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BoI and AIB to gain from KBC and Ulster exits, says Fitch

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KBC is exiting the Irish market

KBC is exiting the Irish market

KBC is exiting the Irish market

Bank of Ireland and AIB will benefit from reduced margin pressure as competition dwindles in the market with the planned exits of Ulster Bank and KBC from Ireland, according to ratings agency Fitch.

Bank of Ireland is preparing to buy €8.8bn in performing loans and €5bn in customer deposits from the Irish arm of Belgian lender KBC.

AIB is poised to buy a portfolio of €4.1bn of corporate and commercial loans from Ulster Bank after its owner, NatWest, announced it will make a phased withdrawal from the Irish market.

The deal will increase AIB’s already strong position in SME market share, which currently stands at more than 30pc, and its leadership in certain SME and corporate segments, noted Fitch.

There are concerns that consumers will be hit by the exit of KBC and Ulster Bank’s as the level of competition significantly diminishes.

“The banks’ planned acquisitions would significantly reshape the Irish banking landscape by reducing the number of fully-fledged commercial banks offering full banking services to three from five,” added Fitch.

“Bank of Ireland and AIB will become even more dominant, with State-owned Permanent TSB remaining the third-largest player. The two transactions would also result in an even larger state interest in the banking sector,” the ratings agency noted.

The State owns just under 14pc of Bank of Ireland and 71pc of AIB.

“Bank of Ireland and AIB… could strengthen their pricing power and leading positions in certain domestic lending segments as a result of acquiring sizeable loan books from other banks,” said Fitch.

“This would mitigate the pressure on profitability due to low lending rates, a problem for banks in Ireland and much of western Europe,” according to the agency.

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