KBC rules itself out of link-up with Ulster Bank

Ulster Bank out of luck as Belgian bank plans to go it alone in Ireland until 2016

KBC’s Irish operation made a loss last year of €864 million, almost three times that in 2012. Photograph: Bryan O’Brien

KBC’s Irish operation made a loss last year of €864 million, almost three times that in 2012. Photograph: Bryan O’Brien

Wed, Jun 18, 2014, 08:31

Belgian financial institution KBC appeared to rule itself out yesterday from any interest in a link-up with Ulster Bank in the Republic as part of the strategic review being carried out by that bank’s parent company, Royal Bank of Scotland.

In a presentation to investors, KBC made clear that it plans to plough an independent furrow in Ireland until it is back in profit here in 2016.

“For Ireland, KBC’s first priority is to become profitable from 2016 onwards. As of then, all available options will be considered – whether to organically grow a profitable bank, build a captive bank-insurance group, or sell a profitable bank,” the Belgian group said in a statement yesterday.

RBS hired Morgan Stanley earlier this year to look at potential strategic options for Ulster Bank in the Republic, which has been a huge drag on the UK group. These options are thought to include investment by a private group and/or a merger with another Irish bank. KBC Bank Ireland and the Permanent TSB are the only likely merger options.

Compelling

When asked by The Irish Times if KBC was indeed ruling itself out of any discussions with RBS about Ulster Bank, it would only say: “The future of KBC Bank in Ireland is to grow into a strong retail player offering compelling value to customers.”

However, sources indicated KBC intends to focus on turning around its own operation here over the next two years.

KBC’s Irish operation made a loss last year of €864 million, almost three times that in 2012 while its impairment charge doubled to €1.05 billion. However, the Belgian bank has sought to reinvigorate its offering in Ireland and return it to the black by 2016.

KBC Bank Ireland has been seeking to grow its consumer banking offering here over the past year or so by opening new branches, launching current accounts, and offering credit cards and other products.

Figures released yesterday by the bank show it has a 10 per cent share of retail mortgage loans, and 3 per cent in retail deposits.

It said its main strategic goal for Ireland was to “make the transition from a digitally led mono-liner (mortgage and deposits) bank to a full retail bank, with a complete retail product offering (including current accounts, credit cards, personal loans, consumer finance and asset management products) and a limited bricks-and-mortar presence”.

Fresh start

“By not having the heritage of a large branch network, KBC Bank Ireland can make a fresh start in developing a complete retail product offering through digital channels,” KBC added.

KBC said its distribution reach would be digitally led via online and mobile solutions and a contact centre supported by an “agile physical presence in key urban areas”.

“The bank . . . has the ambition to grow strongly in retail mortgages while expanding its overall retail product offering,” it said.

KBC said it would continue to reduce its existing corporate and SME loan portfolio in Ireland in line with its deleveraging strategy. It recently sold its interest in loans connected with the Dundrum Town Centre at face value to Nama.

KBC said it was working towards a compound annual growth rate for total income of 25 per cent or greater for the period 2013 to 2017 and a cost-income ratio of 50 per cent or lower.

It said there would be “strict cost control” here given the significant investment in personnel, IT and marketing to implement its retail strategy.