KBC in talks with Bank of Ireland with a view to exiting the Irish Market
Around 5 years ago KBC spent a long time considering whether to say or leave Ireland.
In the end they decided to stay and since then they have invested heavily in building their brand and have provided much needed competition.Their product range expanded to include competitive current accounts, credit cards, loans and insurance.
Back in February this year KBC signalled that the high capital requirement for operating a bank here in Ireland was a concern. This requirement impacts profitability.This requirement was also a factor in the Ulster Bank decision to leave.
Irish banks are required to carry over twice the capital of European banks.The extra capital is there to increase the resilience of our banking system. However the flip side is that it is harder to make money and especially so when the market gets very competitive. Ulster and KBC have done their sums and clearly feel that their capital investment would make more money in other markets.
Other factors in the decision are likely to include:
- New entrants into the market with very competitive rates for low loan to value mortgages.
- KBC Ireland was the only market in their international division where KBC lost money in 2020- losing close to €50 million.
- Structural difficulties in the Irish housing market with limited supply of houses and inflated house prices.
It is ablow to competition and it remains to be seen how the discussions with Bank of Ireland will play out.
The bank is continuing to trade as normal while discussions about a possible sale take place.