KBC only interested in Irish deals with 100% ownership

KBC Group would only be interested in doing deals in the Republic if it could take 100 per cent ownership of the target assets, chief executive Johan Thijs said told reporters in Dublin on Friday.

His comments came a day after the Belgian bancassurance giant reaffirmed its intention to maintain an Irish presence through KBC Bank Ireland, and to grow the business organically and potentially through any banking or insurance deals that might emerge. The decision to commit to the market came after two years of speculation about the Irish operation, which has a €13.1 billion loan book.

Mr Thijs said he does not subscribe to a "gloom and doom" scenario for Ireland as a result of Brexit, predicting that the economy will continue to grow. He said this was evidenced by KBC's decision to remain in the Republic, while he expects other financial services groups to be drawn to Dublin from London as Brexit develops.

Mr Thijs said there were “no files on the table at present” in relation to mergers and acquisitions for KBC Bank Ireland. He added that the business has a lower threshold for profitability than larger players operating in the market because it does not have a large Irish legacy network.

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Insurers

Analysts at Investec said on Friday that KBC may have more luck pursuing deals with insurers such as FBD Group or RSA Ireland than in tying up with a local bank.

A deal with 75 per cent State-owned Permanent TSB "seems like a difficult transaction to justify at this stage – politically, as well as economically, given the likely cost-cutting that would come with it," said Owen Callan, an Investec analyst, in a note to clients on Friday.

"While KBC were keen to note their commitment to continuing their [insurance] partnership agreements with Irish Life and Zurich Insurance, looking at FBD or RSA's Irish insurance book, or buying an intermediary, seem like they would have greater near-term potential than anything on the banking side," he said.

Spokesmen for FBD and RSA declined to comment.

KBC offers life insurance products in partnership with Irish Life, while it collaborates with Zurich Insurance in providing motor, home and other general coverage.

Ireland’s motor insurance industry has been in a state of turmoil in recent years as companies failed to raise enough from premiums to cover rising costs and expenses.

Growing optimism

However, shares in FBD have jumped 30 per cent in the last 12 months on growing optimism that the group will return to profit this year after three years of losses.

This follows insurance rate hikes having been pushed through the by industry over the past two years, efforts by Government to rein in spiralling motor insurance costs, a benign winter weather so far and rebounding bond yields internationally since Donald Trump’s election as US president, which has served to stoke investment returns across the sector.

RSA Ireland, which has received €500 million in capital injections and commitments from its UK parent since 2013, returned to operating profitability in the first half of last year after years of problems. The once-largest Irish general insurance company was thrown into crisis in late 2013 when it emerged it had a large hole in its balance sheet, mainly the result of having put too little money in reserve to cover large claims.