KBC will likely plumb to retain its Irish bank when the Belgian group announced the result of a long flagged review on February 9, according to analysts at Deutsche Bank.
A debt of around €5bn owed by the Irish bank to its parent is seen as a significant “hurdle” to any move by KBC Group that would involve a sell or exit the business, they said.
Management at KBC Group in Brussels have said they will formally communicate a decision on the future of the Irish operations on February 9, at the same time they publish financial results for 2016.
The bank said three years ago that a decision on whether to stay in the Irish market would be made at the end of 2016.
The company said it has three options, including sticking with the status quo and looking to grow the Irish unit organically , alternatively it could try to buy a rival as a catalyst for growth, or, finally, try to sell the Irish unit.
In a note to investors ahead of the wider KBC Group results, analysts at Deutsche Bank said KBC will: ”most likely choose the first option (status quo).”
“We note that the ~E5bn of intragroup funding from KBC to its Irish unit are likely to be a hurdle for a sale or exit of the business, and that KBC management stated on the call with analysts on 2 January (re UBB acquisition) that they don’t have any other M&A on the table at the moment,” according to the note by Deutsche Bank analysts Flora Benhakoun, Benjamin Goy and David Lock.
KBC Ireland returned to profit in 2015 for the first time since the Crash. Despite uncertainty about its long-term plans, the bank has been growing in Ireland in recent years.
It has opened a new network of so-called 'hubs' and positioned itself as a consumer lender and retail bank.
In November KBC Ireland reported a net profit of €44m for the third quarter of the year. It has also sought permission from the High Court to reduce its share capital in a move that will free up the lender to pay dividends to its Belgian parent for the first time since the Crash, a process that over time will reduce that €5bn intra group exposure.