The chief executive of Permanent TSB has described its discussions with Ulster Bank parent NatWest on the possible purchase of parts of the business as positive.
Speaking on Morning Ireland, Eamonn Crowley confirmed the talks included a possible deal on mortgages, as well as the micro-SME aspects of the business.
Asked about branches forming part of any deal, he said the discussions were focused on the 'retail business.'
"We shouldn't think about them as products, but as customers so we're interested in the customers that Ulster Bank have and we're interested in attracting them over to PTSB.'
Mr Crowley said the bank would welcome some of the more than €20 billion in deposits that are expected to depart Ulster Bank accounts in the coming years.
"Deposits are attractive because customers trust banks in order to place their cash. We've no issue with liabilities. The key thing is that the assets transfer as well," he said.
The CEO said it was too early to speculate on the size of any taxpayer cash injection that might be required to facilitate any deal.
On prospects of the bank forming a much-talked of 'third way' in Irish banking, Mr Crowley said the reality was that the bank was already the third bank in the Irish market.
"We're number three in mortgages with a 15% market share. We've over a million customers and we've an ambition to grow SME activity.
"There's no doubt that a combination with Ulster would put us in a strengthened financial position to provide more vigorous competition," he concluded.
His comments came as Permanent TSB reported a loss before tax of €166m for the year to the end of December.
The bank had reported a profit before tax of €42m for 2019.
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Permanent TSB said its total new lending for 2020 fell by 15% to €1.4 billion, while its market share of new mortgage lending stood at 15.3% - broadly unchanged from the previous year.
A strong lending performance, particularly in the second half of the year, led to a 43% increase in new mortgage drawdowns compared to the first half of 2020, the bank added.
It noted that after the opening up of the economy in the third quarter and along with the introduction of an improved mortgage proposition in July, application volumes rebounded strongly.
New mortgage applications in the second half of the year were about 70% higher than the first half of the year.
PTSB said it approved about 10,700 Covid-19 mortgage payment breaks last year to alleviate temporary financial pressures for its customers or about 10% of total gross loans.
99% of Covid-19 approved mortgage payment breaks have now expired, while 103 borrowers remained on an active payment break at the end of January.
It said its non-performing loans of €1.1 billion at December 2020 increased by €80m when compared to December 2019, mainly as a result of new defaults from payment breaks.
The bank has set aside €155m to cover expected bad loans.
SME lending rose by about 2% compared to 2019 - albeit from a low base.
In November, Permanent TSB announced a major expansion of its SME offering by partnering with the Strategic Banking Corporation of Ireland to provide €50m in low-cost loans under the Government's Future Growth Loan Scheme for SMEs.
It said it had received applications for the loan scheme "significantly" in excess of the €50m.
Permanent TSB's stated ambition is to grow its position in the retail and SME markets here and it is in this context that it commenced discussions with NatWest in relation to acquiring certain elements of Ulster Bank's business here as it prepares to wind down its operations.
"Until an acquisition is finally concluded there can be no certainty that an acquisition will occur or on what terms. Any such transaction would be subject to normal shareholder and regulatory approvals," the bank said.
PTSB, which is 75% state-owned, would become the country's third largest lender behind AIB and Bank of Ireland if it concludes the deal.
It is believed to be in talks to acquire a "significant majority" of Ulster Bank's €14 billion mortgage book, around €700m of SME loans and some of its 88 branches.
That would double its mortgage loan book and transform its SME business.
Mr Crowley said that despite the challenges that 2020 brought, he was confident the bank is in a strong position to make the most of the opportunities that will arise in the post-pandemic recovery phase.
"While 2020 was a loss making year for the bank, the second half of the year saw the bank increase its new lending volumes and transactional activity as the economy began to reopen," Mr Crowley said.
"Our active mortgage offer pipeline is at a strong level and positions us well to continue our strong performance into 2021," he added.
In today's results statement, the bank said its fully loaded core Tier 1 capital ratio stood at 14.6% at the end of last year.
Permanent TSB said that all of its branches and contact centres remained open despite the Covid-19 crisis last year. It said it redeployed over 100 staff and mobilised four new regional centres to further support in answering customer queries.
It also said that more than 1,200 of its staff are working from home, supported by a range of investment in digital equipment and functionality, ensuring continuous connectivity and enhanced communication from remote sites.
Looking ahead, Permanent TSB said the outlook continues to remain uncertain with recovery being dictated by the success of the Government led vaccination programme and the overall suppression of the Covid-19 virus.
"In terms of business performance the bank has started the year with a strong performance in new mortgage lending. However, in light of the third lockdown, household spending has been curtailed, resulting in a continued build-up of deposits and a reduction in fee income due to lower transactional activity," it added.