Are KBC Deposits moving to BOI?

Will KBC savings automatically be moved to BOI or do we know what happens yet?

Deposits are mentioned by both banks so I would be hopeful. However, devils in the detail and there is not a lot of that around.

BOI agreed to purchase portfolios of KBCs performing mortgages, performing commercial and consumer loans, credit cards plus a book of deposits. This was announced on October 22nd last, however it is subject to a Phase 2 investigation by the CPPC which began on November 10 last and which is ongoing. Nothing is certain until the CPPC investigation concludes.

Ryan said:

Will KBC savings automatically be moved to BOI or do we know what happens yet?

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Some deposits will. Some won't. Or so the plan goes.

Current account deposits are not auto transferring. About 50% of deposits are in current accounts.

Some deposit products are linked to current accounts such as the Extra Regular Saver product. Not clear what happens to this product given that the current account will not transfer. Maybe the bonus conditions will be revoked but BoI have an obligation to keep terms. An easier option is to just close the product and return funds.

Plus fixed term deposit holders should be able exit penalty free with maturity interest and not forced to migrate which is what has happened when other deposit takers exited the market.

BOI might take the trickle of remaining deposits, why they are bothering to do that is anyone's guess (maybe they want the negative interest business deposits) when they don't need deposits. PTSB are no longer taking the deposits from Ulster, maybe BOI might seek to do a similar U-turn.

My savings are in the Extra regular saver Ciaran

CiaranT said:

Some deposits will. Some won't. Or so the plan goes.

Current account deposits are not auto transferring. About 50% of deposits are in current accounts.

Some deposit products are linked to current accounts such as the Extra Regular Saver product. Not clear what happens to this product given that the current account will not transfer. Maybe the bonus conditions will be revoked but BoI have an obligation to keep terms. An easier option is to just close the product and return funds.

Plus fixed term deposit holders should be able exit penalty free with maturity interest and not forced to migrate which is what has happened when other deposit takers exited the market.

BOI might take the trickle of remaining deposits, why they are bothering to do that is anyone's guess (maybe they want the negative interest business deposits) when they don't need deposits. PTSB are no longer taking the deposits from Ulster, maybe BOI might seek to do a similar U-turn.

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If I understand it, they deposits reduce the cost to BOI of the acquisition of the loans. The loans are an asset to BOI while deposits are a liability, so of BOI acquired 100m loans and 50m deposits the net assets are 50m and it means that BOI only needs to finance the lesser amount? Could be wrong with this mind you!

Markel said:

If I understand it, they deposits reduce the cost to BOI of the acquisition of the loans. The loans are an asset to BOI while deposits are a liability, so of BOI acquired 100m loans and 50m deposits the net assets are 50m and it means that BOI only needs to finance the lesser amount? Could be wrong with this mind you!

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The deposits help BoI fund the loans, rather than using other funding methods, but BoI already has surplus deposits so the need for these deposits is questionable, especially when a lot of the EBS and Ulster Bank deposits will find their way into BoI anyway via manual switches.

i.e. the 50 million, in your example, is not the answer because BoI already has access to surplus deposits.

In addition, surplus deposits, in many cases, are costing banks, 0.5% with the ECB. Something BoI are no doubt factoring in.

i.e. the acquisition of the deposits will create a cost rather than reduce funding needs because the funding is already there.

Why BoI are acquiring the KBC deposits is beyond me. It is not necessary and will cost them money. Far simpler, to adopt the PTSB approach, and only acquire the loans, and let customers manually switch savings if they really want too. Only logic I can think of is maybe KBC insisted on some of the deposits transferring to make their market exit quicker.

CiaranT said:

Why BoI are acquiring the KBC deposits is beyond me. It is not necessary and will cost them money. Far simpler, to adopt the PTSB approach, and only acquire the loans, and let customers manually switch savings if they really want too. Only logic I can think of is maybe KBC insisted on some of the deposits transferring to make their market exit quicker.

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Don't forget that PTSB are funding this through a issuing new shares. NatWest are taking a stake in the bank. This wouldn't be much of a concern for the main shareholder (Irish government) who are more concerned with having a viable third bank in the state. BOI being privately owned is a different story.

The cost to BOI of additional deposits is surely marginal. I fully expect my KBC deposit rates to track down to BOI rates of bit lower. The logistical costs are surely minimal as well. After all they already have a sizeable deposit book as if

The cost of surplus deposits, to BoI, is 0.50% to park with the ECB plus admin costs and customer servicing costs. Losing 0.50%+ on new deposits is a real cost to the bank. Not minimal.

Which rates are you expecting KBC to drop to BoI rates? KBC and BoI pay the exact same for instant access (zero), term deposits (0.05% for 1 year) and regular saver accounts (0.25%). I would guess that BoI will not drop rates further until after the KBC deal closes.

CiaranT said:

The cost of surplus deposits, to BoI, is 0.50% to park with the ECB plus admin costs and customer servicing costs. Losing 0.50%+ on new deposits is a real cost to the bank. Not minimal.

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BOI had two options:

A.buy €100 of KBC loans for roughly €100 or
B. buy the same loan packaged with a €100 deposit for approximately nothing and face an annual ECB charge of 50 cent on that deposit.

The difference between admin and customer services charges under A or B are probably marginal.

So a one off cost of €100 Vs an ongoing charge of 50 cent?

CiaranT said:

Which rates are you expecting KBC to drop to BoI rates? KBC and BoI pay the exact same for instant access (zero), term deposits (0.05% for 1 year) and regular saver accounts (0.25%). I would guess that BoI will not drop rates further until after the KBC deal closes.

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If I were BOI I'd consider dropping all the KBC rates to zero. If people didn't jump ship between announcing their intention to close they might not jump for a rate cut.