The State’s exit from the banking sector will take another step forward later this month when second round bids for Permanent TSB, or PTSB as it’s now known, are due.
The contest for the bank – home to one million Irish borrowers and savers – appears to be between an Austrian lender that nobody has heard of and two equally anonymous US private equity funds. That is who you end up with when you’re trying to sell the number three player – by a big margin – in a small market.
Leaving aside the issue as to whether beggars can get to be choosers in this situation, it is a cardinal error to assume it will make any difference who the Government decides to sell PTSB to in the end. The staff – who have the most skin in the game – might feel they have a better chance of holding on to their jobs and salaries if another bank were to buy the business, but their hope is a forlorn one.
Whoever buys Permanent TSB – valued at around €1.8 billion – will do the same thing. They will cut costs to drive up profits. There really is only one way to do that: reduce staff, reduce branches, and focus on digital banking.
The reality is that Bawag – the Austrian bank on whom the staff are pinning their hopes – has more in common with the two private equity firms that are said to also be in the frame – Lonestar and Centerbridge – than it does with the likes of AIB or Bank of Ireland.
Despite its laudable origins as a trade union-owned bank for Austrian workers, Bawag collapsed in 2006 after a lending scandal and was then taken over by the Austrian government before being sold to US private equity firm Cerberus. They boosted the bank by cutting costs and focusing on digital banking, turning Bawag into one of Europe’s most efficient banks before floating it on the Vienna Stock Exchange in 2017.
Whoever buys Permanent TSB will cut costs to drive up profits. There really is only one way to do that
Bawag’s growth strategy seems to consist of doing to other European banks what Cerberus did to it. It bought Dutch bank Knab in 2024 and Barclays Consumer Bank Europe in February 2025. Both have been restructured in an effort to match their new parent’s market beating cost-to-income ratio of 33 per cent. PTSB has a cost-to-income ratio of 77 per cent. It would be a bloodbath if Bawag got its hands on the Irish bank.
[ Austria’s Bawag could fund PTSB deal through shares and cash, UBS saysOpens in new window ]
New York-based Centerbridge and its Texan peer Lone Star, similarly, have long records of turning around inefficient financial institutions in the same fashion. In the case of Centerbridge, the one that draws the most obvious comparison is the German lender Aareal, which it bought in 2023 and cut staff by more than half a year later, although much of this was attributed to the sale of its software business. Aareal is now targeting a 30 per cent cost-to-income ratio, which would not be much fun for Permanent TSB either.
Lone Star’s record includes the Portuguese lender Novobanco, which it sold in 2025 for €6.4 billion, having bought it from the Portuguese government in 2017 for €1 billion. It then cut the cost-to-income ratio from 75 per cent to 32 per cent. It cut the workforce by 40 per cent, and branch numbers by something similar.
The reality is that Bawag is not a white knight offering succour from the barbarians of private equity. It is more of a wolf in sheep’s clothing. It may plan to hold on to PTSB in the long term – unlike the two private equity players in the mix – but its methods are the same.
From the Government’s perspective, the downside is the same. They will undoubtedly feel blowback once the axe starts to fall under the new owners, whoever they may be. Jobs will be cut, branches closed. Backbench TDs will complain. The Opposition will make hay.
Paradoxically, the rest of us, including PTSB customers, will most likely benefit from the entry of a ultra-competitive player into the market. AIB has a cost-to-income ratio of 44 per cent, and Bank of Ireland’s is 52 per cent; exactly what you would expect in a virtual duopoly.
Bawag’s growth strategy seems to consist of doing to other European banks what Cerberus did to it
The direction of travel in banking is such that PTSB’s fate is sealed unless the Government is prepared to support the bank in its current inefficient form indefinitely. The real choice that Tánaiste and Minister for Finance Simon Harris faces is between the short, sharp shock of the private equity route, or the death by a thousand cuts on offer from Bawag.
The latter might turn out to be particularly painful if the Bawag deal involves a mooted equity swap, with the State taking a stake in the Austrian bank in partial payment for its PTSB stake.
This would be the worst of all worlds. As a significant shareholder in Bawag, the Government would have responsibility for the pain being inflicted by Bawag, but no power to stop it.
If Harris has any sense, he will take the private equity money and run.