UK banking giant NatWest was looking into winding down Ulster Bank in the Republic at least as far back as March 2019, 18 months before it emerged that this was under consideration.
That is according to excerpts of minutes of a board meeting at Royal Bank of Scotland (RBS), as NatWest was then known, outlined in a document published on Friday by the Irish competition watchdog.
The publication related to the Competition and Consumer Protection Commission’s (CCPC) approval in April of a planned sale of €4.2 billion of Ulster Bank commercial and corporate loans to AIB under Ulster’s phased withdrawal from the market, which was announced in February 2021. The Irish Times first reported in September 2020 that NatWest was considering winding down its operation in the Republic.
Minutes of the March 2019 meeting showed that the RBS was not satisfied with the profit returns of Ulster Bank from at least 2018. Redacted extracts from the minutes show RBS had considered a wide range of exit options, but that the board concluded “from a risk perspective beginning a wind-down before […] might be premature and produce unintended consequences”.
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[ NatWest considers closing Ulster Bank in RepublicOpens in new window ]
The document also highlighted minutes from a NatWest executive committee meeting from April 2020 that said it resolved “it was an appropriate time to reconsider the group’s long-term future in the Republic of Ireland”, with the focus on a wind-down or a merger with another entity, whose name was redacted. Permanent TSB (PTSB) was long speculated in the market as a potential partner.
Even in the event of a merger, the ultimate aim would be to exit, either through a sale of its shares or an initial public offering (IPO), the document said.
The CCPC used the minutes of the meeting as evidence that NatWest had set its sights on exiting the Republic before it decided in 2021 to sell the €4.2 billion Ulster Bank commercial and corporate loan book to AIB. The authority concluded that Ulster Bank was on track to cease supplying commercial banking products and services before it agreed to the sale.
While there was an unnamed rival bidder for the portfolio in question, NatWest and Ulster Bank did not consider this to be a preferred option. The CCPC concluded that a deal with the other party would also raise competition concerns. The watchdog noted in April, following a so-called phase two scrutiny of the deal, that the sale of the portfolio to AIB would not cause a substantial lessening of competition, when compared to a run-down of the loans or sale to an alternative buyer.
Still, it highlighted that Ulster Bank’s exit from the market means that only two full-service banks — AIB and Bank of Ireland — will remain in the State to serve the needs of businesses with turnover of €2-€250 million. It went on to warn: “International evidence shows that higher concentration in banking services is likely to have a detrimental effect on competition, leading to poorer outcomes for business borrowers in terms of pricing, innovation and service.”
[ AIB in exclusive talks to buy Ulster Bank's tracker mortgagesOpens in new window ]
The CCPC is also considering Permanent TSB’s planned purchase of €6.8 billion of Ulster Bank home loans and 25 of its branches. Separately, AIB is in exclusive talks to buy Ulster Bank’s €6 billion of tracker mortgages.
