Business Irish

Tuesday 11 December 2018

House price rises help KBC cut bad loan portfolio

KBC chief Wim Verbraeken
KBC chief Wim Verbraeken

Gretchen Friemann and Ellie Donnelly

Belgian bank and insurer KBC reduced its non-performing loans by 25pc last year as rising house prices and the improving financial health of borrowers eased the lender's still heavy burden of legacy-era debts.

KBC's Irish unit was badly affected by the crash and, despite the swift progress in dealing with its NPLs throughout 2017, the level remains the highest in the market at 35pc of the overall loan book.

In total, the volume of soured exposures stands at €4.2bn.

However, that figure is set to fall again next year with the bank forecasting bad debt provision releases of between €100m and €150m in 2018.

In 2017 the lender's write-backs totalled €215m. Yet KBC's impaired owner-occupied mortgages remain relatively steep at €2.1bn or 24pc of outstanding owner-occupied mortgages.

Wim Verbraeken, CEO of the group's Irish arm, emphasised the bank applies a "very conservative" classification to its NPLs and he played down the prospect of imminent loan portfolio sales, stressing the bank has resorted to this strategy only once, offloading a small portfolio of soured exposures in 2017.

Mr Verbraeken also apologised to "all impacted customers for the harm and distress caused by the bank's error or failure" in the industry-wide tracker mortgage debacle.

Earlier this month it emerged KBC is one of the slowest of the 15 lenders probing this issue, in terms of offering compensation and redress to borrowers.

The bank has admitted its role in the overcharging of tracker mortgages resulted in the loss of six family homes and 27 buy-to-let properties - twice the number racked up by larger rivals Bank of Ireland and AIB.

KBC's exposure to this festering problem weighed on the Irish division's full-year net profit, which fell by 20pc to €183m, partly due to a €61.5m top-up provision in the previous quarter to its tracker mortgage redress scheme.

The move brings the total money set aside for this crisis to €120.3m.

According to Owen Callan of Investec, this figure is unlikely to rise much further. "This should be 95pc of what they need to do," he said.

While KBC continues to grapple with legacy issues, the resurgent economy and house-price growth has also helped expand its footprint in the increasingly competitive residential mortgage sector. KBC is now neck-and-neck with PTSB with a 12pc market share. Mr Callan pointed out this takes the lender to within touching distance of its 15pc target.

He described the group as a challenger bank in Ireland, given its digital-led strategy, thin retail presence and concentration on so-called 'micro' businesses.

He predicted the focus will centre on driving up the relatively low volume of deposits, pointing out that the Irish arm remains largely dependent on the group for funding.

Irish Independent

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