Despite Brexit, KBC Probably Won’t Give Up on Ireland Just Yet

  • KBC will announce a plan for its Irish division on Thursday
  • Belgian lender has pumped $1.5 billion into Irish operation

KBC Groep NV is set to lay out its plans for its Irish unit in Brussels on Thursday, with analysts suggesting the lender may opt to stay as the economy continues to recover.

KBC has pumped about 1.4 billion euros ($1.5 billion) into its Irish unit since the financial crisis, and Chief Executive Officer Johan Thijs has promised to clarify his plans for the operation when the bank reports fourth-quarter earnings this week.

“They could try to grow the bank, either organically or through acquisition, or they could follow the bancassurance model which they have on the Continent,” Owen Callan, an analyst at Investec Plc in Dublin. “KBC is a full service bank elsewhere but is focused on the mortgage market and current accounts here, so they may expand their product line in Ireland.”

Other banks, such as Lloyds Banking Group Plc, largely pulled out of Ireland in the wake of the nation’s crash, as mortgage arrears surged, real estate prices plunged and losses mounted. Now, with property prices rising and employment growing, banks are on a firmer footing. KBC’s Irish unit posted a first-half pretax profit of 49 million euros, compared with a 5 million-euro loss a year earlier.

Still, the uncertain global political climate may make it harder for KBC to find a buyer for its Irish unit. The U.K. is Ireland’s largest European trading partner, with over 1 billion euros of trade between the two countries every week.

“The Irish business has improved greatly in recent times, and NPLs have come down sharply, which would make it attractive to a potential buyer,” Bart Jooris, an analyst at Bank Degroof Petercam, said. “Given Ireland’s vulnerability to Brexit, though, it would be difficult to do a deal at this moment.”

KBC declined to comment.

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