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KBC Bank Ireland reaches agreement to sell €1.1bn of non-performing loans

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KBC Bank Ireland has reached an agreement to sell its roughly €1.1bn of non-performing Irish loans to a US-headquartered investment manager, marking a further step in the bank’s exit from the Irish market.

The mortgages are being sold to funds managed by CarVal Investors, and following the deal Pepper Finance will manage the loan portfolio.

The portfolio is made up of private homes and buy-to-let, and a small number of non-mortgage non-performing loans.

In a statement, KBC Ireland said customers will continue to have the same legal and regulatory protections following the sale.

There will be “no immediate change” for customers, the bank added.

Customers do not need to take any action following the latest announcement, KBC said.

Prior to the closing of the transaction, KBC Bank Ireland will contact the customers whose loans are included in the sale, to inform them that their loans are being transferred.

KBC Bank Ireland CEO, Ales Blazek, said: “I’m confident that the agreement we have signed for the sale of substantially all of the remaining non-performing mortgage loan portfolio, and with Pepper managing the loans post completion, offers a good and sustainable solution for our non-performing mortgage loan customers.”

“We can assure that any customers whose loans are included in the transaction will continue to be afforded the same legal and regulatory protections.”

CarVal Investors has approximately $10bn in assets under management in corporate securities, loan portfolios, structured credit and hard assets, while Australian headquartered Pepper has over €36bn in assets under management.

Pepper entered the Irish market in 2012 after buying the share capital of GE Capital Woodchester Home Loans. This included around 3,500 Irish mortgage accounts, with over €600m in receivables. At the time, Pepper also assumed responsibility for servicing GE Capital’s Irish portfolio of personal, small enterprise and auto loans.

KBC signed a memorandum of understand with Bank of Ireland on April 16 for the takeover of KBC’s roughly €9bn in performing loan assets and liabilities.

The Belgian bank is not the only major player exiting the Irish banking market with Ulster Bank having also announcing plans to exit earlier this year.

The move by the two banks – leaving AIB, Bank of Ireland, and Permanent TSB as the three main banks – means Ireland’s retail banking sector is set for the most radical shake-up since then-finance minister Michael Noonan devised the “pillar bank” strategy in 2011.

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Analysts have pointed out that further concentration in the market will give AIB, Bank of Ireland and PTSB more scale, operating leverage and higher profits, but their success will inevitably come at the expense of Irish businesses and households.

KBC Bank Ireland reported a net profit of €21m for the first half of this year, a swing on its loss of €56m in the same period in 2020.

The bank saw its loan impairment charge reduced to zero during the first six months of 2021, from €95m in the corresponding period last year.


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