There is no question over KBC Bank staying in Ireland despite it posting a hefty €48m loss during the 2020 pandemic, and even while all banks struggle to make healthy returns in the market, its chief executive in Ireland Peter Roebben has said.
Challenger bank KBC's recommitment comes as Ulster Bank, the long-established and third-largest mortgage and corporate lender, is likely to decide to wind down the bank in the Republic, analysts and experts have said, after its owner, NatWest put its future up for review late last summer.
Mr Roebben said he wouldn't comment whether KBC as a challenger bank would attempt to acquire mortgage loans from Ulster if NatWest were to decide to pull out, but said there were "structural" challenges facing Irish-based banks that lenders in other European countries don't face.
He said KBC Group, which includes a major lender in Belgium and the Czech Republic, was committed to Ireland — but he reiterated that in time there will be a debate about the relatively large levels of capital the Irish regulator requires Irish banks to offset against their mortgage lending that he said hinders banks from securing healthy returns.
Ireland was the only market in KBC's international markets division — which includes Slovakia, Hungary, and Bulgaria — to lose money last year. It posted a net loss of €3m in the final quarter and a total loss of €48m for the full year.
KBC Bank was not carrying out any similar review to that of Ulster, and was instead looking to build its bancassurance model "with a highly capitalised" group behind it, Mr Roebben said.
He said the net loss of €48m had included €95m in a so-called management overlay, or safety buffer, which was higher than in other countries in which KBC operates because lending here comprises a mortgage book which makes it almost a pure retail bank. At the onset of the Covid-19 crisis in March, KBC Bank Ireland had set aside the buffer to safeguard against any large slump in Irish house prices. The bank forecasts no dramatic shift in house prices this year.
After a small write-back in the fourth quarter, Mr Roebben said it will judge how much of the €95m it can write back during the new financial year. He said that but for the overlay, the bank would have posted a significant profit for 2020.
Its mortgage market share increased to 12.6% last year from a share of 11.8% in 2019 and 10.8% in 2018, it said. Asked if its growth was modest for a bank offering competitive interest rates, Mr Roebben said in a competitive market and with last year's new entrant, Avant Money, it was a creditable performance.
Around 400 mortgage accounts of the 6,800 accounts that tapped payment breaks from the bank last year were unable to resume paying. The bank's overall arrears nonetheless fell to €1.4bn last year from €1.6bn in 2019
The chief executive said the bank has no plans to charge retail customers negative interest rates for holding their money — although the group has already applied negative rates to wholesale and corporate deposits.
"We are not going to penalise customers for bringing retail deposits to us," he said.