AIB has agreed a deal to buy about €4.2 billion of performing corporate and commercial loans from Ulster Bank.

AIB said the deal was reached further to the Memorandum of Understanding that was announced in February when Ulster Bank owner NatWest said it would withdraw from the Irish market.

It also follows a period of due diligence on the loan book.

AIB will acquire the portfolio for a total consideration of €4.1 billion, equivalent to 97.63% of par value, payable in cash funded from its existing resources.

It said the exact size of the portfolio and consideration payable will depend on movements in the portfolio up to completion.

The transaction remains subject to customary regulatory approvals following which, AIB intends to migrate the loan book on a phased basis over a period of 12 to 18 months to ensure optimised customer outcomes.

As a result of today's deal, about 280 Ulster Bank workers who are directly involved in the servicing of the loan book will transfer to AIB. The final number of roles will be confirmed as the deal completes.

AIB said the deal would be accretive to earnings from 2023 and provide net interest income of around €100m a year. Additional annual costs after the deal would come in around €30m a year, it added.

In a statement, Ulster Bank said there is no immediate change for customers, adding that it remains open for new and existing business for all customers.

It said that commercial banking relationship managers will continue to actively engage with business customers throughout this process.

The future transfer will not affect the legal and regulatory protections of impacted customers, it added.

AIB CEO Colin Hunt

AIB's CEO Colin Hunt said the bank's "landmark" acquisition of Ulster Bank's €4.2 billion corporate and commercial loan book will further underpin AIB's ambitious growth plans and will position it to support the business community and Ireland's economic recovery as the country emerges from the pandemic.

"We continue to deliver on the strategy we announced last December to enhance and diversify our revenue streams and ensure AIB's long-term sustainability. We look forward to welcoming new colleagues from Ulster Bank and working with our new customers as they transition to AIB," Colin Hunt said.

Mr Hunt also said that the bank is confident in the outlook for the remainder of the year.

"We look forward to updating on our further progress when we announce our first half results on 4 August," he added.

Ulster Bank chief executive Jane Howard said today's binding agreement represents a significant update on the bank's phased withdrawal from the Irish market.

"Although it remains subject to regulatory approvals, I am confident that we are with AIB, delivering a good solution for our performing commercial loan book customers," Ms Howard said.

Ulster Bank CEO Jane Howard

The Ulster Bank CEO also said that talks continue with Permanent TSB Group Holdings among other strategic banking counterparts 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," she added.

AIB shares were lower in Dublin trade today.