BoI made first move in bid to buy KBC Ireland

KBC was not considering pulling out of the Irish market before an approach from Bank of Ireland, the Irish Independent has learned.

It is understood that having been approached KBC took the decision to consider an offer.

Bank of Ireland is now in talks to take over KBC Ireland in a move set to dramatically further reduce competition just weeks after Ulster Bank, the third biggest bank in the country, announced its plans to exit the Irish market.

The loss of KBC will mean just three banks are left, all with substantial state ownership. The big two of AIB and Bank of Ireland are also currently at different stages in buying Goodbody Stockbrokers and Davy, respectively, further consolidating their market dominance.

The move by Bank of Ireland is in contrast to the situation at Ulster Bank, which had flagged a potential exit from Ireland following an internal review and in effect invited bids for the business here.

KBC and Bank of Ireland said in Friday they have entered into a Memorandum of Understanding (MoU), with Bank of Ireland potentially buying KBC’s performing loan assets and liabilities.

KBC’s Irish bad loans would be sold separately, with vulture funds the only likely buyers.

Execution of these two transactions would result in KBC Group's withdrawal from the Irish market, the bank said.

While these discussions are ongoing, KBC Bank Ireland said remains committed to offering its retail banking and insurance services for its existing and new customers.

There is no impact on KBC Bank Ireland customers' products or services and they do not need to take any action as a result of this announcement, the bank said.

Speaking on radio this morning, KBC Ireland CEO Peter Roebben confirmed that KBC is seeking to exit the Irish market through the sale of its loanbook to Bank of Ireland and through “divesting our non-performing loanbook”.

“Should those transactions be completed, it would ultimately lead to KBC withdrawing from the market,” Mr Roebben told RTÉ Radio One’s Morning Ireland.

Mr Roebben said the move has come about due to “talks between banks and the offer that was on the table” from Bank of Ireland. Mr Roebben said that nothing was finalised, KBC would consider the offer made and that all deals would be subject to regulatory and Government approval.

While Mr Roebben said the bank had a fiduciary responsibility to its shareholders, he said it would seek a deal where “the interests of our customers and staff, as well as our shareholders are protected”.

“There is a long way to go and my main message to customers is that you don’t have to do anything, we are open for business and will continue to be open for business”.

Mr Roebben said it was “far too early” to speculate whether job losses would come as part of the deal. 

In a statement this morning, KBC Group CEO, Johan Thijs, said: “Given the challenging operational context for European banks and after careful consideration, we have reached an agreement with Bank of Ireland Group regarding the potential sale to Bank of Ireland Group of substantially all of the performing loan assets and liabilities of KBC Bank Ireland.”

“Next to this MoU, KBC Bank Ireland's remaining non-performing mortgage loan portfolio is currently being reviewed for potential divestment."

The transaction remains subject to due diligence, further negotiation and agreement of final terms and binding documentation, as well as obtaining all appropriate internal and external regulatory approvals.

Francesca McDonagh, CEO of Bank of Ireland, said: "When we look at opportunities we consider if they are a good fit for the customers involved and for the bank. This MoU complements our strategy to grow our business in Ireland, and supports the investments we are making in the transformation of our systems and digital banking services.”

Further announcements will be made in due course.

Reacting to the news, Minister for Finance, Paschal Donohoe said the decision taken by KBC to leave the Irish market is “regrettable, particularly as it comes so soon after NatWest’s decision to withdraw Ulster Bank Ireland DAC from the Irish banking sector.”

“The decision announced by KBC is a very significant event for the Irish banking sector, its staff and customers. Our thoughts immediately turn to KBC’s staff and the impact of this decision for them,” Minister Donohoe said.

“The news that discussions have commenced with Bank of Ireland regarding substantially all of the performing loan assets and liabilities is welcome. It is my hope that these negotiations are concluded quickly and prioritise the continuation of financial services for these customers and the preservation of jobs.”

The Minister added that neither the Government nor him had any role in the decisions.

The Regulator has also been reacting to this mornings announcement.

Ed Sibley, Deputy Governor of the Central Bank, said that if the deal goes ahead there will be concerns it will further reduce competition in the market here.

“We do 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.”

More to follow

Online Editors