Bank of Ireland chief executive Francesca McDonagh has downplayed the likelihood that the group will have to sell on part of the €9 billion KBC Bank Ireland loan book it plans to acquire, in order to secure competition approval for the deal.
Speaking to reporters on Monday, after the bank reported full-year results, Ms McDonagh said that it is “not necessarily a consensus expectation” that the group will be required to offer part of the KBC portfolio in the open market to challenger lenders.
Concerns
Ms McDonagh said that the bank is “responding robustly and fully” to Competition and Consumer Protection Commission (CCPC) questions and inquiries around the proposed deal, following Brussels-based KBC Group’s decision last year to quit the Irish market.
The CCPC warned of its competition concerns in the middle of last month as it continued an in-depth investigation into the transaction.
Both banks have until the end of next week to respond to the watchdog. The CCPC is also investigating the planned purchase by Permanent TSB and AIB of parts of Ulster Bank as that lender is also withdrawing from the market.
“I don’t want to jump to any conclusions. It would be inappropriate,” Ms McDonagh said. “We are working to demonstrate that there is competition.”
The chief executive highlighted that Bank of Ireland is acquiring KBC Bank Ireland's existing portfolio - or what is known as its back book - rather than its lending platform.
“We would point also to the level of competition we are seeing. We’ve got two brands announcing they’re leaving, but you also have three challengers who are certainly very active in trying to win market share.” This was a clear reference to Dilosk, owner of the ICS Brand, Finance Ireland and Avant Money, all of whom have entered the owner-occupier lending market in recent years.
Non-bank lenders accounted for about 10.5 per cent of drawdowns in the first half of 2021, about twice their market share a year earlier.
Loans
Bank of Ireland has agreed to buy KBC’s €5 billion Irish deposit book, in addition to all of its performing loans, as part of its deal with the Belgian-owned bank. However, Ulster Bank has no accord with another bank on its current accounts and savings portfolios, which held a total of €18.6 billion of customer deposits as of the end of last year.
Ulster Bank plans to start writing soon to almost 1 million personal and business customers setting them deadlines of six months to switch and close their current and deposit accounts with the lender – at a time when the wider Irish banking system is grappling with holding too much deposits money.
Ms McDonagh said that her bank is investing in resources to deal with an expected surge in Ulster Bank customers seeking alternative homes for the cash.
However, she warned: “The issue is not just the banks’ response to changing current accounts. It is system wide....Customers need to tell their utility firms, [such as] refuse collectors, that [their] direct debit needs to go from a new account.”
She said that there could be direct debit backlog problems if utility companies and other service providers are not able to deal with the changes.
