Bank of Ireland’s KBC purchase attracts competition scrutiny

Portfolio of €9bn in performing loans due to change hands as KBC exits Republic

KBC is exiting the market in the Republic. Photograph: Brian Lawless/PA Wire

KBC is exiting the market in the Republic. Photograph: Brian Lawless/PA Wire

 

The Competition and Consumer Protection Commission (CCPC) has decided to carry out a full phase-two investigation into Bank of Ireland’s planned purchase of KBC Bank Ireland’s mortgage-focused €9 billion of performing loans, as the Belgian-owned lender seeks to exit the Irish market.

“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 authority said in a statement on Wednesday.

The competition regulator said that it received a number of third-party submissions during an initial investigation into the proposed deal. It was formally notified of the plan on April 16th, the same day Brussels-based KBC Group revealed that it was looking to retreat from the Republic and was in talks to sell most its loans to Bank of Ireland.

The CCPC has called on any further parties that would like to make comments on the transaction to submit their views by November 10th.

Bank of Ireland had a 25.5 per cent share of new mortgage lending in the Republic, while KBC Bank Ireland’s slice of activity was 12.6 per cent.

AIB and Ulster Bank

The competition regulator is also carrying out an initial investigation of AIB’s planned purchase of about €4.2 billion of corporate and other business loans from Ulster Bank, which is also in retreat from the Republic. In addition it is preparing to look into Permanent TSB’s proposed acquisition of €7.6 billion of mortgages and small business loans from Ulster Bank.

The Iseq Financial index, dominated by the three remaining retail banks, has jumped 50 per cent so far this year, helped by the prospect of reduced competition in the market, which, analysts estimate, will result in the remaining banks achieving profit returns that would be acceptable to international investors, after more than a decade of sub-par profitability.