Money Mentor Margaret Nolan provides an update on KBC bank, discusses its third quarter results and the phase two CCPC investigation currently under way.

Earlier this year, KBC bank announced it was leaving the Irish market. KBC Bank Ireland recently entered into a legally binding agreement to sell €8.8bn in performing mortgages and its €4.4bn deposit book to Bank of Ireland, as well as a small number of non-performing mortgages.

The bank sold off about €1.1bn of its non-performing Irish loans to US distressed debt investment firm Car Val Investors last summer.

KBC Group third quarter results

Last week, KBC Group reported a €601m profit for the third quarter, despite its exit from the Irish market reporting a loss of €319m.

This loss includes a once-off loan impairment charge of €170m, €81m in staff restructuring costs, (1,300, staff), and a once -off loss of €13m in relation to its tracker mortgage review. However, the group expects to claw back around €200m of its Irish losses once the Bank of Ireland deal completes.

KBC Group said its key measure of financial strength and ability to withstand shock losses, commonly called Tier 1 capital ratio (CET1), will increase by an overall 0.9 percentage points once the Irish loan sales have completed.

As a consequence of the 2008 property crash, and resultant mortgage arrears crisis in Ireland, Irish banks are required to hold more capital against potential losses than the average European lenders.

KBC bank has confirmed that it will abide by the rules of the transfer of business (TUPE) legislation where applicable.

CCPC investigation

KBC Group expects the Bank of Ireland deal to come to a conclusion in the second half of 2022. The Competition and Consumer Protection Commission (CCPC) is currently carrying out a full phase-two investigation into the proposed transaction "in order to establish if it could lead to a substantial lessening of competition in the State". This follows an extended preliminary investigation.

The CCPC can reject the deal, approve it unconditionally, or approve it subject to conditions.

KBC as a mortgage bank

KBC bank traditionally competed for new customers based on mortgage interest rates, and therefore was a keen competitor in the Irish mortgage market.

Some banks do not offer existing customers the same interest rates as new customers, and use "cashback", payments for legal fees, and other incentives to attract new customers instead.

The interest rate is the single most important consideration when sourcing a mortgage. If you hold a tracker rate mortgage, do not switch lenders as you will lose that rate.

If you are a KBC mortgage holder

KBC bank is bound by Irish legislation, and all customers of the bank are protected under the Central Bank rules.

If you hold a KBC mortgage, your loan will transfer to Bank of Ireland, once the CCPC signs off on the deal (likely to be the second half of 2022). All your terms and conditions will be protected.

Once your mortgage is transferred, and if you have a fixed interest rate which expires, the options available to you at that time will depend on what interest rate options are available at Bank of Ireland.

These rates may not be as competitive as you would like, so be sure to do your homework before deciding. Switching your mortgage from one lender to another is not the ordeal it used to be. Over the life of a mortgage it could save you a considerable amount of money.

Latest figures from the Central Bank show that the average interest rate on a new mortgage in Ireland has fallen, 2.72% in September 2021, a reduction of 0.06% compared to September 2020.

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