The news comes a week after IBRC announced that it had decided against a full-on sale of the wealth management unit, despite running a sales process for almost a year.
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IBRC said Key Capital was the preferred counterparty based on its "strategic fit for IBRC’s clients, its sound financial position and its strong operating platform in Ireland and the UK encompassing a broad product and service offering".
Dublin-based Key Capital operates across capital markets, corporate finance, real estate, asset management and wealth management.
However, the legal entities within the Wealth Management Business will not form part of the sale element of the transaction. The business has about EUR2.5 billion of the bank’s loans linked to deals.
Commenting on announcement, Tom Hunersen, Group Executive – Corporate & Institutional Recovery, IBRC said: "Today’s announcement is a very positive development for IBRC’s Wealth Management Business and its clients. The transaction strategy provides a vehicle for the sale of certain assets and/or operational co-sourcing of the Business to Key Capital in line with IBRC winding down this division of the Bank in an orderly manner.
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By GlobalData"It also delivers an opportunity for IBRC to maximize investor returns and deliver value for the Irish taxpayer from the main operating platform, IBRC Assurance Company," he added.
The deal is subject to approval by the IBRC and assurance company boards and the consent of the Central Bank with final ratification by the Minister for Finance, Michael Noonan.
AIB, which was bailed out by Irish government in December 2008, is winding wind down the wealth management division as part of an overall strategy to have itself closed by 2020.
AIB, like all other bailed-out banks, is mandated to have to have a maximum of EUR122.50 on loan for every EUR100 on deposit by the end of 2013. AIB’s last reported ‘loan-to-deposit ratio’ was 143% (or EUR143 on loan for every EUR100 deposit).
But given the prevailing credit crunch and economic uncertainty in the eurozone, we believe that IBRC may not be able to succeed in fetching enough price from Key Capital to make required progress in their stated objectives and meet obligations set by the European regulators.
Hence WealthInsight believes that instead of selling the assets at fire sale prices, IBRC may well park these assets along with toxic loans, and off load them when market conditions improve in near future.
