Loans in default at KBC to peak at 14%

THE number of loans that have been in default for more than three months are expected to peak at 14% at KBC Bank.

The Belgian bank said its Irish business contributed €13 million to group profit after a year-to-date loan impairment of €45m.

KBC said non-performing loans in Ireland rose to 11.1% in the first quarter of the year, compared to 10.3% in the preceding quarter.

It maintained its forecast that the proportion of non-performing loans in Ireland will peak at 13% to 14%.

On residential mortgages, 7.7% of customers have been in arrears for more than 60 days, while 12.2% of buy-to-let mortgages are in arrears for that time.

There is €9.7bn outstanding on residential mortgages and €3.3bn on buy-to-let. On real estate investment loans, there are 16% non-performing. This rises to almost 50% for real estate development loans.

Yesterday, chief financial officer Luc Popelier repeated KBC’s guidance for loan-loss provisions in Ireland of €40m to €50m on a quarterly basis.

On a group level, KBC unveiled forecast-beating underlying net profit in the first quarter, buoyed by a strong performance in retail banking and its dealing room operations.

Fee and commission income declined 7% from last year, as the amount of assets the group managed fell compared to the final quarter of 2010.

Deposits grew in the group’s retail unit, especially in Belgium, where KBC also registered higher loan volumes. Loan volumes in central and eastern Europe were flat. The group said that loan loss provisions were “exceptionally low” in all business units.

Underlying net profit rose 22% to €658m.

Chief executive Jan Vanhevel said: “Our banking and insurance businesses in our Belgian and core Central and Eastern European home markets turned in a sound performance, while the merchant banking business unit bounced back, thanks to robust market activities.”

KBC agreed with the European Commission to divest its Czech unit, CSOB, and its private banking arm, KBL, in exchange for having received €7bn in state aid at the height of the credit crisis.

The €1.35bn sale of KBL to Indian firm Hinduja fell through after KBC failed to gain regulatory approval. The bank said more potential buyers eyeing the unit.