The Competition and Consumer Protection Commission (CCPC) has warned of its concerns about Bank of Ireland's plan to purchase €9 billion of performing loans from KBC Bank Ireland, and given both parties three weeks to respond.
The warning comes as part of an in-depth scrutiny of a deal announced last year as the Belgian-owned lender retreats from the Republic. It will embolden some non-bank lenders in the market, who are eyeing potential buying opportunities if Bank of Ireland is asked to sell on part of the portfolio to appease the competition watchdog.
“The bank notes the CCPC’s preliminary view, at this stage of the process, is that the proposed transaction is likely to give rise to a substantial lessening of competition in relation to the market for the provision of mortgages in the State, and that this is not the final determination by the CCPC,” Bank of Ireland said on Friday morning.
A spokesman for the bank declined to comment further.
The statement came within hours of the CCPC publishing a notice on its website saying it had issued an assessment of the proposed transaction to both banks. While the authority did not give an indication in the public statement of its views, it said that both parties had 15 working days, as per its normal procedures, to respond in writing. They may also ask to make an oral submission, it said.
While Diarmaid Sheridan, an analyst with Davy, said he believes the deal will ultimately be approved, Bank of Ireland may be required to make some concessions. These could include opening marketing databases to challenger lenders or a sale of a portfolio of mortgages to a new entrant to assist in its establishment in the market.
“In line with normal practice, Bank of Ireland will prepare a detailed response to the assessment which will seek to address the concerns raised by the CCPC,” Bank of Ireland, led by chief executive Francesca McDonagh, said. “Bank of Ireland will continue to engage co-operatively with the CCPC in advance of the CCPC’s final determination.”
A spokesman for KBC Bank Ireland said that the CCPC assessment “is a procedural step in the ongoing investigation and it is not unexpected”. He declined to coment on the authority’s views.
The planned KBC Bank Ireland deal would increase Bank of Ireland's mortgage market share from almost 20 per cent to about 27.8 per cent, based on the value of mortgages outstanding in the Republic in the middle of last year, according to John Cronin, an analyst with Goodbody Stockbrokers. AIB, currently the largest mortgage lender in the State, has an almost 25 per cent slice of the market.
The CCPC is also assessing AIB's planned purchase of €4.1 billon of corporate and commercial loans from Ulster Bank and Permanent TSB's deal to acquire an estimated €6.8 billion of mortgages and small business loans from the UK-owned bank, which is also exiting the State.
Non-bank lenders present in the Republic and eyeing the market may be presented with opportunities if banks are required by the authority to sell on parts of the loan books being traded, in order to secure regulatory clearance for their planned deals, according to industry observers.
Some of the country’s non-bank lenders, including ICS Mortgages’ parent, Dilosk, are closely monitoring the CCPC assessment of the flurry of deals among the mainstream banks. While First Citizen Finance, which is weighing entering the mortgage market, previously signalled it may be interested in loan purchases, it is understood that this is no longer the case.