CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Bank of Ireland to buy KBC’s Irish loan book in €5bn deal

By Jenni Reid

11:37, 22 October 2021

A Bank of Ireland branch in Dublin
Bank of Ireland will take over KBC’s performing loans as it exits the Irish market – Photo: Shutterstock

Bank of Ireland will acquire the performing loan assets and deposits of KBC Bank Ireland for a total consideration of around €5bn.

The deal comes as Belgium-based KBC Group winds down its operations in Ireland, where it has 12 hubs and 320,000 customers.

Bank of Ireland, the country’s largest bank, will acquire €8.8bn of performing mortgages, €0.1bn of performing commercial and consumer loans and c.€4.4bn of deposits.

A memorandum of understanding over the deal was announced in April, while a binding agreement, which is still subject to regulatory approval, was announced today.

No change

KBC Bank Ireland chief executive Ales Blazek said customers did not need to take action at this point.

“KBC Bank Ireland remains committed to servicing customers of its retail banking and insurance products through its digital channels and hubs,” Blazek said.

“We will communicate to our customers well in advance of any actual steps that may be taken with respect to their products or if our customers need to take any action at any point.”

Irish exit

KBC Group chief executive Johan Thijs called the deal an “important step” in his group’s withdrawal from the Irish market, and expressed confidence that Bank of Ireland would provide a “good home” to KBC Bank Ireland.

In August, KBC Bank Ireland announced it would sell its non-performing mortgage loan portfolio of around €1.1bn to US-based investment manager CarVal Investors. Pepper Finance Corporation, which is regulated by the Central Bank of Ireland, was named portfolio manager.

Thijs has previously said the decision to leave Ireland, where it has built a digital-first retail bank with a strong liquidity and capital position was due to the “challenging operational context for European banks”.

In February, NatWest-owned Ulster Bank also said it would begin a phased withdrawal of all banking activity and associated services within the Republic of Ireland.

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Bank growth

Bank of Ireland Group chief executive Francesca McDonagh said the loan book acquisition was a “positive development for our business and consistent with our growth strategy.”

The group will acquire the performing mortgages for 103.6% of par value.

It will also pick up a small portfolio of €0.3bn non-performing mortgages.

The acquisition is expected to bring in incremental net interest income of c.€160m in 2023, which will reduce over time as the portfolios redeem.

Read more: How Ireland’s first tax rise since 2003 will affect the tech giants

The difference between stocks and CFDs

The main difference between CFD trading and stock trading is that you don’t own the underlying stock when you trade on an individual stock CFD.

With CFDs, you never actually buy or sell the underlying asset that you’ve chosen to trade. You can still benefit if the market moves in your favour, or make a loss if it moves against you.

However, with traditional stock trading you enter a contract to exchange the legal ownership of the individual shares for money, and you own this equity.

CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional stock trading, you buy the shares for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks.

CFDs attract overnight costs to hold the trades, (unless you use 1-1 leverage) which makes them more suited to short-term trading opportunities. Stocks are more normally bought and held for longer. You might also pay a stockbroker commission or fees when buying and selling stocks.

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