AIB to close deal to sell £ 1billion pound on UK SMEs to Allica Bank

AIB has selected young UK small business challenger Allica Bank as the preferred bidder for its nearly £ 1bn (€ 1.2bn) UK SME loan portfolio, which has gone to market earlier this year.

It is understood that a deal could be announced in a few weeks, allowing AIB to withdraw from a segment of the market that has generated low returns for the bank, due to its small scale and labor demands. relatively high work.

AIB chief executive Colin Hunt told analysts in a phone call earlier this month, after the bank released a business update, that the group was in exclusive talks with a party about the loan portfolio, without identifying the other party.

“Our plans to exit the UK SME market are progressing well with a considerably advanced sales process and we have moved into the preferred buyer stage,” a bank spokesperson said on Friday, declining to comment on the portfolio contender. .

A spokesperson for Allica Bank also declined to comment.

Mr Hunt announced last December that the bank was pulling out of the UK SME market, while doubling its lending to businesses in areas such as renewables, manufacturing and warehousing. AIB spokesperson confirmed on Friday that AIB UK remains engaged in these areas, as well as in the health and infrastructure sectors.

The Irish Times reported in March that AIB had hired international investment bank Alantra to find a buyer for the UK SME portfolio, which also includes £ 2.8 billion in associated deposits. Bidders had been reduced to a shortlist of four by early August.

Full authorization

Allica Bank, which is backed by London-based investment firm Warwick Capital Partners, received full UK banking authorization at the end of 2019 and hired its managing director, Richard Davies, at Revolut last year. The bank said last month it had made more than £ 600million in loans to SMEs since it opened in March 2020 and was “laser-focused to bring that amount to billions over the years. future”.

AIB’s exit from the labor-intensive SME segment of the UK market will save the bank around € 35 million in the coming years.

The bank also decided this year to restructure its operations in the North, announcing in July that it was closing eight of its remaining 15 branches there, in the wake of decisions by Bank of Ireland and Danske Bank to close branches in the region. . AIB cut its network in the North by 30 branches in 2017.

The Bank of Ireland said in February it was cutting its Northern Ireland network by more than half to 13 locations as part of a major branch cut across the island this year.

Meanwhile, Danske, Northern Ireland’s largest bank, said in July it was closing four branches in that market, which would reduce its footprint to 32 locations.

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