Hi John, you mentioned Natwest having 2 percentage points of CET1 capital trapped in Irish Business. I wonder is that 2% of the capital it had to hold as a percentage of its total loans or I have misread it? Usually CET1 are in the range of 14-18% in Ireland.
Hi I mean it had the equivalent of circa 2 percentage points of group CET1 trapped in Ireland and unusable. They wouldnt have been able to meet CET1 target / shareholder distribution objectives if they stayed in ireland.
The regulatory overhang you mentioned is probably the biggest headwind for Continental banks like UniCredit that might otherwise be tempted by the market dynamics. Even with the CBI's recent shift to a more reasonable tone, any acquirer would be modeling in a worst case scenrio where political winds shift post-exit and suddenly levies or DTA usability becomes a moving target. The irony is that PTSB screens perfectly as an opportunistic entry point into a concentrated market, but the regulatory gold plating and political uncertainty effectively price out exactly the type of sophisticated buyer who could extract the most value from it.
I think those factors will absolutely be taken into significant consideration. Whether they deter buyers from what could be a one-off opportunity in a slightly softer regulatory regime relative to a few short years ago remains to be seen. Other banks' experience with the regulatory regime might. Politics is a risk everywhere and I don't think Ireland stands out particularly. Also, on the DTAs as a particular case in point my sense is that the market discounts them heavily and that's how sell-side analysts have been valuing them for years too - so, I would expect a buyer to haircut them for sure, but I am not convinced potential legislative change in that vein (of which there is no sign - and it would hurt all 3 players to a greater or lesser extent if gov't did do something) is an outright obstacle to achieving bids. It's all about what competitive tension they can generate here but PE firms will rightly be cynical about their ultimate acceptability as a buyer I think.
I would also add I don't think the irish givernment would sell to Revolut even if they were to bid. they would be bricking it that revolut would use it to eat the other two banks for lunch in time!
It has been speculated. The thesis is that they get a banking licence - but they already have a Lithuanian licence they can and do use to passport in. Would give them insight intro how an old school bank works and what the efficiency opportunity could be I guess - might give them a better sense of their potential relative competitive strength and where they need to invest I guess. But I'm gonna bet no here with a fairly high conviction level. I'd say they'll seek to participate in the process but am doubtful they would actually bite; I would assign a higher probability to it if PTSB was in a market in which Revolut does not have a licence (or a means to passport in).
Hi John, you mentioned Natwest having 2 percentage points of CET1 capital trapped in Irish Business. I wonder is that 2% of the capital it had to hold as a percentage of its total loans or I have misread it? Usually CET1 are in the range of 14-18% in Ireland.
Hi I mean it had the equivalent of circa 2 percentage points of group CET1 trapped in Ireland and unusable. They wouldnt have been able to meet CET1 target / shareholder distribution objectives if they stayed in ireland.
The regulatory overhang you mentioned is probably the biggest headwind for Continental banks like UniCredit that might otherwise be tempted by the market dynamics. Even with the CBI's recent shift to a more reasonable tone, any acquirer would be modeling in a worst case scenrio where political winds shift post-exit and suddenly levies or DTA usability becomes a moving target. The irony is that PTSB screens perfectly as an opportunistic entry point into a concentrated market, but the regulatory gold plating and political uncertainty effectively price out exactly the type of sophisticated buyer who could extract the most value from it.
I think those factors will absolutely be taken into significant consideration. Whether they deter buyers from what could be a one-off opportunity in a slightly softer regulatory regime relative to a few short years ago remains to be seen. Other banks' experience with the regulatory regime might. Politics is a risk everywhere and I don't think Ireland stands out particularly. Also, on the DTAs as a particular case in point my sense is that the market discounts them heavily and that's how sell-side analysts have been valuing them for years too - so, I would expect a buyer to haircut them for sure, but I am not convinced potential legislative change in that vein (of which there is no sign - and it would hurt all 3 players to a greater or lesser extent if gov't did do something) is an outright obstacle to achieving bids. It's all about what competitive tension they can generate here but PE firms will rightly be cynical about their ultimate acceptability as a buyer I think.
Would Revolut consider buying ptsb?
I would also add I don't think the irish givernment would sell to Revolut even if they were to bid. they would be bricking it that revolut would use it to eat the other two banks for lunch in time!
It has been speculated. The thesis is that they get a banking licence - but they already have a Lithuanian licence they can and do use to passport in. Would give them insight intro how an old school bank works and what the efficiency opportunity could be I guess - might give them a better sense of their potential relative competitive strength and where they need to invest I guess. But I'm gonna bet no here with a fairly high conviction level. I'd say they'll seek to participate in the process but am doubtful they would actually bite; I would assign a higher probability to it if PTSB was in a market in which Revolut does not have a licence (or a means to passport in).