Irish house price rises boost Belgian bank's bottom line
KBC Bank said rising Irish house prices and reduced mortgages arrears here could boost the Belgian bank's profits by as much as €200m this year.
Write-backs on previously written down Irish loans contributed an €87m boost in the Belgian group's bottom line in the three months to the end of June, KBC said yesterday.
KBC Group CEO Johan Thijs told analysts yesterday that his bank is not currently in discussions to buy Permanent TSB, despite speculation of a possible tie-up.
Managers in Ireland said no merger talks with any rival are under way, but did not rule out acquisitions in the banking or insurance sectors.
The bank said Irish loan write-backs for 2017 are now expected to come in at between €160m and €200m - up from a previous €120m to €160m estimate.
Write-backs reflect a change in the bank's expected recovery on impaired loans, with rising house prices a significant factor, the bank said.
KBC's Irish arm yesterday reported profits of €102.7m for the three months to the end of June, compared to just under €40m in the same period last year.
Net profit for the first six months of the year rose to €173.1m after tax and impairments, up €99.4m compared to the six months to June 2016.
The bank said customer numbers are at a record high of 250,000 in Ireland.
Mortgage arrears cases fell by close to a fifth in the same period, the bank said, with nine out of 10 cases having now been offered a restructuring arrangement.
Belgian parent KBC Group ended the second quarter of 2017 with a better than expected net profit of €855m, pushing first-half profits to €1.485bn - up a third on the same period last year and boosted by the better recoveries now expected on Irish loans.
The group said profit growth was strongest in its Belgian and its international markets business, while results in the Czech Republic remained broadly unchanged compared to last year. New mortgage lending in the first six months of 2017 rose 29pc to €333m, it said.
KBC Ireland chief executive Wim Verbraeken said his bank's share of the mortgage market was "now trending solidly above 10pc for new business", ahead of historic levels.
Mr Verbraeken said the bank expects house prices to continue to strengthen on the back of the current lack of supply in particular, but noted the potential risk of soaring values.
"It is in everybody's interest long term to see moderate price inflation," he said.
The bank's ability to grow the mortgage business was constrained by the lack of housing supply, he noted.
Demand from first-time buyers increased in the past year, after mortgage rules set by the Central Bank were relaxed, he said.
"We are not advocating any further adjustments (to the rules)," he added.
The chief executive said the increase to 250,000 mostly retail customers was a "milestone" for the Irish bank.
KBC is among the banks engaged with the Central Bank in a process to identify and potentially compensate mortgage customers who incorrectly lost their low cost tracker mortgage rates.
Wim Verbraeken said customers the bank has identified as paying the wrong interest rates have been contacted and put back on lower rates.
However, he said KBC will not publish details of the numbers involved until the Central Bank probe ends.
KBC Ireland's SME business is in wind-down, with just 900 customers still on the books, a figure reducing by about a fith each year, the bank said.