Belgian-based KBC has become the latest lender to announce its intent to leave the Irish market. The announcement came on the morning of Friday, April 16, and is part of a broader exodus of retail banks from the country. Just weeks prior, NatWest, the UK-based owner of Ulster Bank, stated that it would scale back its operations in Ireland considerably over the course of the next year. KBC is also in talks with Bank of Ireland to sell its existing loans and deposits.
Why have banks been so keen on exiting the Irish loan market? In the case of Ulster Bank, it had been struggling to make returns on investment deemed acceptable by NatWest. KBC’s chief executive, Johan Thijs, stated that talks with Bank of Ireland were being conducted in light of “…the challenging operational context for European banks…” One potential explanation for this trend is the relatively low interest rate environment of Ireland making it difficult for banks to see adequate returns. Further, the market saw a general trend downward from 2015 to 2020, with an average industry growth of -4%.
KBC’s exit will leave only three major retail banks in operation in Ireland. Following this announcement, shares in Bank of Ireland, one of the few remaining, saw a substantial increase in its share price. As of 2020, KBC’s market share sat at 12.6%. With the departure of two major competitors in such a short span of time, Bank of Ireland will likely continue to see an increase to its own market share and value.
Peter Roebben, the chief executive of KBC Bank in Ireland, provided his assurances following the announcement that their customers will not need to take any immediate action regarding their investments, and KBC will continue to provide its services for the time being. Additionally, the Deputy Governor of the Central Bank, Ed Sibley, has said they will supervise the agreement to be sure that customers are “…treated fairly and that the banks are operating safely and soundly.”
However, there has nonetheless been criticism of the suddenness of the move and the nature of its announcement. Progressive politicians have claimed it will be damaging to consumers and that KBC staff should have been informed of the move earlier.
Concerns have also been raised over the continued competitiveness of the Irish banking market, and whether it might be becoming too centralized in just a few large entities. The Competition and Consumer Protection Commission (CCPC) is in the process of reviewing the proposed sale of KBC assets to Bank of Ireland, as they claim it could lead to a “substantial lessening of competition.”