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Bankinter shows way to banks wary of setting up Irish subsidiaries

Spanish firm entering market here but not using a standalone business

Spanish lender Bankinter said last week it would enter the Irish retail banking market.

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Cantillon
Tue Apr 30 2024 - 06:00

Spanish banking group Bankinter may last week have been the first traditional bank to decide to enter the Irish market in almost two decades. But it’s taken a leaf out of the books of some neo-banks that have ventured into here in recent times: by setting up a branch of a bank regulated elsewhere in the EU rather than a standalone subsidiary.

Revolut, N26 and Bunq are each offering select banking services in the Republic operating off licences from Lithuania, Germany and the Netherlands, respectively. Revolut abandoned plans to secure an Irish licence in 2022.

“Expansion via a branch has not been common for traditional banks – it is however an efficient method to so, avoiding potential constraints on capital and liquidity, particularly when it already operates a lending business via a non-banking subsidiary in Ireland with a readymade customer base,” Diarmaid Sheridan, an analyst with Davy, said in a note to clients on the development on Monday.

[ Q&A: What does Bankinter move to Irish market mean for me? ]

Bankinter already has a €3.3 billion Irish loan book, having entered the Irish cards and consumer finance market in 2019 with the purchase of Avantcard, subsequently renamed as Avant Money, and moved into mortgages in last 2020 – just before the last overseas-owned traditional banks in the State, Ulster Bank and KBC Bank Ireland, decided to pull out.

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Bankinter, which will use the Avant Money brand for Irish banking, will initially focus on deposits – an area ripe for competition.

Setting up a branch, rather than a subsidiary, avoids the potential for expensive capital being “trapped” in a unit that could be put to better use elsewhere.

[ Arrival of first overseas bank since Celtic Tiger a ‘win’ for consumers ]

Ulster Bank and KBC Bank Ireland, both of whom received large bailouts from their parents during the financial crisis, would subsequently find out that it was much more difficult to get regulatory permission to move excess capital back to base when their financial circumstances improved. This is known to have contributed to the respective moves by their owners to get out of the Republic.

KBC Bank Ireland is officially handing back its licence on Tuesday to the Central Bank and renaming itself Exicon. Ulster Bank is expected to wait until next year before returning its permit. Bankinter has set the tone for any future traditional bank looking at opportunities here.

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