BoI chief downplays likelihood of loan sales to secure KBC deal

ByRichard C. Sloan

Feb 28, 2022

Bank of Ireland chief executive Francesca McDonagh has played down the likelihood that the group will have to sell part of KBC Bank Ireland’s €9bn loan portfolio it plans to acquire, in order to secure the loan. competition approval for the deal.

Speaking to reporters on Monday, after the bank released its annual results, Ms McDonagh said ‘it is not necessarily a consensual expectation’ that the group will be required to offer part of KBC’s portfolio to the market free to challenger lenders.

Concerns

Ms McDonagh said the bank was ‘responding robustly and comprehensively’ to questions and inquiries from the Competition and Consumer Protection Commission (CCPC) about the proposed deal, following the group’s decision KBC based in Brussels last year to leave the Irish market.

The CCPC warned of its competition concerns in the middle of last month as it continued a thorough investigation into the transaction.

Both banks have until the end of next week to respond to the watchdog. The CCPC is also investigating Permanent TSB and AIB’s proposed purchase of parts of Ulster Bank, with that lender also pulling out of the market.

“I don’t want to jump to conclusions. It would be inappropriate,” Ms McDonagh said. “We are working to demonstrate that there is competition.”

The chief executive pointed out that Bank of Ireland is acquiring KBC Bank Ireland’s existing portfolio – or what is known as its order book – rather than its lending platform.

“We also highlight the level of competition we are seeing. We have two brands announcing their departure, but you also have three challengers who are certainly very active in trying to gain market share. This was a clear reference to Dilosk, owner of the ICS brand, Finance Ireland and Avant Money, all of which have entered the homeowner loan market in recent years.

Non-bank lenders accounted for around 10.5% of drawdowns in the first half of 2021, roughly double their market share a year earlier.

Loans

Bank of Ireland has agreed to buy KBC’s €5 billion Irish deposit portfolio, in addition to all of its performing loans, as part of its deal with the Belgian bank. However, Ulster Bank has no agreement with any other bank over its current accounts and savings wallets, which held a total of €18.6 billion in customer deposits at the end of last year.

Ulster Bank plans to soon start writing to nearly a million retail and business customers setting six-month deadlines for them to switch and close their current and deposit accounts with the lender – at a time when the banking system Irish at large is struggling with too many deposits. money.

Ms McDonagh said her bank was investing in resources to cope with an expected increase in Ulster Bank customers seeking alternative accommodation for cash.

However, she warned: “The problem is not just banks’ response to changing current accounts. This is system wide…. Customers should tell their utility companies, [such as] garbage collectors, that [their] direct debit must be from a new account. »

She said there could be direct debit backlog issues if utility companies and other service providers are unable to keep up with the changes.