KBC Irish division contributes €42m in profit to group

THE Irish division of Belgian banking group KBC contributed profits of €42 million in the first half of this year and continues to trade strongly, despite reports suggesting that the operation has been a “cause for concern” at group headquarters in Brussels.

Impairment charges for KBC’s Irish business – the monetary hit it took on so-called bad loans, or those which are unlikely to be repaid – amounted to €62m for the first six months of the year and the group’s management said as much as 86% of its Irish loan book remains in the low-to-medium risk category.

“Compared to the previous quarter, loan losses remained stable for both Belgium and for Eastern Europe. Losses on the non-domestic loan book outside Belgium and Eastern Europe rose – especially in relation to the credit exposure to the US, largely for mortgage-backed securities; the UK, mostly corporate and Ireland, primarily residential mortgages,” KBC Group chief executive, Jan Vanhevel commented.

“The operating environment has improved since the start of the year. Leading indicators signal that the economy is bottoming out. Expectations, however, remain that it may recover only very gradually. Therefore, non-performing loan trends are anticipated to continue to be upwards until at least the end of the year. Developments in some Eastern European markets and also Ireland remain areas of attention.”

While Ireland remains a profitable business location for KBC – and its Irish division a relatively rare case of an international bank not having to make significant write-offs on its loan book here – Mr Vanhevel pointed to continuing falls in property prices, GDP contraction and rising unemployment levels as the chief challenges for this market.

Overall, KBC Group made a net loss of €3.3bn for the first half of this year.

Much of that was down to a first quarter loss of €3.6bn; which was prompted by bad loan write-offs and a significant adjustment concerning State recapitalisation funding from the Belgian government.

It returned to quarterly profit in the second three months of the year, with a €302m net profit.