Belgian bancassurance giant KBC Group said it will free up €1 billion of capital in its Irish unit following the sale of substantially all of the division’s performing loans to Bank of Ireland, allowing it to hand the money out to shareholders.
The group said that the planned payout will either be by way of a share buyback or extraordinary dividend, or both, subject to approval from regulators at the European Central Bank. “The final decision by the board of directors will be taken in the first half of 2023,” KBC Group said as it reported full-year results.
Bank of Ireland confirmed last Friday that it had completed the purchase of €7.8 billion of loans and €1.8 billion of deposits from KBC Bank Ireland, as the Belgian-owned lender advances plans to exit the Republic. The €1 billion of regulatory capital that is being released had been in reserve against the loans, to provide a cushion in the event of shock losses. The capital relief resulting from the deal is in line with analysts expectations.
It is expected that the portfolios – including €7.6 billion of performing mortgages, €100 million of small business and consumer loans, and €100 million of non-performing loans – will move across by the end of March.
KBC Group, which said in April 2021 that it was planning to quit the Republic, booked a €319 million charge later that year to cover costs of exiting the Irish market.
The figure included €81 million in staff restructuring costs and €170 million of loan impairment charges. It also includes the write-off of €53 million of an accumulated tax benefit – or so-called deferred tax assets – resulting from losses racked up during the financial crisis.
The Irish unit posted a €37 million net profit last year, with a €54 million surplus recorded in the second half more than offsetting €17 million of losses for the first six months of 2022.
The wider KBC Group’s net result increased by 10 per cent last year to €2.86 million and the company has updated its financial guidance for the next three years.
“Between 2022 and 2025, we are aiming to achieve a compound annual growth rate of approximately 6 per cent for total income and approximately 1.8 per cent for operating expenses – excluding bank taxes,” chief executive Johan Thijs said.
Frank Jansen, chief executive of KBC Bank Ireland, told the Oireachtas finance committee last week that some 26,000 of the company’s current-account holders still need to open an account elsewhere. The figure is down 50 per cent from May 2022, just before the bank started issuing notice to customers to find alternative arrangements.
Mr Jansen disclosed that only 50 of the 650 KBC Bank Ireland employees eligible to transfer to Bank of Ireland had so far taken up the offer by last week. However, employees have up until the date of loan transfers to make a final decision. KBC Ireland has a total of 1,019 employees.