KBC plots Irish exit with loans sale to Bank of Ireland


This post is re-published from an article by Joe Brennan, Markets Correspondent, The Irish Times

The list of lenders who have left the banking market in the Republic since 2008 includes Bank of Scotland, Anglo Irish Bank, Irish Nationwide Building Society and Ulster Bank.

KBC Bank Ireland’s surprise announcement on Friday that it is planning to exit the Irish market comes only four years after the company’s Belgian parent reaffirmed its commitment to the Republic after a strategic review.

Since then, the lender has managed to repay €410 million of the €1.4 billion bailout it received from its parent during during the financial crisis.

However, the prospect of the bank making acceptable profit returns – and dividends – for KBC Group in Brussels has become increasingly difficult in recent years amid ongoing ultra low interest rates, muted loan demand, and the fact that Irish banks have to hold three times as much expensive capital against mortgages as the average European lender, a legacy of the domestic banking crisis.

KBC said on Friday that it has signed a memorandum of understanding to explore the sale of its €8.9 billion performing loans and €5 billion of deposits to Bank of Ireland, but that no decision on an exit has been made. But it’s clear that the bank is set to be the latest in a string of lenders to quit the Republic in a little over a decade, which will reduce the market to just three retail banks – AIB, Bank of Ireland and Permanent TSB.

Here is a list of the other major exits:

Bank of Scotland/Halifax

Bank of Scotland entered the Irish market quietly in 1999 through the purchase of Equity Bank and went on to introduce tracker mortgages to the State in 2001 as it chased market share aggressively during the boom years. It purchased 54 ESB outlets in 2015 for €120 million to build out a branch network using its Halifax brand.

The bank’s Edinburgh-based parent HBOS was taken over by Lloyds Banking Group in 2008 in a rescue deal. Lloyds subsequently handed back its Irish licence in 2010 and most of its loan book – which reached €33 billion – has been sold on.

Anglo Irish Bank

Anglo Irish Bank, whose loan book soared by 800 per cent between 2000 and a peak of over €72 billion in 2008 as it was lender of choice to many property developers during the boom, succumbed to nationalisation the following January as it was threatened with collapse as a result of soaring bad debts and emerging scandals.

The company required a total €29.3 billion bailout, saw half of its loans taken over by Nama and was subsequently put into wind-down in late 2010. The following year it was renamed as Irish Bank Resolution Corporation (IBRC) and took over fellow-failed lender Irish Nationwide Building Society. Liquidators were appointed to IBRC in February 2013.

Irish Nationwide Building Society

Irish Nationwide Building Society (INBS), which traced its roots back to 1873, would build up an €11 billion loan book by the time the property market crashed in 2008. Some 80 per cent of this book was exposed to commercial real-estate lending.

Following an abortive attempt to sell itself in 2007, the lender would require a €5.4 billion taxpayer bailout during the financial crisis, before being subsumed into IBRC and put into liquidation.

Danske Bank

Danish lender Danske Bank entered the Republic in 2005 by acquiring National Irish Bank and targeting a segment of the tracker mortgage market where loan values were less than 50 per cent of the value of the property.

Danske decided in 2013 to exit the retail banking business in the Republic after racking up enormous bad-loan losses. The group has retained a small branch in Dublin focused on corporate and institutional clients and its Danske Northern Ireland unit remains the second-largest lender in the North, after Ulster Bank Northern Ireland.

ACC Bank

Founded in 1927 as a state-owned lender called Agricultural Credit Corporation (ACC), the bank was acquired by Rabobank, the biggest mortgage lender in the Netherlands, in 2002.

The bank handed back its licence to the Central Bank of Ireland in 2014 and was renamed as ACC Loan Management as the loan book was put into rundown. The final part of the loan book was sold in 2019 to Wall Street investment bank Goldman Sachs, distressed debt firm CarVal Investors and debt collection firm Cabot for a deeply discounted price of €800 million.

Rabobank returned its local banking licence to the Central Bank in 2016 as part of a global initiative to reduce costs. Its corporate banking business was transferred to the Irish branch of the group.

In 2018, the group shut down its Irish online savings operation RaboDirect Ireland.

Ulster Bank

Ulster Bank confirmed on February 19th that it is exiting the Republic on a “phased basis” after more than 160 years. Its UK parent NatWest Group blamed the general low interest-rate environment and fact that it was unable to see a way for Ulster to make acceptable returns.

Ulster Bank chief financial officer Paul Stanley noted that the high levels of capital that Irish banks must hold against their mortgages, compared to the UK or countries within the EU, had a negative impact on the company’s returns.

AIB is currently in talks to buy €4 billion of corporate and other business loans from Ulster Bank, while Permanent TSB is negotiating to acquire much of its remaining €16 billion of loans. Ulster Bank in Northern Ireland is a separate entity and unaffected by this decision.

Whether you are a first time buyer, moving home, looking to switch lender , should you have any concerns about the issues raised in this article,  or investing in a buy-to-let property, why not chat to a Seaspray mortgage adviser today about finding the mortgage that’s right for you- tel.+353 1 7070 000     or email     john.finnamore@seasprayfs.ie


Seaspray Financial Services Ltd trading as Seaspray Private and Seaspray Mortgages is regulated by the Central Bank of Ireland with registered number C165527

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