Permanent TSB has retained investment bank Morgan Stanley to advise on a potential bid for Ulster Bank's Irish small-to medium-sized business loan portfolio if its larger rival decides to exit the market, according to a report in The Irish Times.
Ulster Bank, which is owned by NatWest Group, is conducting a strategic review of its operations in Ireland.
Citing unidentified sources, the newspaper said it was not clear how much of Ulster Bank's SME franchise PTSB would consider bidding for.
Analysts at Davy Stockbrokers said Ulster Bank's underlying SME portfolio amounted to about €2- 2.5 billion.
Mortgage lender PTSB's SME book stood at just €47m at the end of 2019. However, its chief executive Eamonn Crowley said the bank wanted to increase its presence in the business lending market.
A spokeswoman for PTSB, which is 75% owned by the Irish state, declined to comment on the report.
In a note, the Davy analysts said an acquisition would have a transformative impact on the earnings profile at PTSB.
It would also ease concerns about an Ulster Bank Ireland exit from the market from a competition perspective, the stockbrokers added.
The Financial Services Union, which represents workers in banking and finance, has called on Minister for Finance Paschal Donohoe and the Central Bank to make a statement on the potential bid.
"Today's story is clearly a serious and significant one. Arising from it, we are seeking an urgent meeting with the Minister, who we are also calling on to issue a statement about what is planned," said FSU general secretary John O'Connell. "We have been warning about this for months. A carve-up of Ulster Bank will be a terrible outcome for customers and staff as well as for competition in the Irish banking sector."
Mr O'Connell also called on Ulster Bank's parent company NatWest to engage with it about its plans for the Irish market.
"We have campaigned for months to get NatWest to commit to the future of Ulster Bank. If NatWest decide to exit the Irish market any solution needs to involve the maximum protection for customers, for jobs and the branch structure," he said. "Continued repetition of its line about this process is no longer tenable as it risks taking people for fools. The Bank needs to immediately engage with us in a meaningful way about its actual plans."