KBC Bank Ireland back in profit as impairment costs decline

Loan impairment costs down from €47.9m to €7.4m

½KBC recorded an operating profit of €26.1 million before tax and impairment costs for the quarter under review.
½KBC recorded an operating profit of €26.1 million before tax and impairment costs for the quarter under review.

KBC Bank Ireland has reported a €16.2 million profit for the first three months of 2015 compared to a loss of €17.1million for the corresponding quarter last year.

The bank said impairment costs declined from €47.9 million for the first quarter of 2014 to €7.4 million for the same period in 2015.

KBC recorded an operating profit of €26.1 million before tax and impairment costs for the quarter under review.

The bank’s parent meanwhile beat forecasts and reported a stronger than expected net profit of €510 million for the first quarter in what chief executive described as “an exceptionally strong start to the year”. The latest result compares to net profit of €473 million in the fourth quarter of 2014 and €347 million for the first three months of 2015.

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Net income for the group reached €172 million, up 8 per cent on the same quarter a year ago. KBC attributed the increase to the performance of its Irish division.

KBC Bank Ireland chief executive Wim Verbraeken said the subsidiary was pleased to contribute to the group's overall success.

“We’re obviously pairing back from the level of losses we’ve seen over the last five years. At the local level, we’ve recorded a profit of €16 million, which is the first time since 2010 that we had a quarter of profit in what have been difficult times,” he said.

KBC said retail deposit in Ireland growth jumped by 22 per cent to €3.6 billion with 15,000 new customer accounts opened in the first three months of the year. During the quarter the bank opened new banking hubs in Naas, Kilkenny and Waterford and acquired new premises in College Green, Dublin and Wilton, Cork as it continues to build its retail business here.

“Since we launched our new retail platform in September 2013 we’ve been building out our own physical footprint and this had led to an increase in the level of direct sales of both mortgages and other products for retail banking. It marks quite a dramatic strategic shift for KBC, said Mr Verbraeken.

KBC Bank Ireland, which employs 1,014 people locally, said its mortgage business continued to grow to a 12 per cent market share. Meanwhile, mortgage arrears cases have fallen by 23 per cent since December 2013.

“We’ve seen great results in addressing the issue of mortgage arrears. We have about 10 per cent of the market in terms of mortgages in Ireland and about 10 per cent of the problem loans. It takes a long time and a lot of effort to work things out and 25 per cent of our staff are dedicated solely to resolving these issues but it can take several quarters for problems to reach a conclusion,” said Mr Verbraeken.

KBC has kept its guidance for Irish loan losses of between €50-100million in 2015 and 2016 with first quarter loss provisions of €7 million, which includes a €14million writeback.

The group's chief executive Johan Thijs said in a conference call on Tuesday that further writebacks of earlier Irish loan loss provisions may be possible and that KBC's guidance is conservative.

Mr Verbraeken acknowledged the recent debate about variable mortgage rates in Ireland but said KBC had no plans to cut the rates they charge anytime soon.

“We constantly monitor the market and believe our rates are both competitive and appropriate,” he said.

Charlie Taylor

Charlie Taylor

Charlie Taylor is a former Irish Times business journalist