Allied Irish Banks (AIB) has signed a binding agreement with Ulster Bank to acquire the latter’s €4.2bn of its performing corporate and commercial loan book.

The move follows a period of due diligence on the loan book.

The consideration paid for the loan book is €4.1bn. AIB will pay for the deal in cash using its existing resources.

The deal awaits regulatory nod, after which AIB will transfer the portfolio in a phased manner over 12-18 months.

Nearly 280 employees related to the servicing of the loan book are expected to join AIB as part of the deal.

The exact number of employees transferred will be confirmed once the transaction is finalised.

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By GlobalData

AIB CEO Colin Hunt called the deal a ‘landmark acquisition’.

“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,” he said.

AIB expects the deal to add to its earnings in 2023 and offer net interest income of €100m per year. It also expects the acquisition to increase operational costs of €30m annually.

The transfer will not impact the legal and regulatory protections of affected customers, stated Ulster Bank.

Ulster Bank CEO Jane Howard said: “Talks continue with Permanent TSB Group Holdings plc among other strategic banking counterparties on other elements of the phased withdrawal.

“I remain committed to managing our withdrawal carefully and responsibly over time, to deliver constructive solutions for our customers and their banking services within the Republic of Ireland.”

The decision for Ulster Bank’s phased withdrawal from Ireland was announced in February this year. The decision was made after a strategic review by its parent NatWest Group.

Also, a non-binding memorandum of understanding (MoU) with AIB was reached for the sale of performing commercial loans.

Meanwhile this April, KBC Bank Ireland reached a MoU with Bank of Ireland for sale of all of its performing loan assets and liabilities to the latter.