UniCredit to quit the IFSC after 26 years

Irish unit posted €42m net profit last year, 72% ahead of of internal forecasts

The past decade has seen a number of banks in the IFSC hand back their licences. Photograph: iStock

The past decade has seen a number of banks in the IFSC hand back their licences. Photograph: iStock

 

Italian financial services giant UniCredit is planning to close its unit in the International Financial Services Centre (IFSC) in Dublin after more than quarter of a century and transfer its operations and €12.9 billion balance sheet back to Milan.

UniCredit Bank Ireland, set up in 1995, originally under the name Credito Italian Bank (Ireland), mainly acts as a manager of treasury and liquidity operations for the Italian group. It is chaired by Aidan Williams, a former investment banker who is also chairman of Nama.

“UniCredit has taken the decision to transfer the activities performed by its Irish subsidiary, UniCredit Bank Ireland, to its sole shareholder, UniCredit SpA, by way of a cross-border merger by absorption,” a spokesman confirmed. “This decision is part of an overarching multi-year strategy to centralise trading functions and streamline operations.”

The Irish unit posted a €42 million net profit last year, which was 72 per cent ahead of internal forecasts and up from €32 million in 2019, according to its latest set of annual accounts, filed with the Companies Registration Office last week. The main earnings driver was the sale of some sovereign debt holdings last summer, taking advantage of high bond prices as the European Central Bank (ECB) pumped hundreds of billions of euro into financial markets amid the Covid-19 crisis.

Shareholders’ equity tied up in the Irish unit amounted to €2.4 billion at the end of 2020, equating to common equity Tier 1 capital ratio of 81.3 per cent. That’s almost 5½ times the wider group’s reserves ratio, giving an indication of the level of excess capital that is tied up in the Dublin operation.

UniCredit Bank Ireland managed to pass on a €32.2 million dividend to its parent last May, even as the ECB pressed euro zone banks two months earlier not to make shareholder payments amid the pandemic. The bank said the ECB recommendation did not apply to it, as it was transferring the money to its owner, which is a “significant supervised group”.

Similarly, a plan to pay a €42 million dividend to UniCredit in Italy by the end of this month is also exempt from the general ECB recommendation, which is set to remain in place until the end of September.

The unit’s annual accounts, signed off on February 5th , made no reference to the plan to wind down the business, which employs 28 staff.

Latest to leave

The past decade has seen a number of banks in the IFSC hand back their licences as their parents seek to release capital that is “trapped” in various subsidiaries and streamline their own organisations. Wall Street giant Goldman Sachs and a number of German lenders, including DZ Bank, Helaba and Commerzbank, are among those to have returned local licences.

UniCredit and the German banks were among a wave of European lenders that set up Irish wholesale banking subsidiaries during the 1990s as the IFSC took off.

In March Irish-based EAA Covered Bond Bank, once part of the German lender WestLB, which collapsed during the financial crisis, relinquished its banking licence after an attempt to sell the business fell through a year ago.

Meanwhile, a slew of overseas lenders into the domestic Irish economy, including Danske Bank, Bank of Scotland and Rabobank, have retrenched from the retail market since the financial crisis. Ulster Bank and KBC Bank Ireland have also signalled in recent months that they plan to exit the Republic.

A spokeswoman for the Central Bank said the UniCredit Bank Ireland merger with its parent was “subject to regulatory approval by the European Central Bank and will not be effective until this is granted”.