Ulster Bank has agreed to sell €7.6bn in performing loans and 25 branches to Permanent TSB, as the British bank advances its plan to pull out of Ireland.

PTSB and Ulster Bank’s owner, NatWest, have signed a provisional memorandum of understanding that will see NatWest secure a 20% stake in PTSB as part payment, and 400 to 500 Ulster Bank employees will transfer to PTSB.

Shares in Permanent TSB rose by more than 15% in Dublin in early trading in response to the announcement, while in London NatWest shares rose 2.4%.

Subject to the deal going through, PTSB will take over Ulster Bank’s non-tracker mortgages, micro-business loans, and the group’s Lombard Asset Finance loan business. The deal is expected to be finalised by the last quarter of this year and will bring PTSB’s branch total from 78 to 103.

The NatWest group sold around €4.2bn of commercial lending in late June to Allied Irish Bank, in a deal that saw around 280 workers transfer from Ulster to AIB.

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Ulster Bank has around 1.1 million customers in Ireland, along with 2,800 staff in 88 branches.

PTSB chief executive Eamonn Crowley (pictured) said: “We see this as a once in a generation opportunity to fast-track the growth of an Irish bank with a strong community and customer service ethos that has evolved over its 200-year history. It also supports the investments we are making in the transformation of our in-branch and digital banking services.

He added that the deal will be self-financing and that PTSB will not have to raise funds from existing shareholders, including the state which owns 75% of the bank.

Ulster Bank chief executive Jane Howard added: “We have advanced negotiations to a non-binding MOU with Permanent TSB for the proposed sale of a c€7.6bn perimeter of performing non-tracker mortgages, and the performing loans in our micro-SME business and Ulster Bank’s Lombard Asset Finance business, including the Lombard digital platform and 25 Ulster Bank branch locations.

“Today’s agreement with PTSB, will provide a good solution for these customers and colleagues, building on our recently announced agreement with AIB. We remain in talks to find a similar constructive solution for our performing tracker mortgage portfolio.

Finance minister Paschal Donohoe commented: “The successful conclusion of a transaction in line with that described in PTSB’s announcement would be a very positive outcome providing a significant number of Ulster Bank customers with certainty as to the destination of their loans, and a large number of staff with comfort in terms of job security.

“However, I appreciate that the conclusion of any transaction is subject to normal due diligence, further negotiation and agreement of final terms, as well as obtaining appropriate approvals.

“For PTSB, the acquisition of these loan portfolios would provide the bank with additional scale, further strengthening its role in the marketplace. With the withdrawal of Ulster Bank and KBC from market, an enlarged PTSB has a more important role than ever in providing meaningful competition for consumers both in terms of product choice and pricing. I am hopeful that these discussions will lead to a successful outcome and remain supportive of the bank as shareholder.”

Ulster Bank branches transferring to PTSB