KBC makes profit after cutting loan impairments
KBC Ireland returned to profit in the first quarter of the year after the bank dramatically reduced loan impairments, figures released yesterday revealed.
KBC's group accounts show that provisions for Irish bad debts came in at €45m for the first months of the year, sharply below the €142m a year earlier.
The improved loan losses helped KBC Ireland to contribute €13m to group-wide profit for the quarter, against a €59m bottom-line loss a year earlier.
On a conference call, KBC finance boss Luc Popelier said the bank was "confident" about its provisions and believed loan losses for the rest of the year would come in at "between €40m and €50m".
KBC put its Irish offshoot through the tough stress tests used on the domestic banks and believes it is "adequately" capitalised to deal with even the "adverse" scenario, chief executive Jan Vanhevel added.
The trend experienced by KBC is in sharp contrast to the experience of other foreign-owned banks, including National Irish Bank, which recently reported a 17pc rise in first quarter loan losses.
In its earnings presentation, KBC said the Irish economy was "beginning to show signs of stabilisation" with "marginally positive" economic growth in 2011 and "progressive improvement" afterwards.
After the latest round of loan losses, some 11.1pc of KBC's 17.1pc loan book is now classed as "non performing"; the bank is expecting those non-performing loans to top out at "13pc or 14pc".
Mr Popelier stressed that the most recent batch of impairments were in "existing portfolios" rather than "new files".
KBC's €600m real estate development portfolio has the highest level of non-performing loans, with some 48.8pc of debts falling into the troubled category.
The €1.3bn real estate development book is the second worst, with 16pc of loans classed as non-performing, followed by buy-to-let mortgages at 12.2pc.
Mr Vanhevel also said KBC Ireland was seeing "good, strong signs" in its deposit book over the first quarter of the year -- in 2010, KBC Ireland grew deposits by 50pc to €6bn.
KBC Ireland boss John Reynolds has previously spoken of plans for an advertising blitz to continue deposit growth and kick start KBC's lending activity after its share of the mortgage market halved.