Bank of Ireland pays €5bn for KBC’s assets

January 2022 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

January 2022 Issue

Bank of Ireland has agreed to acquire ‘substantially all’ of the Irish performing assets of Belgian financial group KBC in a deal worth €5bn.

According to a joint statement released by the two banks, Bank of Ireland, the country’s largest bank by assets with a loan book of €77bn, will acquire €8.8bn of performing mortgages, €100m of performing commercial and consumer loans and €4.4bn of deposits. A portfolio of around €300m of non-performing mortgages will also be acquired as part of the transaction.

Bank of Ireland said it was acquiring the performing mortgages for 103.6 percent of par value and that it expected incremental net interest income of around €160m in 2023 because of the deal.

KBC said the deal, if coupled with a separate sale of its non-performing mortgage loan portfolio, would ultimately result in the bank’s withdrawal from the Irish market. The bank also said the exact size of the portfolio and consideration payable will depend on movements in the portfolio up to completion, but is not expected to materially change.

“We are delighted to have reached agreement with KBC on this important transaction,” said Francesca McDonagh, group chief executive of Bank of Ireland. “This acquisition is a positive development for our business and consistent with our growth strategy. We look forward to supporting our new customers on their important financial decisions over the years ahead.”

“Today’s agreement with Bank of Ireland Group regarding the sale to Bank of Ireland Group of substantially all of the performing loan assets and deposits of KBC Bank Ireland and a small portfolio of non-performing mortgages represents an important step in KBC Group’s withdrawal from the Irish market,” said Johan Thijs, chief executive of KBC Group. “The transaction remains subject to regulatory approvals. Yet, I’m confident that together with Bank of Ireland Group our customers will be provided with a good home, whilst continuing to enjoy the same legal and regulatory protections. We remain committed to managing this process responsibly over the coming period.”

“I would like to reassure our customers that they do not need to take any immediate action at this point as a result of this announcement,” said Ales Blazek, chief executive of KBC Bank Ireland. “KBC Bank Ireland remains committed to servicing customers of its retail banking and insurance products through its digital channels and hubs. We will communicate to our customers well in advance of any actual steps that may be taken with respect to their products or if our customers need to take any action at any point.”

The deal remains subject to various closing conditions, including the approval of the Irish antitrust regulator. To that end, the Competition and Consumer Protection Commission (CCPC) has decided to carry out a full phase-two investigation into the deal. Bank of Ireland had a 25.5 percent share of new mortgage lending in the Republic of Ireland, while KBC Bank had a 12.6 percent share. The inquiry will try to establish if the proposed deal could lead to a substantial lessening of competition in the Irish republic.

“Following an extended preliminary investigation, the CCPC has determined that a full investigation is required in order to establish if the proposed transaction could lead to a substantial lessening of competition in the State,” the CCPC said in a statement.

The competition regulator said that it received several third-party submissions during an initial investigation into the proposed deal. It was formally notified of the plan on 16 April, the same day KBC Group revealed that it was looking to exit the Irish market and was in talks to sell most of its loans to Bank of Ireland. KBC gave no specific reasons for wanting to exit the Irish market, but in a statement cited “the challenging operational context for European banks”.

Richard Summerfield