Belgian-owned KBC Bank Ireland is planning to leave the Irish market after more than 40 years and is exploring selling off its performing loans to Bank of Ireland.
The two banks have signed a Memorandum of Understanding under which BoI will explore the possibility of committing to acquire substantially all of KBC Bank Ireland’s performing loan assets and liabilities.
In April 2019, KBC offloaded its €260m performing corporate loan portfolio to Bank of Ireland
The news comes hot on the heels of NatWest’s decision to wind down and eventually shut Ulster Bank in the Republic of Ireland and will further diminish competition in the banking sector.
The Central Bank slapped KBC with an €18.3m fine in September 2020 in relation to tracker mortgage issues. The bank’s accounts filing for 2019 disclosed costs of €8.5m in 2019 and €14.2m in 2018 related to the CBI’s tracker mortgage examination.
In Association with
Central Bank deputy governor Ed Sibley commented: “We understand that there will be concerns that this transaction, if it goes ahead, will result in a further reduction in the level of competition in the Irish retail banking sector, and a reduction in choice for consumers. Competitive pressures can clearly have an effect on the functioning of the financial system and the achievement of the Central Bank’s aim for it to sustainably serve the needs of the people and businesses of Ireland."
KBC’s new mortgage lending in 2019 amounted to €1.1 billion, an increase of 19% on the previous year, and the bank added 38,000 new current account customers that year.
Net operating income was €260m. Operating expenses were €230m, including €35m in levies paid to the state, while the cost of tracker mortgage redress added €23m to the annual overhead. That left a pre-tax, pre-impairment surplus of just €10m.
KBC’s payroll overhead for 1,300 employees in 2019 was €103m, with wages and salaries accounting for €86m (average pay: €66,200) and pension costs amounting to another €8m.
KBC Group chief executive Johan Thijs stated: “Given the challenging operational context for European banks and after careful consideration, we have reached an agreement regarding the potential sale to Bank of Ireland of substantially all of the performing loan assets and liabilities of KBC Bank Ireland.”
BoI chief executive Francesca McDonagh said: “We would be very pleased to provide KBC Ireland customers with a good home, and look forward to progressing our discussions with KBC over the coming period.”
KBC Ireland boss Peter Roebben said the bank will continue to offer banking and insurance services: “Our customers do not need to take any action as a result of today’s announcement,” he said.
Any deal concluded by the two institutions after due diligence is concluded will be subject to approval from the Central Bank and the Competition and Consumer Protection Commission.
