July 9 (Bloomberg) -- Bank of Ireland Plc won a campaign to keep its life assurance unit, after the European Union accepted an alternative plan to exit business and corporate banking in the U.K. mainland with the sale of 4.6 billion euros ($5.9 billion) of loans.
Ireland’s largest lender by assets must also quit its ICS Building Society mortgage distribution platform, including as much as 1 billion euros of loans and deposits, to avoid a three-year-old EU order to sell New Ireland Assurance Co. Plc as a condition for the bank’s then 3.8 billion-euro state bailout.
A sale of the life business, which has $1 billion of net assets, “would negatively affect BoI’s capital and capacity to return to profitability and that would slow down progress toward long-term viability,” the Brussels-based European Commission said in a statement on its website.
Bank of Ireland Chief Executive Officer Richie Boucher has repeatedly said he was a reluctant seller of the life company, the nation’s second-largest with a 24 percent market share, as he seeks to return the lender to profit. The bank has posted losses since 2009 amid soaring bad loans following the collapse of the nation’s real-estate market.
The commission said today that the sale this year of the country’s largest life assurer, Irish Life Group Ltd., “has affected the number of potential buyers of New Ireland Insurance Co., increasing the likelihood of selling it with losses.”
Great-West Lifeco Inc., Canada’s second-largest insurer, said last month it was close to completing its 1.3 billion-euro purchase of Irish Life, which has a 33 percent market share.
Today’s EU decision is “not something we’d expected,” said Colm Foley, an analyst with Dublin-based securities firm Goodbody Stockbrokers, which rates the stock a buy. “I don’t think the bank would have put up such a fight to keep it if they didn’t see it as beneficial in the long-term to retain it.”
New Ireland Assurance’s operating profit rose 8 percent to 79 million euros last year, mainly as a result of lower expenses, according to Bank of Ireland’s annual report.
Bank of Ireland fell 0.6 percent to 16.5 euro cents in Dublin trading at 12:29 p.m.
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