AIB approaches deal to sell £ 1bn British SME book to Allica Bank

The AIB has chosen the young UK challenger bank for small businesses, Allica Bank, as the preferred bidder for its nearly £ 1 billion (€ 1.2 billion) UK SME corporate loan book, which was launched earlier this year.

It is understood that an agreement can be announced within a few weeks, allowing AIB to leave a segment of the market that has provided low returns to the bank due to its small scale and relatively high labor requirements.

AIB CEO Colin Hunt told analysts on a call earlier this month after the bank released a trade update that the group was in exclusive talks with one party on the loan book without identifying the other side.

“Our plans to leave the GB SME market are progressing well with a sales process that is significantly advanced and we have gone for preferred bidding,” a spokesman for the bank said Friday, refusing to comment on the suitor for the portfolio.

A spokeswoman for Allica Bank also declined to comment.

Hunt announced in December last year that the bank was withdrawing from the UK SME market, while doubling in corporate lending in areas such as renewable energy, manufacturing and warehousing. The AIB spokesman confirmed on Friday that AIB UK remains committed to these areas as well as to the healthcare and infrastructure sector.

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

Full authorization

Allica Bank, backed by London investment firm Warwick Capital Partners, received full UK banking authorization in late 2019 and continued to hire its CEO, Richard Davies, last year from Revolut. The bank said last month that it had provided more than £ 600 million in loans to SMEs since opening its doors in March 2020, and it was “laser-focused on increasing this to several billion over the coming years” .

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

The bank also moved this year to restructure its business in the Nordic region and announced in July that it would close eight of its remaining 15 branches there, following following decisions by the Bank of Ireland and Danske Bank to close branches in the region. AIB had cut its network in the north from 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, the largest bank in Northern Ireland, said in July that it was closing four branches in this market in a move that would reduce its footprint to 32 locations.

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