KBC will take year to decide its future in Ireland
A decision on the future of KBC's Irish unit won't be taken until later this year, its chief executive, Wim Verbraeken, has said.
Yesterday the bank reported a profit of €75m for 2015, after tax and impairment costs. That's a marked improvement on the full-year loss of €91m recorded in 2014.
KBC Group in Brussels has said it will look at possible options for the Irish unit once it is back in profit. Options could include retaining a stand-alone Irish bank, a sale, or partnership.
Although Mr Verbraeken wouldn't be drawn on the potential options, he said the primary objective of the bank was to become profitable, with other options to be considered only if that failed. And he said Brussels had given the Irish operation a signifacnt budget to invest in IT infrastructure and its core 15 retail hubs.
"Initially the guidance to the market was to be back in profit in 2016, so we're essentially early with that, given the results in 2015," Mr Verbraeken told the Irish Independent.
"The Group is now looking to consolidate that to make sure that we can be sustainably profitable. Over the course of 2016 we expect that KBC group will come to its determination, probably to the later end of this year. The primary objective of KBC Group is to build out a profitable bank in Ireland, and it is only if that should fail, that they will consider other options. KBC is very committed to building a profitable retail bank in Ireland and they have given us a very, very significant budget to invest in IT infrastructure and the [retail] hubs."
The bank's preliminary results for 2015 show that it grew its customer base, with retail and corporate deposits rising to €5.1bn. In the closely watched mortgage space, its share of the market was 14pc, and it recorded a 26pc reduction in mortgage arrears.
Mr Verbraeken said it was difficult to quantify the exact impact of the Central Bank's mortgage deposit rules, which were introduced just over a year ago and which cap home loans at up to 80pc of a property's value and three-and-a-half times borrower income.
"It's one factor [affecting the market]," he said.
"There's clearly an imbalance between supply and demand in the housing market and that's obviously affecting the rental market. There are various factors in terms of recovery.
"The economic recovery has clearly broadened, but has it benefited every category of the population? Has it benefited the people who would be in a position of being a first-time buyer?
Asked what he would say to Central Bank Governor Philip Lane ahead of the latter's planned review of the rules later this year, Mr Verbraeken said both the financial sector and the country needs "stable regulation".
"We can't flip flop from one year to the next, because that creates a lot of uncertainty. It creates volatility and I don't think we need that," he said.
Asked about the impact of a possible British vote to withdraw from the European Union, Mr Verbraeken said that KBC Ireland's SME customers had expressed concern.
"Initially people would have thought this would be a boon for Dublin as a financial centre, now opinions are much more divided and maybe even tilting towards this not being a favourable event for Ireland," he said. "I would have sympathy with that view."
Mr Verbraeken said the return to profit was down in part to lower impairment costs.