KBC Ireland halves losses but faces many challenges in returning to profit

KBC Ireland made an after-tax loss of €77m for the first three months of the year, compared with a €148m loss for the same period last year. Loan loss provisions for the quarter were €99m compared with €195m for the first three months of 2012.

However, the Belgian-owned bank faces formidable challenges in returning to profitability. Mortgage arrears are still rising, although the pace of increase is showing signs of stabilisation, albeit at very high levels.

The bank has a residential mortgage book of €9.2bn with arrears reaching 18.1% at the end of March. There is a €3.1bn mortgage book in the buy-to-let sector with arrears running at 30.6%. There are €1.7bn of SME and corporate loans, of which arrears are running at 19.5%.

There is an outstanding €500m property development loan book, which has troubled loans running at 90.1% and a €1.3bn real estate investment exposure with troubled loans coming in at 31.3%.

It added €300m in deposits over the first three months of the year through an additional 5,000 new customer accounts. Total retail deposits at the end of March reached €2.4bn.

An extra €125m in capital reserves were added over the quarter to ensure that tier-one capital at the Irish business is 12.28%. It was 11.14% at the end of December last year.

KBC is one of the six banks covered by the Central Bank initiative on tackling the mortgage arrears crisis launched in March. “KBCI is experiencing positive results from its customer engagement programme and mortgage arrears resolution strategy, thereby restoring a significant number of customers back to financial stability,” it said in a statement.

KBC Group announced a net profit of €520m for the first quarter compared with €240m last year, although stripping out the effect of exceptional items it made €359m net profit.