EAMON QUINN: KBC Bank Ireland chief sees path to mortgage rate cuts narrowing as it grows market share to over 10%

The chief executive of KBC Ireland said that the road is probably narrowing for the prospects of further reductions in home loans.

The bank is challenging many of the big lenders with low standard variable rates.

Wim Verbraeken told the Irish Examiner that he was not necessarily calling “the bottom” of the interest-rate cycle, but that the interest-rate environment in Europe and the policy at the ECB suggest that rates may not fall that much further.

The bank had extended its share of the homes loans market to over 10%, and is “happy with the quality of the book”, he said.

His comments come as the bill sponsored by Fianna Fáil’s finance spokesperson Michael McGrath that seeks to give a reluctant Central Bank powers to cap the levels of mortgage rates that lenders are permitted to charge continues its path through the Oireachtas.

However, Mr Verbraeken said that he supported those views voiced by regulators and by the industry that believe the bill would only help dissuade new competitors from entering the market.

However, he said that he favoured the Central Bank controls on mortgage lending as a way of stopping house prices soaring.

However, he said he was sceptical that the new ‘help to buy’ scheme proposed in the budget last month would help alleviate the problem of severe shortages of new homes that has led to the housing crisis and soaring rents.

“I think it [the ‘help-to-buy’ scheme] is not broad-based enough to provide a solution,” said Mr Verbraeken.

KBC Ireland said that it was justified in writing back a substantial net amount of €28m in provisions which had previously been set aside for bad loans.

The writeback helped boost net profits to €44.4m in the third quarter from €24.6m a year earlier.

However, as a proportion of its total amount set aside for provisions, the net writeback was a small amount, the bank said.

KBC had a small number of court orders, and was successfully dealing with most arrears cases through striking restructuring deals with borrowers, Mr Verbraeken said.

A decision from the review on the future ownership of KBC Bank Ireland by its Belgian parent group was likely to be made in the first half of next year, he said, but the Irish subsidiary in its path to recovery had already “made a good case”.

The bank had completed its work on identifying the number of borrowers on tracker mortgages who may have been overcharged.

The review is part of a Central Bank review across the industry into tracker rates.

KBC Group shares rose yesterday by over 1% to €55.73, valuing the bank at over €22.9bn.

The shares have slipped 3.4% since the start of the year.


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