The Government’s rush to get out of Irish banks might see it having to consider climbing aboard a foreign one.
Vienna-based bank Bawag, widely seen as the strongest counterweight to private equity firms circling PTSB, would most likely try to fund a potential offer with a mix of cash and shares in itself, according to a report by analysts at UBS on a potential transaction.
The Swiss investment bank puts a potential bid price of €1.83 billion on PTSB, or about €3.35 per share. That is about 11 per cent higher than PTSB’s current share price and 44 per cent above where it was trading before PTSB announced in late October that it was putting itself up for sale.
The Government owns a 57 per cent stake in PTSB.
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There is scepticism in Dublin financial circles that Tánaiste Simon Harris, only two months in the role as Minister for Finance, will warm to private equity – often caricatured as asset-stripping vultures or financial engineers leaving a trail of damage behind.
But make no mistake, whoever buys PTSB – whether strategic or financial – is going to accelerate cost-cutting to get its expenses, running at about 75 per cent, down below 50 per cent, where its larger rivals AIB and Bank of Ireland stand.
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An introductory briefing by Department of Finance officials for Harris, published on Friday, flagged the continued €20,000 cap on bonuses at bailout-era banks as a “significant diligence topic” for bidders.
The UBS note, however, puts “broad alignment across stakeholders” – which would include Irish authorities – around “cost optimisation (including branches and personnel)” as a key issue for bidders.
The scope for cuts would be even greater if Bawag also succeeds in buying Finance Ireland, where it is reportedly in exclusive talks. UBS says boosting earnings at PTSB – and across the wider Bawag group – would “heavily rely” on stripping out staff costs and shrinking the branch network, with further digital investment likely to follow.
Taking Bawag shares as part payment for the State’s PTSB stake would, in theory, allow the Government to share in the upside. But it would also postpone the long-promised exit from the bailout era – and leave Harris facing awkward political questions about owning a slice of a bank cutting jobs in Dublin.
Would he really have the stomach for it?
