DBRS: BoI and AIB will increase their dominance as five banks shrink to three in Republic

Francesca McDonagh, CEO of Bank of Ireland. The bank had €47bn loans in the Republic and by acquiring KBC's €9bn performing loans could increase its overall loans by 19% and home loans book by 39%. 

Irish banking will shrink when the Ulster and KBC lenders exit the market, with Bank of Ireland and AIB in particular set to bolster "their dominant domestic market positions",  ratings firm DBRS Morningstar has said.  

The assessment comes amid talks between Ulster Bank owner NatWest over selling €4bn in corporate loans to AIB as well as a large part of all its mortgage book to Permanent TSB. KBC is having talks with Bank of Ireland over selling almost all its non-soured mortgage loans to Bank of Ireland.  

DBRS said AIB had net loans in the Republic of €48.6bn, of which €17.4bn were loans to corporates and SMEs. 

"The [Ulster] acquisition would allow the bank to increase its Irish loans portfolio by 8% and its Irish corporate and SME loan portfolio by 23%," it said. 

Bank of Ireland had €47bn loans in the Republic and by acquiring KBC's €9bn performing loans could increase its overall loans by 19% and home loans book by 39%. 

For PTSB, a deal with NatWest could "double its asset size", DBRS said, noting that PTSB has not yet signed a memorandum of understanding. 

"If approved by regulators, the transactions would allow BoI and AIB to further strengthen their dominant domestic market positions in residential mortgages and SMEs and corporates respectively," it said. 

One of the reasons for foreign lenders deciding to quit was the comparatively high level of capital requirements demanded by the Irish Central Bank for mortgage lending in the Republic, DBRS said.