Wednesday 18 September 2019

KBC Bank forced to put extra €54m aside to cover its tracker redress costs

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Charlie Weston and Donal O'Donovan

Lender KBC Bank has been forced to put aside millions more euro to cover the cost of refunding customers for taking good-value trackers off them.

The revelation came as Fianna Fáil accused banks of "dramatic inconsistencies" in the compensation packages being offered to tracker-scandal-hit customers.

Ratings agency Moody's said it was a worry for investors that Bank of Ireland has been forced to put aside up to €200m to refund customers after the bank admitted to an extra 6,000 tracker mortgage cases.

KBC Bank has reported a fall in profits after setting aside an extra €54.4m to cover refunds, compensation and other costs relating to overcharging of tracker mortgage customers.

The bank has identified up to 1,600 cases going back almost a decade.

Last year it said it would cost just €4.4m to deal with tracker overcharging.

Now the total tracker provisioning at the Belgium- headquartered bank is close to €60m.

This works out at a cost to the bank of around €50,000 per customer.

Last month, KBC Bank admitted, after its executives met with Finance Minister Paschal Donohoe, that up to 1,661 customers may have been affected by tracker overcharging.

In a statement the bank has now said: "KBC continues to engage with the Central Bank in relation to the identification of impacted customers and KBC expects to have concluded this identification process for the vast majority of customers impacted by the end of the year."

Meanwhile, Moody's has taken a dim view of extra provisioning made by Bank of Ireland to cover more tracker cases.

It said in a report: "The increased provisioning is credit negative for Bank of Ireland because we expect that it will negatively affect the bank's 2017 earnings, although the effect on the bank's capital will be more contained at around 30 basis points, offset by strong core profit generation."

Fianna Fáil finance spokesperson Michael McGrath has expressed alarm at what he said was dramatic inconsistencies in compensation packages being offered to affected customers.

Banks have been allowed by the Central Bank to decide on what level of compensation they will pay.

Meanwhile, Central Bank chief Philip Lane said banks need to develop an "entirely new relationship" with customers to rebuild confidence in the financial sector.

Speaking after addressing Leaving Cert students in Longford, he said: "It's a question of going forward and behind all of that is to build a new culture in the banks."

Mr Lane also said the onus was now on bank chiefs to lead from the front on the tracker mortgage issue.

"The senior leaders in the banks need to show leadership and demonstrate that in the way they conduct themselves, run their businesses and in putting their customers first," he said.

Irish Independent

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