KBC increases its forecast for loan losses
BELGIAN financial giant KBC now expects quarterly loan losses at its Irish bank to run at €40m to €50m -- almost twice the level of quarterly impairments predicted in August.
Senior KBC group executives confirmed the higher figures yesterday as they expressed "unease" about NAMA's ability to dictate terms in syndicated loans including the Belgian bank.
The commentary came as KBC Ireland revealed loan losses of €53m for the quarter to September -- that is a significant increase on the €28m impairments for the quarter to June.
"On an ongoing basis, we had said we would expect Ireland's credit cost to be €20m to €30m a quarter -- (that's now) going to be closer to between €40m and €50m," KBC group chief executive Jan Vanhevel said.
KBC's real-estate portfolio makes up less than €2bn of the bank's €17.4bn loan book but it has been hit by the highest level of provisions.
Mr Vanhevel said he expected "further volatility" on the real-estate portfolio as NAMA begins "dumping" loans that it had snapped up.
"As everyone starts dumping loans on the Irish market, I don't know where the buyers are going to come from," he admitted.
The bank's group finance boss, Luc Philips, also told analysts that KBC was "uneasy" about being forced to partner NAMA in some syndicated loans.
Before NAMA, KBC could have had a quarter of the voting rights in a syndicate, with three other Irish banks each holding a quarter, he explained.
"If those assets (of the three other banks) go over to NAMA, then the voting rights are concentrated in NAMA," Mr Philips said. "KBC then becomes a minority partner."
That position wouldn't be "comfortable" for KBC, he added, since NAMA could "misuse" its majority to force through restructurings.
Asked if he could give a figure on the amount of syndicated loans involved, Mr Philips replied: "No, I could not".
On the mortgage side, KBC's portfolio includes a €9.8bn exposure to the homeowners market and a €3.3bn exposure to buy-to-let mortgages.
The bank has already taken provision of 21pc against its owner occupied portfolio and 26pc against its buy-to-let book.
A further 10pc decline in house prices would trigger another €50m hit, while a 1pc rise in unemployment would trigger about €25m.
KBC Ireland boss John Reynolds said that about 5,000 of the bank's 60,000-plus home loans customers were currently in arrears.
This figure includes 3,000 who are more than 90 days behind on payments on their mortgages.
Yesterday's quarterly update from KBC also reaffirmed previous statements that the Irish division will "remain profitable" for full year 2010, although no quarterly profit figures were disclosed.
Ireland was one of the poorer countries for KBC in the third quarter as its group-wide net income rose 3.2pc to €545m -- a result that was better than had been expected.