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KBC Bank could leave Irish market as talks with BOI begin

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Michelle Devane, PA
·4-min read
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KBC Bank Ireland looks set to leave the Irish market after announcing the potential sale of its performing loan book to Bank of Ireland.

Discussions are at an early stage but if the sale goes ahead it would “ultimately” lead to KBC Bank Ireland exiting the market, its chief executive said.

However, Peter Roebben said that, “for the time being”, nothing will change for its customers or staff.

KBC has entered into a Memorandum of Understanding (MoU) with Bank of Ireland, which could lead to “a transaction whereby Bank of Ireland commits to acquire substantially all of KBC Bank Ireland’s performing loan assets and liabilities”.

KBC said its remaining non-performing mortgage loan portfolio, which is not part of the MoU, is currently being analysed whereby KBC Group is reviewing its options to divest the NPL portfolio.

In a joint statement, the banks said: “The transaction remains subject to customary due diligence, further negotiation and agreement of final terms and binding documentation, as well as obtaining all appropriate internal and external regulatory approvals.”

Mr Roebben said the bank remains committed to offering its quality retail banking and insurance services to both new and existing customers.

“For the time being nothing changes, neither for existing nor for new customers,” he said.

“Our customers do not need to take any action as a result of today’s announcement.”

The Belgian-owned bank first entered the Irish market in 1978 through the majority acquisition of Irish Intercontinental Bank.

Mr Roebben added that the bank continues to benefit from a strong liquidity and capital position and that the board and executive committee are “fully conscious” of the bank’s responsibilities to its “customers and colleagues and the role of KBC as part of the Irish banking system”.

He told RTE Radio 1’s Morning Ireland programme if the transaction goes ahead it will “ultimately” lead to the bank withdrawing from the market.

“This is a process that is starting; we have not reached any conclusions, and any deal is the subject of further negotiations and regulatory and government approvals,” he said.

The chief executive added that there is “a long way to go” and that it is “far too early” to talk about any potential job losses as a result of any sale.

“Whatever deal might emerge at the end of this process will definitely take into account the interest of staff,” he said.

Finance Minister Paschal Donohoe described the decision as “regrettable”, particularly as it comes so soon after NatWest’s decision to withdraw Ulster Bank from the Irish banking sector.

He said: “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.

“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.

“Neither the Government nor I have any role in decisions such as these, which are a matter for the relevant banks and their independent boards.

“Robust consumer protections are in place in the event of a bank withdrawing from the Irish market, including the Central Bank’s Codes of Conduct, and that the terms of any contract currently in place with KBC remains in place into the future.”

Speaking on RTE’s Morning Ireland programme, Mr Donohoe described the move as a “significant development” in the Irish banking sector.

A KBC Bank branch in Dublin city centre
KBC Bank first entered the Irish market in 1978 (Brian Lawless/PA)

He acknowledged it was a difficult day for the staff of the bank and said there was “no need for existing customers of KBC to do anything and that all their rights as consumers are fully protected in any scenario”.

Mr Donohoe added that a trend was emerging of large banks making decisions regarding their presence in smaller economies and deciding to exit the market because they are not able to make the kind of money or return they can make in other parts of Europe.

“A challenge that we are facing is, for small economies like Ireland, questions are being asked and the banks are acting accordingly regarding what kind of profits and return they can make in very small banking markets, like our own,” the minister said.

“This is what NatWest have done and this is what KBC have now done.”

But Mr Donohoe said Ireland still has large domestic banks “well capable of meeting the needs the economy has and providing credit and investment that we need”.