KBC reports losses of €40m for Q1

The Irish operation of KBC bank has reported losses of €40m for the first three months of the year following on from a loss of €766m for the last three months of 2013, due mainly to its residential loan book.

KBC reports losses of €40m for Q1

The bank’s residential loan book continues to cause problems, with KBC indicating that it may reclassify €2.6bn of loans, including €300m worth of restructured home loans, as non-performing in the third quarter of this year.

In a note, the bank said it may reclassify a section of its loan book from impaired to non-performing, which will result in its coverage ratio for non-performing loans falling from over 60% to 36%.

When the bank’s provisions for bad loans are removed from its balance sheet KBC reported a pre-provision profit of €1m.

Chief executive of KBC Bank Ireland, Wim Verbraeken, said the bank remains on track to make a profit in 2016.

“We are satisfied with our performance over the first few months of the year, as we continue to expand our retail banking presence. The financial results and impairments are in line with our expectations and we remain on track to return to profit by 2016,” he said.

Davy analyst Emer Lang said the bank was flagging the change in designation.

The bank is continuing to grow its retail deposit business, with more than €3bn in deposits with over 9,000 customer accounts added in Q1, 2014.

“We also launched a competitive new credit card and strengthened our mortgage offering with a new tracker switcher product which allows our existing customers to trade up or down and retain their tracker product. We are recruiting for new positions this year across a range of professions to drive forward with our expansion plans,” said Mr Verbraeken.

As a result of the push into the retail banking space KBC has incurred higher costs. “The group cites higher staff expenses (an increased number of FTEs, particularly in the MARS support unit) and higher marketing expenses related to the KBCI retail strategy (eg the launch of its current account in September 2013),” said Ms Lang.

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