revenue rose 33% to around $10.24 billion.