KBC's loan losses soar by 400pc in Q4 but deposits remain strong
LOAN losses at KBC Ireland soared by more than 400pc in the fourth quarter of 2010 after the Belgian financial giant took a sharply more negative view of the Irish banking landscape.
The Irish offshoot has also seen its share of the local mortgage market shrink from 10pc of existing mortgages to less than 5pc of new mortgages written in 2010.
But KBC Ireland chief John Reynolds yesterday insisted his bank's owners remained committed to the Irish market and would back the bank through the recession.
KBC grew deposits by 50pc last year and is planning a major marketing campaign in 2011 to build on that growth and regain share in the mortgage market, he added.
The €263m of impairments -- the highest quarterly tally ever booked by the Irish offshoot -- was revealed in a KBC group trading statement yesterday.
The Belgian bank attributed the impairments to the "negative impact" of the planned restructuring of Ireland's banks, which it fears will trigger a collapse in asset values.
That prospect prompted KBC to increase provisions for losses on its €4bn Irish commercial loan portfolio "mainly in its relatively limited real estate development and investment financing activities".
KBC has also slashed its forecasts for Ireland's economic growth, prompting an increase in impairments on the bank's €13bn residential mortgage book.
Mr Reynolds said the bank was not expecting to see a recovery in the Irish economy until "well into 2011", but he said KBC would be "very disappointed" if this year's loan losses "turned out to be anything like" 2010's, which came in at €468m.
News of the Irish losses, coupled with revelations of a potential hit of €150m at KBC Lease UK, triggered a 3pc fall in the Belgian group's share price.
Despite this, Mr Reynolds insisted that KBC was going to stay in the Irish market, in stark contrast to departed players like Bank of Scotland (Ireland) and Postbank.
"Over the next few years, we want to see our business in Ireland develop," Mr Reynolds stressed. "When things turn around, we should have something quite valuable.
That approach means KBC enters 2011 very much "open for business" despite last year's fall-off in activity.
"We'd like to be doing more mortgage business than we're doing," Mr Reynolds said.
"We'll be targeting that through good, old-fashioned promotion -- we're going to be a lot more active in terms of advertising in 2011."
The advertising blitz will also extend to KBC's deposit offering, which has already seen customer funds grow from €4bn at the start of the year to €6bn at year-end.
The deposit boost is in sharp contrast to recent outflows of funds at Irish-owned banks including AIB, Anglo Irish Bank and Bank of Ireland.
"It's still a competitive market out there, but we're part of a very substantial entity," said Mr Reynolds. "If we're doing our job properly, we should be able to attract deposits".