Possible KBC interest rate hike

KBC Bank is not ruling out an interest rate increase for some of its 58,000 mortgage customers in Ireland this year.

It said any decision on interest rates depends on the performance of the economy but KBC Ireland, chief executive John Reynolds said if there was to be a hike it would likely be in the latter half of the year.

KBC Ireland reported profits, after tax and impairment costs of €92 million for 2009, down more than 10% from the 2008.

The bank said the results were “acceptable” given the tough trading environment but Mr Reynolds said mortgage lending was down by a “massive amount”.

“We did not do enough business on the mortgage side as we would have liked,” he said.

Mr Reynolds expects 2010 to be “somewhat more buoyant” than last year adding that activity should increase significantly by 2012. He also does not think there’ll be any reduction to their 420 strong Irish workforce.

The bank, the Irish subsidiary of Belgian bank KBC, said that its loan losses rose to €176m last year, reflecting the deterioration in the economic environment.

Its overall loan portfolio fell to €18bn from €18.8bn the previous year due to what the bank called very limited demand.

At the end of 2009, home loans and residential investment loans amounted to €13.4bn representing about 9% of the Irish market. Business loans amounted to €2.9bn at year end.

KBC said 5.8% of its Irish portfolios have been restructured, reflecting its interaction with “customers under pressure”.

Davy analyst, Stephen Lyons said the fact the division has managed to generate a profit this year is undoubtedly a major reason for the bank’s continuing presence in Ireland.

He said that according to Davy’s mortgage broking contacts, KBC is “very much open for business” in Ireland unlike the other foreign banks and has recently made some of its products more attractive.

“This is a positive for the banking sector and the economy, given that foreign banks account for a third of sector credit,” he said.

The arrears statistics in the home loans and business categories showed an increase in the first half of 2009 reflecting the deterioration in the economic environment, said KBC.

It said its underlying profitability remains robust and its loan portfolios are carefully managed to withstand the ongoing effects of the poor economic climate.

Mr Reynolds said: “Our key consideration in 2010 is to support customers during what we believe will be another tough year and to generate an acceptable return for our shareholders.”

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